MANILA – While Philippine Airlines (PAL) is struggling over ownership issues, rival Cebu Pacific is expanding its footprint with a bid to fly to the US.
“We applied to FAA for our operating permit to fly to US,” Alex Reyes, head of Cebu Pacific’s long haul division, told Interaksyon.com.
Cebu Pacifiic’s move to fly ito the US came after the Federal Aviation Authority upgraded the Philippines’ aviation rating to Category 1 last April.
Cebu Pacific already has clearance to fly to Guam, Saipan, Honolulu, San Francisco, and Los Angeles after the Philippine carrier bagged the approval of the US Department of Transportation.
According to Centre for Asia-Pacific Aviation (CAPA), Cebu Pacific’s first US route will be Honolulu-Guam.
“Cebu Pacific plans to launch Guam by the end of 2014 using its A320 fleet. Honolulu will take slightly longer to launch as Cebu Pacific first needs to secure extended range twin-engine operations (ETOPS) approval for its A330 fleet,” CAPA said.
CAPA said Honolulu will also be “challenging from a competitive standpoint” as PAL is increasing its Manila-Honolulu flights from four to seven a week ahead of Cebu Pacific’s expected entry into the Hawaii market.
“PAL’s response thus far to Cebu Pacific’s long-haul expansion has been extremely aggressive. PAL also launched Dubai and Abu Dhabi at about the same time as Cebu Pacific entered Dubai and also has launched Dammam and Riyadh ahead of Cebu Pacific,” CAPA said.
By September, Cebu Paciifc will be flying to Kuwait and Sydney, Australia.
But despite the stiff competition in the long-haul market, “Cebu Pacific is prepared to weather the storm. If anything PAL is more likely to retreat as questions again surface over PAL’s future ownership structure,” CAPA said.
Recently, San Miguel Corp (SMC) admitted that it was in discussions for either divesting from PAL or buying out the Lucio Tan Group.
SMC, through wholly owned subsidiary San Miguel Equity Investments Inc, earlier entered into investment agreements with Trustmark Holdings Corp and Zuma Holdings and Management Corp, giving the food-and-beverage conglomerate a 49 percent stake in PAL and Air Philippines Express for $500 million. The remaining 51 percent of PAL remains with Tan.
The FAA upgrade also allowed PAL to expand operation to the US, particularly to New York, Chicago and Florida.
PAL operates a total of 26 weekly flights to the US, with frequencies to Los Angeles, San Francisco, Honolulu and Guam.
“Cebu Pacific is still too new to the long-haul low-cost game to determine if it will be a winner,” CAPA said.
Additional aircraft acquisition
According to CAPA, Cebu Pacific was already evaluating acquisition of the A350, 787 and the 777X.
“The latter is still several years away but would enable flights from Manila to the west coast of the US, which have traditionally been PAL’s largest and most lucrative long-haul markets,” CAPA said.
“We are always evaluating aircraft acquisition since we are in constant touch with airframe manufacturers,” Cebu Pacific’s Reyes said.
“As an airline we are continually studying opportunities for further growth,” he added.
At present, the airline has 50 aircraft and total remaining order book of 11 A320s, 30 A321 NEO, and2 A330s on operating lease, with 8 A320s for lease returns.
In the first six months, Gokongwei-owned Cebu Air Inc (CEB) reported a profit of P3.18 billion, up 124.7 percent from the P1.414 billion in the same 6 months of last year. In the second quarter alone, Cebu Pacific’s net income shot up to P3.01 billion from the previous year’s P257.34 million.
Revenue grew 23 percent to P26.72 billion in the first half from P21.73 billion last year. In the second quarter alone, top line rose to P14.95 billion from last year’s P11.18 billion.