PAL faces competition from North Asian, low-cost airlines

MANILA, Philippines – Philippine Airlines (PAL) is facing rising competition from the expansion of North Asian airlines as well as low-cost carriers (LCCs), think tank CAPA - Centre for Aviation said in a report.

In its latest analysis, CAPA said the outlook for new Southeast Asia-US nonstop routes, including those being considered by PAL, is relatively bleak.

PAL, which is currently the largest airline in the Southeast Asia-US market through its 12 percent share of bookings in the year ending June 30, 2016, is looking to further grow its market share by adding new nonstop flights to the eastern half of the US.

There are Filipino communities in US metropolitan areas such as Chicago, Houston and Washington DC.

CAPA said the flag carrier has also been evaluating more US West Coast destinations such as Las Vegas, San Diego and Seattle where there are sizeable Filipino populations.

PAL currently has three nonstop routes in continental US such as Manila to Los Angeles, Manila to San Francisco, and Cebu to Los Angeles, as well as one one-stop route, the Manila to New York via Vancouver. It also operates flights to Guam and Hawaii.

The flag carrier is looking to upgrade the New York flight to nonstop by 2018 when it takes delivery of its new A350-900 aircraft. 

PAL is also considering the launch of new destinations in the US using the new A350 aircraft.

Ahead of the arrival of the A350-900, PAL is adding capacity to the Los Angeles and San Francisco routes over the next few months as it expands its 777-300ER fleet from six to eight aircraft.

While the Southeast Asia-US market which has over three million annual one-way passengers is growing, CAPA said the plan to launch new nonstop routes faces challenges as the market is already very well served and composed of price-sensitive leisure passengers who are generally not willing to pay more for a nonstop product.

“There are already plenty of competitively priced one-stop options and one-stop competition will only get fiercer as North Asian airlines continue to expand in the US, and as LCCs enter the North Pacific market. Launching new nonstop flights to the continental US represents a strategic and likely unprofitable move for most Southeast Asian flag carriers,” CAPA said. 

North Asian carriers Korean Air, Cathay Pacific and EVA Air have been expanding recently in the US market. 

LCCs such as Malaysia’s AirAsia X as well as Cebu Pacific, which are considering expanding operations, also pose threats to new Southeast Asia-US routes. 

AirAsia X is planning to launch services to the US within the next year and its one-stop product via Japan is expected to add another highly competitive one-stop option for Southeast Asia-US passengers.