MANILA – Philippine Airlines is expanding its routes and opening new destinations ahead of the entry of a new strategic investor. It also wants Manila to become North America’s gateway to Asia, despite the capital's congested airport.
The Philippines’ flag carrier will resume flying to New Delhi in the second quarter, reviving a route to Asia’s second largest economy that it discontinued in 2013. PAL will start flying to Hanoi and Phnom Penh at the end of March.
PAL President Jaime Bautista said the new routes mark a shift in the company's strategy toward making Manila a transit point for passengers from the U.S. and Canada to other Asian destinations.
“Our goal is to strengthen PAL’s network and establish the Philippines as a true gateway hub for Southeast Asia and South Asia for the North American market,” Bautista said.
To achieve its goal, PAL will expand its flights to the U.S. and Canada. PAL already has the widest route network of any Southeast Asian airline, with 43 flights a week to New York, Los Angeles, Toronto, San Francisco, Honolulu and Vancouver.
Bautista said PAL will also take advantage of the Philippines’ location in the Asia-Pacific as a convenient jumping-off point to other Asian capitals.
The carrier’s ambitions face headwinds primarily from its hub in Manila, which at one point was ranked the world’s worst airport. Its standing has improved in recent years, but it is still in dire need of upgrades.
"The fact that PAL is not in a global alliance is a weakness but the inferior transit experience at Manila compared to other hubs is a bigger concern," said Brendan Sobie, chief analyst and Southeast Asia chief representative at CAPA Center for Aviation.
PAL operates out of Ninoy Aquino International Airport in Manila. In 2017, the airport welcomed 42 million passengers in facilities designed for only 31 million. Bautista said only a tenth of passengers transit from Manila to other destinations, and the carrier wants to raise that number to 15-20%.
“If we improve the airport infrastructure, we should be able to have more transit passengers through Manila,” Bautista said. PAL plans to deploy larger aircraft as part of its efforts to deal with the congestion in air traffic.
PAL’s affiliate, the LT Group, is part of a consortium that pitched a $6.8 billion proposal to expand NAIA’s capacity to 100 million passengers in exchange for a 35-year concession to manage the airport.
The airline's strategy will compete with bigger Asian airlines who share the same ambition such as Singapore Airlines, Cathay Pacific and ANA Holdings.
PAL’s vision comes at a time when the carrier is in talks with an unnamed party for a strategic partnership that would boost the Philippine carrier’s growth significantly. PAL wants to get a 5-star rating from transport rater Skytrax by 2020. Last year, it secured a 4-star rating.
Bautista said PAL aims to close the deal for a strategic partner in the first half of 2019.
Sobie said it will be a difficult strategy for PAL given the stiff competition.
"Yields in the Southeast Asia-North America market have become insanely low, making it nearly impossible for an airline pursuing aggressive expansion in this segment to become profitable," Sobie said.
"To overcome all of this and attract traffic in markets such as Vietnam-U.S., PAL would need to offer fares which are well below cost, making it difficult for the airline to improve its financial situation."