PAL losing out to rivals as market share shrinking fast over 10 years

Air Asia Philippines is taking the domestic and international market share that Lucio Tan-led Philippine Airline is losing over the last 10 years, as airline experts blamed the flag carrier’s continued losses to its inability to utilize its aircraft optimally. 

PAL, which laid-off 300 ground-based administrative and management personnel, suffered a 17.4-percent decline in international market share to 46.6 percent last year from as high as 64 percent in 2010, according to data from the Civil Aeronautics Board.  

PAL’s international market share stood at 51.5 percent in 2018 and 52.9 percent in 2017.

PAL’s international passenger growth of 2.7 percent last year was the slowest since 2013 at 5.06 percent. The airline carried 7.6 million international passengers last year from 7.44 million international passengers in 2018. 

The domestic market share of PAL and subsidiary PAL Express also fell to 29 percent last year from 43.17 percent in 2010. In 2018, PAL Group’s domestic market share stood at 29.94 percent 

“That’s expected with the increase in fleet of Air Asia and Cebu Pacific as well as the introduction of more flights, obviously that would result in the reduction of the market share of PAL,” said former PAL and Southeast Asian Airlines president Avelino Zapanta in a telephone interview. 

PAL has over 100 aircraft, but Zapanta said: “but the problem is that PAL is not utilizing its aircraft optimally.” 

Budget airline Air Asia Philippines, meanwhile, is eating the international and domestic market share of PAL. From just a 1.58-percent international market share in 2010, Air Asia’s market share significantly expanded to 15.1 precent in 2019. 

For domestic, Air Asia’s market share rose to 18.08 percent last year from just 7.3 percent in 2018.  

Cebu Pacific’s international market share stood at 36 percent last year from 33.6 percent in 2010 and 34.7 percent in 2018. Cebu Pacific’s domestic passenger market share stood at 44 percent from 48 percent in 2010. 

Zapanta said PAL was losing a big amount of money in the last two to three years because it was paying lease charges for so many aircraft that they were not using optimally. 

“The economics of airline operations lies in the optimal utilization of your fleet,” he said. 

Zapanta added the reduction of manpower could help PAL to reduce losses “but the reduction of 300 manpower to 1,000 is not as much as loss when you are amortizing millions of dollars of aircraft and you are not generating enough revenues.”

PAL’s financing charges as of end-September last year ballooned 142 percent to P9.45 billion from P3.8 billion a year ago due to leases and additional aircraft financing.

Astro del Castillo, managing director of First Grade Holdings Inc., agreed with Zapanta, saying  PAL has to re-strategize in order to preserve its market share.  

“They need to be aggressive in pricing,” Castillo said, as well as in expanding unexplored routes. 

An official from PAL, which requested not to be named, said some routes were “challenging but in general we have a strong market.” 

PAL currently flies to over 30 domestic and 40 international destinations covering Asia, Oceania, Middle East, North American and Europe. 

In order to cuts its losses, Zapanta said PAL should increase its flights frequencies and introduce more flights to gain more traffic.

“They have to take the challenge unless they don’t have the confidence of doing that. They will turn around if they will generate more traffic and revenue,” he said. 

PAL Holdings Inc., PAL’s parent firm, earlier reported a net loss of P7.86 billion in the first nine months of 2019, up 139 percent from a total comprehensive loss of P3.29 billion in 2018.

Consolidated revenues in the January-to-September period amounted to P117.92 billion, up 5.6 percent from P111.62 billion on year.

Topics: Air Asia Philippines , Philippine Airline , Civil Aeronautics Board
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