Budget airlines seen expanding int’l network

Budget airlines are expected to do for international travel what it did for the domestic sector, which are to bring down fares and make plane travel more accessible to millions of passengers.

A report by the Center for Asia Pacific Aviation (Capa) released this week said budget airlines’ penetration in the country’s international market showed ample room for growth.

“The Philippines already has one of the highest LCC (low-cost carrier) penetration rates in the world, about 60 percent,” CAPA said.

“While the domestic LCC penetration is unlikely to grow significantly as it is already above 80 percent, the approximately 32 percent international LCC penetration rate will continue to increase as regional markets such as Japan open up and as Philippine LCCs expand into the long-haul market,” it added.

The report cited expansion plans by several local budget carriers into the long-haul international arena currently dominated by flag carrier Philippine Airlines (PAL).

For instance, market leader Cebu Pacific has announced plans to start flying to points in the Middle East, Australia, Eastern Europe and the United States starting the third quarter of next year.

Zest Airways, owned by juice magnate Alfred Yao, also recently asked the Civil Aeronautics Board (CAB) for flight entitlements to the Kingdom of Saudi Arabia.

Like Cebu Pacific, Zest Airways will use Airbus A330 wide-body planes for its long-haul services.

CAPA said the PAL group, now run by conglomerate San Miguel, would be well advised to expand its low-cost sister AirPhil Express into the international medium- to long-haul market.

“Having a budget carrier for both the short-haul and long-haul international markets is logical given the strategy of PAL’s Asian peers and the fact the Philippines is predominantly a budget market,” Capa said.

“While there will be some growth in the premium market as the Philippines’ economy expands, most of the growth in the country is at the lower end of the market. To capture this growth, the PAL Group needs a strong budget brand for the domestic, international short-haul and international medium/long-haul markets,” it added.

PAL handles 32 percent of all international traffic going in and out of the Philippines.

Its rival Cebu Pacific, on the other hand, has about 17 percent of the market.

PAL would be the third full service airline group in the region to launch a low-cost long-haul operation, joining Qantas and Singapore Airlines.