PHILIPPINE Airlines (PAL) must cut down its widebody fleet to help it reduce low-yielding routes from its long haul operations, particularly to Europe and North America, an aviation think tank said.
Australia-based Center for Asia Pacific Aviation (CAPA) said in a report over the weekend the flag carrier should consider replacing its long-range jetliners with new aircraft that would more suitably meet the demand for long haul flights.
“Operating fewer long haul aircraft would enable PAL to cut capacity to North America and/or drop Europe entirely… The Philippines-Europe market is extremely competitive, due to aggressive competition from the Gulf carriers and from other Asian airlines. PAL is best off retreating from Europe entirely,” it said.
PAL currently has 16 long haul aircraft in its fleet: six Airbus A350-900s and 10 Boeing 777-300ERs. These are flying to London, Los Angeles, New York, San Francisco, Toronto and Vancouver.
The CAPA report noted PAL has not been making profit out of its Manila-London route, despite numerous attempts to adjust its schedule, frequency and aircraft since it was launched in 2013.
While PAL is looking at the possibility of halting London flights and opening a Paris route instead, CAPA said the better option is for the carrier to stop flying to Europe altogether.
“The Philippine carrier is probably better off dropping its European ambitions entirely and reducing the size of its widebody fleet. PAL is looking at acquiring more (Airbus) A350s or ordering (Boeing) 777Xs to replace its older model (Boeing) 777-300ERs, but should instead use upcoming lease returns as an opportunity to cut long-haul capacity and improve profitability,” CAPA said.
PAL’s 10 units of 777-300ERs are on lease, which would all be expiring starting 2022 to 2025.
“PAL should consider returning the first two 777-300ERs without replacing them — and therefore postpone a selection of new widebodies for another two years, when it will have to decide on the eight 777-300ERs that can be returned in 2024 and 2025,” the report said.
“Without a reduction in the fleet, it is difficult for PAL to cut back in North America or axe London without launching Paris (as is tentatively planned),” it added.
Regarding flights to North America, CAPA said the potential new destinations are “competitive and have significantly less local traffic to the Philippines,” hence it is better for the carrier to only keep its flights to Los Angeles, New York and San Francisco.
“PAL could be better off with a reduced year-round schedule to North America. For example, a 10% to 15% cut would still result in significantly more North America capacity than in prior years and provide impetus to improve load factors and yields,” it said.
PAL has been recording losses since 2017, which CAPA attributed to the operations of long-haul flights. “Suspending London and shelving the launch of new US destinations is a sensible initial move by PAL as it tries to restore profitability,” it said.
In the first quarter of 2019, the listed carrier posted an attributable net loss of P838.17 million, 24.3% slimmer compared to in the same period last year, driven by a growth in passenger volume from added flight frequencies and new routes. — Denise A. Valdez