Airlines In The Philippines II

[fd20]

CAPA just published an analysis of PAL's long haul operations, hinting that they may drop LHR eventually. This is a bit strange - I thought LHR was already improving?

They also suggested that PAL cut back on its long haul operations and reduce their widebody fleet as they are supposedly highly unprofitable.

https://centreforaviation.com/analysis/reports/philippine-airlines-long-haul-adjustments---first-drop-london-478183

Historically, though, CAPA has never really been optimistic about PAL (I've also read some of their earlier articles about PAL and they were generally very negative). They usually praise Cebu Pacific, though. According to someone on A.net, they were also very optimistic about an African airline that barely even exists now (which calls into question its credibility).

[Solblanc]

LHR is still in the stage of maturing. The traffic is there, but the competition is quite fierce.

In any case, long-haul is a challenge in this day and age of Chinese carriers offering super-cheap fares.

As mentioned on A.net, the CAPA article quotes JJB. Someone else is in charge now. So we’ll probably only see major decisions play out once the transition to new management is complete.

[Arianespace]

We have discussed this before. Its true that JJB hinted to drop this route 2 years ago but never did for reason cited. And that was two years ago. He was also quoted to leave the middle east because of fierce competition. They are still there. If it is truly unprofitable then they would have cut losses and left a long time. But never did.  

[Evodesire]

fd20 wrote

CAPA just published an analysis of PAL's long haul operations, hinting that they may drop LHR eventually. This is a bit strange - I thought LHR was already improving?

They also suggested that PAL cut back on its long haul operations and reduce their widebody fleet as they are supposedly highly unprofitable.

https://centreforaviation.com/analysis/reports/philippine-airlines-long-haul-adjustments---first-drop-london-478183

Historically, though, CAPA has never really been optimistic about PAL (I've also read some of their earlier articles about PAL and they were generally very negative). They usually praise Cebu Pacific, though. According to someone on A.net, they were also very optimistic about an African airline that barely even exists now (which calls into question its credibility).

I have the same thoughts about CAPA. They have been so negative about PAL and they are all out praises for Cebu Pacific, to the point of even naming them the Airline of the Year.

CAPA went on saying that Cebu Pacific's long haul plans will easily put PAL out of the market but guess what happened.

Sadly, mainstream media decided to report their story.

AFAIK, LHR was reduced to 5 times a week only but would most likely increase again come the winter season. Same as US.

The goal of PAL is still to become a 5-star airline, but what will surely change there is the target time period as I do see the new management rationalizing everything. I do also see a new wide body order in the horizon as the lease of 2 PAL 777s will expire in 3 years.

Why is CAPA also telling PAL to drop the EU routes? Do they have the financial statements and numbers of PAL? Then if PAL follows, they will urge Cebu Pacific to fly to EU?

IMO, their credibility is at question.

About CAPA, I honestly feel that they are like a marketing arm of Cebu Pacific disguised as a think tank.

[Solblanc]

CAPA in general is very pro-LCC. They do envision LCCs to be the future of travel, and they’re not necessarily wrong there.

Incidentally, looks like there is quite some drama at PAL. But if they’re going to look for a Filipino professional to manage PAL, how many are there in the world? Are there any pinoys that managed to climb the management ladders in other airlines in the world? Or will they settle for someone married to a pinoy?

[seven13]

Solblanc wrote

CAPA in general is very pro-LCC. They do envision LCCs to be the future of travel, and they’re not necessarily wrong there.

Incidentally, looks like there is quite some drama at PAL. But if they’re going to look for a Filipino professional to manage PAL, how many are there in the world? Are there any pinoys that managed to climb the management ladders in other airlines in the world? Or will they settle for someone married to a pinoy?

Knock doors on ANA.
I hope they do find someone who is well versed with aviation and has a good sense of management and shaking things up in PAL

[Arianespace]

Unknown to many, apparently this is Ms. Tan's third act, as confirmed from the inside.

The first executive action was the sacking of PAL vice president for Ancillary Business Unit Kevin Hartigan-Go, PAL assistant vice president Babyruth Chuaunsu, and PAL chief customer experience officer Jessica Abaya. They are the people chiefly responsible for the 4 star Skytrak rating. No matter how the PR of PAL coat it, the outcome is still the same and JJB was not pleased about it.

