Tourism campaign: At heart of gov’t strategy lies flag carrier’s dream
(Last of a series)
Targeting 10 million foreign tourists and 35.5 million domestic travelers as the core of a P266-billion tourism master plan is going to strain the country’s tourism infrastructure.
The Manila international airport, already stressed beyond capacity today, will burst at the seams. So will the country’s major carriers, especially the flag carrier, Philippine Airlines, recently acquired by San Miguel Corp. Yes, the food and beverage conglomerate.
What is a food and beverage giant doing in airlines and airports? It has a master plan that will make the showcase tourism project of the Aquino presidency fly by 2016.
The government’s tourism plan was presented by Tourism Secretary Ramon Jimenez Jr. at a parallel forum during the recent 45th Annual Meeting of the Board of Governors of the Asian Development Bank in Manila.
Jimenez also unveiled the department’s “It’s more fun the Philippines” worldwide marketing campaign.
Saving the flag carrier
In another blockbuster move that seemed almost a twin of the tourism master plan, SMC acquired management control of the troubled flag carrier PAL.
Ramon S. Ang, SMC president, recently engineered the acquisition of a 49-percent stake, worth half a billion American dollars, in PAL. That also gave him management control.
What would a food and beverage tycoon know about running a troubled airline? Apparently much, because he is a certified pilot, besides being an engineer who restores and collects antique cars and can tune their engines.
A dream city
But the acquisition of PAL is just the tip of the iceberg of a $5-billion (around P210 billion) project that will make the P266-billion tourism plan take off by 2016.
Ang outlined his core strategy, where SMC would invest in a new international airport that would have up to four runways and could handle up to 100 million passengers a year on a 4,000-hectare site.
The proposed airport will be closer to Metro Manila than Clark, and the undisclosed site will only be “five to ten minutes’ drive from EDSA.”
For the immediate term, Ang plans to help the government regain Category 1 status for the country from the US Federal Aviation Administration, since this is crucial for the airline’s profitability and eventual expansion.
Where to get resources?
“Not a problem,” Ang says. “As of today, PAL is already healthy, financially, since we put $500 million in. Another $500 million will come in the near future.”
Ang is in a hurry to break ground before the year ends on the 4,000-hectare airport project. He already has a core tenant: a four-runway international airport and a modern air terminal capable of handling as many as 100 million passengers a year.
So a lot is riding on the success of the tourism signature campaign “It’s more fun in the Philippines.” The two mega-projects dovetail perfectly.
State of the art
The development will also have its own business district, a commercial and residential area, and will target ecozone status to accommodate locators at the manufacturing site.
It will also supply its own electricity, which Ang says will be cheaper than power from existing technology from commercial producers. The country’s power rates are the highest in the region, discouraging foreign investors.
Passengers can reach the airport complex “in 10 minutes from EDSA” using SMC’s proposed elevated roadway that cuts across Metro Manila north to south.
Ang says the project is meant to provide the country with an alternative to the aging Ninoy Aquino International Airport, which has reached the limit of its expansion, and the Clark International Airport, which is too far from Metro Manila.
“It will be a mini-city,” Ang says, with PAL moving its base of operations there.
Looking for $5 billion
The total project cost, including the elevated tollway, a modern air terminal, runways and the land will be around $5 billion.
“Can we afford it? Of course we can afford it,” Ang asserts.
To understand the logic of what can only be best described as an unconventional leapfrog strategy, one has to peel away the layers of Ang’s business plans to get to the core of his leaps of vision.
He has several hands-on ideas about how to turn around the airline that has lost market share in recent years to aggressive budget carriers.
“PAL is a good company with an excellent brand. Despite so many problems over the last 20 years, the company has always been above water,” Ang says.
Fuel is an airline’s single most expensive operating cost item. Airlines make or lose money on sheer turnaround efficiency, by cutting the hours planes stay on the ground and increasing flying time.
Simple does it
Ang’s plans for PAL are simple and straightforward, which means they can work: Rationalize its operations together with its sister firm Air Philippines, which SMC also bought into.
In Ang’s mind, Air Philippines is to take overall domestic and short-haul international routes using the budget carrier model, to allow the airline to compete directly with Cebu Pacific and Zest Air.
With Air Philippines taking over the short-haul routes, PAL will concentrate on long-haul routes like regional flights that take longer than three hours, where passengers are willing to pay more for service and comfort.
Nuts and bolts
Ang also plans to acquire up to 100 new planes for both PAL and Air Philippines over the next five years. New planes are more fuel-efficient.
That’s the nuts-and-bolts logic to turn around PAL and Air Philippines.
The airport complex is the hub of the strategy. It is also key to making the tourism master plan fly.
Apple’s resident strategist, Allan Kay, best articulated what has since become the new mantra of strategic planning: “The best way to predict the future is to invent it.”
Working in tandem with Tourism Secretary Ramon Jimenez Jr., Ramon S. Ang plans to invent the future up, up and away.
(The author is president of a think tank specializing in transforming social and economic trends into public policy and business strategy. E-mail [email protected].)
