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Experts see early benefits in PAL-ANA alliance

/ 10:53 AM February 04, 2019

MANILA, Philippines — The entry of Japanese industry giant All Nippon Airways (ANA) into Philippine Airlines (PAL) will provide a host of benefits for the flag carrier, including the immediate goal of helping reverse losses over the last two years as PAL’s aggressive international strategy delivered mixed results.

The alliance, involving ANA Holdings’ acquisition of a 9.5 percent stake in operator PAL Holdings for $95 million, is also viewed by industry experts as an ideal fit that would strengthen ties between North Asia and Southeast Asia.

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“An Asian carrier partner is more compatible in cultural and organizational terms, which is important for a service business,” Roberto Lim, former Philippines country manager for the International Air Transport Association, told the Inquirer.

PAL president Jaime Bautista earlier said they have also been in talks with suitors from the Middle East.

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“This investment bodes well for expanding tourism for both markets and is a boost to expanding the route network of PAL,” added Lim, who was also the former vice president for legal affairs at PAL.

In an email, CAPA Center for Aviation chief analyst Brendan Sobie called the investment a “major breakthrough” for the flag carrier in its long-running search for a foreign strategic partner.

In his report, Sobie said the ANA deal would provide PAL with added capital and expertise to fuel its expansion plans abroad.

ANA’s presentation to investors last Jan. 29, the same day the investment in PAL was formally announced, signalled expanded codeshare flights, or those that can be sold by an airline but operated by another carrier.

Sobie said the tie-up also opens up the possibility of membership in a global airline alliance, which offers benefits such as an expanded network and cost savings, apart from providing a boost to PAL’s target to achieve a five-star Skytrax rating by 2020.

However, the entry of ANA could prompt PAL to slow down its rapid international expansion. Sobie noted that PAL’s operations to Australasia, the Middle East and North America have been losing money over the past two years.

He said with ANA onboard, PAL could focus on “consolidating its position in the international market and improving profitability.”

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“With relatively conservative ANA on board as a new investor, a focus on profitability and rational growth is likely,” he said. PAL has been in the red since 2017, however, the airline is expecting better prospects this year as jet fuel prices ease, Bautista said last Jan. 8.

Congestion woes in Manila’s Ninoy Aquino International Airport would also need to be addressed for PAL to succeed in its efforts to tap transit traffic between North America and Southeast Asia.

“PAL would be better to focus on the local market and hold off on international hub aspirations until infrastructure constraints at Manila are eased – and until it is able to offer a transit service on par with other Asian hubs, including ANA’s at Tokyo Narita,” Sobie said. /je

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TAGS: airlines, All Nippon Airways, alliance, ANA, Business, latest news, PAL, Philippine Airlines
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