PH airlines stand to gain much from FAA upgrade

Now that the Philippines has regained its Category 1 status from the US Federal Aviation Administration (FAA), expect the local airlines to reap the benefits of flying to more destinations in the United States, aviation consultancy CAPA Center for Aviation said in a report.

The Category 1 safety rating was granted last week by the FAA six years after the Philippines satisfied the US agency’s requirements. The previous Category 2 prevented Philippine carriers operating in the US from expanding operations and blocked the entry of new players.

CAPA said in its report that the upgrade “opens up short-term expansion opportunities for Cebu Pacific Air and Philippine Airlines (PAL), brightening the outlook for both carriers.”

Both carriers have the option to further expand in Europe, but it said flights to the United States, which is home to three million Filipinos, against the 700,000 living in Europe could dominate their respective strategies for now.

The upgrade was more important for Philippine Airlines, as this would allow the flag carrier to save millions of dollars by switching to more fuel-efficient planes like the long-range Boeing 777-300ERs, and capitalize on new partnerships with US-based carriers, CAPA said.

PAL already has flights to Los Angeles, San Francisco, Hawaii and Guam, while Cebu Pacific has no presence in the US market.

“PAL had been looking at launching multiple European destinations in 2014 and still has a sufficient number of A340-300s to potentially launch one or two. But new US destinations could become the priority over continental Europe,” CAPA said.

“It would be logical for PAL to focus on the US and catch up on the six years it has not been able to grow in the US market.”

The aviation consultancy firm noted that PAL would have the edge when it expands in the US. PAL president Ramon Ang said last week that the airline would revive flights to key cities like New York and Chicago within a year following the upgrade.

CAPA said PAL would have less competition with Gulf carriers as the flag carrier is the only airline to provide nonstop flights from Manila to the US west coast.

CAPA said the route has also been lucrative, with PAL’s LA and San Francisco flights operating at a 75-percent load factor except during off-peak months from September to December.

Cebu Pacific, which can also expand to the US and Europe, is expected to serve areas outside the mainland US and Europe, given limitations on the range of its long-range Airbus A330 planes.

“The LCC [ low-cost carrier ] is expected to initially focus on Guam and Honolulu with both routes likely to be launched by the end of 2014,” CAPA said.

As noted, the restoration of Category 1 would allow domestic carriers to tap new codeshare agreements with US carriers, giving them connections on the mainland beyond gateways.

CAPA said Hawaiian Airlines, Alaska Airlines and Virgin America are all potential suitors, while JetBlue was also a potential partner for PAL should it launch flights to New York.