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Cebu Pac flights to Australia face delay

MANILA, Philippines - The planned launch of flights by budget airline Cebu Air Inc. (Cebu Pacific) to Australia faces delay due to the differences by both the Philippine and Australian governments on the proposed extension of the bilateral air services agreement, think tank Centre for Aviation (CAPA) said.

CAPA said in an aviation analysis that bilateral agreement differences are providing a check on the launch of services to Melbourne and Sydney in Australia by Cebu Pacific using its brand new Airbus A330-300.

 “The differences between Australian and Philippine authorities on an extension to their air services agreement is frustrating Australian airports, which have seen medium or long-haul low-cost carriers drive international traffic growth in recent years,” CAPA stated in the analysis.

Unlike most of Australia’s other air services agreements, the agreement with the Philippines has historically included a cap which applies to all Australian airports.

In most other agreements Australia applies a form of open skies policy such as the the Australia-Malaysia agreement that includes a cap applying to the four main airports of Brisbane, Melbourne, Perth, and Sydney but leaves the flexibility for unlimited capacity at other airports.

The Australia-Philippines agreement was revised following the most recent round of negotiations to allow unlimited capacity only at the Avalon airport that is about 55 kilometers away from Melbourne.

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The Australia-Philippines agreement does allow for unlimited capacity from Philippine airports other than the Ninoy Aquino International Airport wherein about 77 percent of Cebu Pacific’s total operations are centered.

 “It is highly unlikely that Cebu Pacific can be persuaded to launch Manila-Avalon or Clark-Melbourne. The carrier wants Manila-Sydney and Manila-Melbourne as these are much more likely to be commercially viable,” the think tank believed.

If approved, Cebu Pacific would become the fourth medium or long-haul low cost carrier including Malaysia’s AirAsia X, India’s Jetstar, and Scoot.

 “The Philippines is a much smaller market for Australia than Singapore or Malaysia. But there is potential for significant growth, particularly if a new low cost carrier can enter, stimulating demand in a market which is highly price sensitive,” the think tank added.

Data showed that the Philippines is the 13th largest market from Australia with only about 10,500 return seats weekly between Australia and the Philippines while Australia is the 11th largest market for the Philippines as it is the fifth largest overseas Filipino population and is the fifth largest country for inbound tourism to the Philippines.

CAPA said low cost carriers only account for 13 percent of non-stop capacity between the Philippines and Australia. National flag carrier Philippine Airlines that operates non-stop flights to Melbourne, Sydney and Darwin currently accounts for 64 percent share of seat capacity in the market while Jetstar’s parent Qantas that flies to Sydney, accounts for 23 percent.

 Australia has the world’s fifth largest overseas Filipino population after the US, Saudi Arabia, Canada, and the United Arab Emirates. Filipino visitor numbers have been on the rise. Australia issued about 40,000 visitor visas to Filipinos last year.

Australia is also a growing generator of tourists for the Philippines as the number of visitors from Australia grew by 11.5 percent to 103,000 in the first half of the year.

CAPA said Cebu Pacific is the logical new carrier for the Philippines-Australia market as the market mainly consists of the Filipino migrant worker and visiting friends and relatives segments.

Cebu Pacific became the fourth widebodied low cost carrier operator in the Asia-Pacific region last June after t took delivery of its first of at least eight A330-300 aircraft that currently serves the Manila to Singapore and Seoul routes.

It has so far only announced long-haul Manila to Dubai route starting Oct. 7 and has been looking at additional long-haul routes that it intends to start in the first quarter of next year.

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