Failed PH-Aussie air talks limit Cebu Pacific’s expansion options

The failure of the Philippines and Australia to reach a new air deal was not only limiting the expansion options for budget carrier Cebu Pacific, which is growing its long-haul business, but also costing the island-continent potential significant growth in demand, an aviation think tank said.

In a report dated Aug. 19, the Center for Asia Pacific Aviation (Capa) described the inability of both jurisdictions to come to an agreement as  “a classic case of mercantilistic bilateral pugilism,” involving end-to-end rights, beyond fifth freedom rights and third country code sharing.

“The differences between Australian and Philippine authorities on the extension of their air services agreement are frustrating Australian airports, which have seen medium/long-haul low-cost carriers drive international traffic growth in recent years,” Capa said.

“The implications can be far-reaching and are almost always negative,” it added.

The Civil Aeronautics Board (CAB) said in June that talks to revise an existing air agreement between the Philippines and Australia, held from June 18 to June 19, did not result in a successful deal. CAB executive director Carmelo Arcilla confirmed that fifth freedom rights were among the stumbling blocks.

Fifth freedom rights would allow an airline to fly passengers from its home country to a second country where it has an existing air service agreement, before proceeding to a third destination.

Arcilla said in a text message that the Philippines and Australia were unlikely to have new air talks for the rest of the year.

He earlier noted that CAB was negotiating to double the current 6,000 seat entitlements per week to Australia, most of which are allocated to flag carrier Philippine Airlines.

A new air deal between the Philippines and Australia would open up opportunities for Cebu Pacific to enter this market. The budget carrier, owned by the Gokongwei family, is considering expanding its long-haul services with the addition of Airbus A330-300 planes.

“With (Philippine Airlines) unlikely to allocate more wide-body capacity to Australia, Cebu Pacific is the logical carrier to unlock a new period of growth in the Philippines-Australia market,” Capa said.

It noted that the Philippines remains Australia’s 11th-largest market but the increasing numbers of overseas Filipino workers could open up avenues of growth.