THE plan of Cebu Pacific to offer budget long-haul services could force Asia’s oldest airline “out of business,” according to the Centre for Asia Pacific Aviation (CAPA). The airline unit of JG Summit Holdings Inc. (JGHSI) on Tuesday surprised the industry when it announced that it would offer long-haul operations in the third quarter of next year. The country’s leading budget airline targets to operate in cities where large Filipino communities reside such as Europe, Middle East, Oceania and the United States. In its report, CAPA said that Cebu Pacific would benefit from the Philippines’ extremely price sensitive market that has seen low-cost carriers (LCCs) achieve a staggering 80 percent share of the domestic market and a fast-growing share of the regional international market. With a gross domestic product (GDP) per capita of $2,255, CAPA said that “price is more sensitive” in the Philippines. “Demand for low-cost long-haul services will come primarily from the large visiting friends and relatives [VFRs] and migrant worker market. But Cebu’s new low-cost long-haul operation will also benefit from growing tourism and potentially the ability to transfer passengers over a geographically convenient hub if Cebu decides to stray from its original point-to-point model,” CAPA said. The report further said that Cebu Pacific would have an advantage over the other low-cost long-haul carriers in proving the model on ultra-long-haul flights. “Filipinos already demand long-haul flights given its large expatriate populations in the Americas and Europe,” CAPA added. Data from CAPA showed that there are about 11 million Filipinos living overseas, including about 3 million in the US and about 2.5 million in the Middle East. “Only a little over one million expatriate Filipinos live in Asia, a market Cebu has targeted with its fast-growing regional international operation, and has stimulated [the market] by offering low fares that allow these workers to return home much more frequently,” the report said. “The fact an overwhelming majority of the expatriate Filipino population lives outside Asia shows the huge potential of a low-cost long-haul operation in the Philippines,” it added. The CAPA report also warned that Cebu Pacific’s plan to operate in Europe and Middle East could be challenging because of stiff competition and higher operating expenses. The Philippines-Europe market is now served mainly by the Gulf carriers, which have relatively low-cost structures and the advantage of operating geographically well-positioned hubs that can connect a wide range of city pairs. Changing competition landscape Flag carrier Philippine Airlines (PAL), also Asia’s older airline, pulled out of Europe several years ago. KLM is now the only European carrier still serving Philippines but it plans to drop its non-stop Amsterdam-Manila flight in late March in favor of a new Amsterdam-Taipei-Manila service. CAPA, however, said that if Cebu Pacific would be allowed to launch US flights, the situation would be different since competition is not nearly as intense as it is on flights to the Middle East and Europe. Cebu Pacific earlier said that it expects its passenger volume in international routes to grow by 20 to 25 percent, and those in domestic routes to expand by 10 to 15 percent. Its passenger count is seen to increase from 11.9 million in 2011 to about 14 million by yearend. If Filipino aviation had to be re-created from scratch, CAPA said that low-cost would be the model of choice, possibly with one carrier adopting a hybrid model. “The case for Cebu long-haul services is clear-cut, but the medium-term opportunity for PAL less so. Reducing a cost base to be more competitive can be done, but when PAL outsourced certain divisions in 2011, strikes crippled the airline, nearly shutting it down for a number of days. No carrier has successfully stripped costs out to be competitive against LCCs. Half the solution is to cut costs while the other half is to improve positioning.” CAPA said. PAL has become a weak carrier with a bleak outlook, CAPA said, but Asia’s oldest airline has time to respond to the new threat Cebu Pacific’s long-haul operation will bring and revise its strategy accordingly. “The new fleet of 777-300ERs and US expansion, if allowed, could help PAL’s viability. But it should seek out new airline partners, improve its premium product and look to join a global alliance [persuading an alliance to accept PAL however could prove to be a challenge],” it added. “To fend off the latest threat, PAL will need to work hard, make changes and hope that Cebu really sticks to the pure LCC model. A hybrid model for Cebu would create a far more challenging scenario for PAL,” CAPA added. Source:- http://www.manilatimes.net/index.ph.../16424-cebu-pacific-out-to-give-pal-headaches
Might be interesting if it ever gets off the ground (no pun intended) Cebu Pacific is not currently on my list of preferred carriers.
What we are not thinking of, isn't the price of the flight in itself, it is the humungous amount of various taxes that we have to pay to be able to get on that flight from the UK.... We, at times, rant about the Philippine Departure Tax, and terminal fees, and fail to realize that our government and airports, rip us off in a more scandalous way.... And if we do realize how deep we are being shafted, we seem to moan a bit, but in the end, we just take it, as there aren't too many alternatives on offer... Cebu Pacific, eventually will start full of good intentions, but they cannot budge or circumvent the UK tax system, so the prices they will charge will be more or less what we already are used to pay to other carriers.
A mate of mine a little while a go went on holiday to with his wife to Rio. He ended up booking his flight from paris, he then boked a budjet airline from glasow to paris. The difference in price was considerable when comparing the cost of a flight originating in the uk to one out of paris. It might be something worth considering especaily if yuor missus has a UK passport then there is no worrries about schengen visas etc.
We'll look into this when my wife has her British passport. Does anyone have a list of the airlines that fly to Cebu City & Manila?
this was my list from a year ago - the Hong Kong route is quickest because its a great circle route. I went Cathay to Cebu they were fine. Going via the Arab carriers tends to be cheaper but longer travel time. I set up alerts in Kayak which I would recommend. Then if you see something good go to the airline website check if a different day will adjust the price down a bit. But I am sure others here may have more up to date info/comments... best airlines/routes cathay P - HK Singapore - Singapore Asiana - Seoul Etihad - Abu Dhabi Qatar - Doha Malaysian - Kuala Lumpur Emirates - Dubai
Airlines tend to use great circle routes on medium / long haul flights as it sthe shortest distance between to points on a sphere. Onlt know that as its one of the navigation methods we use at sea. Good list of airlines though, now klm are going to stop flying to the phils I'm having to have a re-think. Has anyone used Lufthansa to go out there recently?
The KLM thing is not a done deal yet Stu, it appears there are still direct flights out as far as dec 2012, sadly they have ruined the flight as it now flys in at 7pm instead of the morning so one will often by flying into lightning and storms and of course the time of arrival is going to lose me a day or two annual holidays as I arrive back at the wrong time to get to work.
Ah did not realise that, might still get to use my airmiles towards a business class seat I keep promising the wife!! Still like you say by altering the time that much brings about its own series of problems. Didn't realise the weather altered so much on those flights depending on the time traveled. Shows how long I've been using KLM and no other airlines doesn't!!
Yep Well if you are in and around Manila from June till November-December you can pretty much guarantee an electric storm from around about 6pm onwards, in the morning it's different, the weather is usually sunny or a little rainy so landings are usually a breeze. For me I will miss arriving in the morning, I always felt safe getting out of NAIA in the morning, it also meant I could have fun with the kids in the morning and get a good sleep in the afternoon and be fresh enough to maybe go out somewhere with Ana in the early evening, now I'll really have to rethink the sleep patterns before and during the flight. Plus the return now gets into Manchester at about 8am, so for me I would have to go straight to work arriving back tired at 10pm the night before was great because I usually slept really well and adjusted right back into work almost perfectly the next day, I did tend to then sleep at about 6pm for a few nights but I tend to do that anyway most of the time
