Emirates threatening Gulf plans of PAL, CebuPac

DUBAI flag carrier Emirates’ move to fly to Clark International Airport and Cebu by March this year will make it the second-biggest foreign carrier operating in the Philippines, placing more pressure on the Middle East ambitions of local airlines, an aviation think tank said.

CAPA-Center for Aviation said in a report last week the Cebu-Clark-Dubai circular route means Emirates will corner 42 percent of the capacity between the Philippines and the United Arab Emirates. Emirates said it will use its Boeing 777-300ERs to service the route.

Emirates is also adding four weekly flights to Manila, meaning a 79 percent capacity expansion in the Philippine market, thus providing more competition for Philippine Airlines and Cebu Pacific Air, CAPA said.

Added flights would place Emirates just behind Cathay Pacific, the largest foreign carrier operating in the country.

The move comes on the heels of air talks between the UAE and the Philippines in August last year, which local carriers, unsuccessfully, had sought to block.

Emirates was seeking more flights between Dubai and Manila, which the Philippine negotiating panel granted on the condition that it would develop hubs like Clark and Cebu.

Emirates pulled out of Clark in 2014 after operating for seven months, partly citing the low passenger load.

“Emirates’ decision to serve both Clark and Cebu rather than just one, which would have met the requirement under the Philippines-UAE bilateral, is logical. Emirates is generally not keen to do circular routings but the circular routing enables it to test out both markets,” CAPA said in its report.

“Eventually, Cebu and Clark could potentially support its own flight, particularly if Emirates is unable to add capacity at Manila through more frequencies or up-gauging existing flights to the A380,” it added.

Apart from Emirates, rival Etihad is also adding three weekly flights to Manila.

CAPA said the combined capacity expansion from both Gulf carriers increases the risk that the market could “again suffer from overcapacity, resulting in similar conditions as late 2013 and 2014.”

“Gulf carriers will inevitably continue to expand in the Philippines, further pressuring Cebu Pacific and particularly PAL as the flag carrier aims to expand its European network,” CAPA said in its report.

In response, PAL is adjusting its strategy in the UAE. CAPA said PAL has been adding tags to its Abu Dhabi and Dubai services, meaning its flights to the UAE will continue to other destinations in the Middle East.

Cebu Pacific, meanwhile, has yet to announce new plans in the region.

“The new flights will enable PAL to rely less on the end-to-end Manila-Dubai and Manila-Abu Dhabi sectors,” CAPA said.

“A portion of its Manila passengers will carry on to Doha, Kuwait and Jeddah while PAL will also be able to pick up local passengers to fill the seats occupied by Manila-Dubai and Manila-Abu Dhabi passengers,” it added.