The second action would be too easy. His head. What would you do if your support group get the axe? Leave. And JJB just did. JJB has the support of the elder Tan, never of the daughter which they usually get at odds with. Intel has it that JJB and gang profited from Airbus deal. I remember the same rumor mill lodged against SMC which was found untrue. Tan Jr immediately come to JJB rescue saying he is "honest man". But damage to his name has already been made. Same damage that was done to SMC. Some say these are the same group that makes the claim. The elder Tan persuaded JJB to stay but stood his ground saying he cannot work with this woman. I wonder why? The official statement however is time with the family. How convenient. The picture here is not all well despite the smile.



Bautista does not talk ill about his boss but his action does to his family members. He was absent in the board meeting and will be absent in the days to come until June 30. He is supposed to retire two years from now. That showed intense animosity and displeasure regardless of how you coat it to be. And yet PAL statement showed them working together. I mean, really?

Ms. Tan's group thought its all in the bag until the Board spoke adopting Bong Tan's recommendation to "hire professional manager" to shield the company from corporate squabble, and in effect confirmed JJB's plan for the airline to continue, ie long haul expansion and service improvement against the wishes of the woman. Some service reduction is consistent with the lean season but the woman wants to cut more and so she did.

Ms. Tan maybe the smartest of the Tan siblings which presupposes that its no brainier for her to assume the top post, but she never had the business acumen of his father. That belong to Tan Jr who is JJB's protege and groomed to be his replacement. But the woman wants none of it. Note that IQ is different from EQ. So she was tossed up there. And yet you cannot see the elders support from there. Makes you question more? Remember these are squabbles between the two.

From all indications, round one was won by Bong convincingly. Now lets see round two. What would she do with this grounded planes? I can easily see 4 wide bodies doing nothing with leases rolling. And probably to CAPA's displeasure, London flights is not affected at all.

[XWB_flyer]

Arianespace wrote

Unknown to many, apparently this is Ms. Tan's third act, as confirmed from the inside.

The first executive action was the sacking of PAL vice president for Ancillary Business Unit Kevin Hartigan-Go, PAL assistant vice president Babyruth Chuaunsu, and PAL chief customer experience officer Jessica Abaya. They are the people chiefly responsible for the 4 star Skytrak rating. No matter how the PR of PAL coat it, the outcome is still the same and JJB was not pleased about it.

The second action would be too easy. His head. What would you do if your support group get the axe? Leave. And JJB just did. JJB has the support of the elder Tan, never of the daughter which they usually get at odds with. Intel has it that JJB and gang profited from Airbus deal. I remember the same rumor mill lodged against SMC which was found untrue. Tan Jr immediately come to JJB rescue saying he is "honest man". But damage to his name has already been made. Same damage that was done to SMC. Some say these are the same group that makes the claim. The elder Tan persuaded JJB to stay but stood his ground saying he cannot work with this woman. I wonder why? The official statement however is time with the family. How convenient. The picture here is not all well despite the smile.



Bautista does not talk ill about his boss but his action does to his family members. He was absent in the board meeting and will be absent in the days to come until June 30. He is supposed to retire two years from now. That showed intense animosity and displeasure regardless of how you coat it to be. And yet PAL statement showed them working together. I mean, really?

Ms. Tan's group thought its all in the bag until the Board spoke adopting Bong Tan's recommendation to "hire professional manager" to shield the company from corporate squabble, and in effect confirmed JJB's plan for the airline to continue, ie long haul expansion and service improvement against the wishes of the woman. Some service reduction is consistent with the lean season but the woman wants to cut more and so she did.

Ms. Tan maybe the smartest of the Tan siblings which presupposes that its no brainier for her to assume the top post, but she never had the business acumen of his father. That belong to Tan Jr who is JJB's protege and groomed to be his replacement. But the woman wants none of it. Note that IQ is different from EQ. So she was tossed up there. And yet you cannot see the elders support from there. Makes you question more? Remember these are squabbles between the two.

From all indications, round one was won by Bong convincingly. Now lets see round two. What would she do with this grounded planes? I can easily see 4 wide bodies doing nothing with leases rolling. And probably to CAPA's displeasure, London flights is not affected at all.

So if Ms. Tan become the new President and replaces JJB we could see service cuts to PAL onboard product and scaling back network development. Meanwhile JBB and Tan Sr. have groom Tan Jr. as the next President of PAL and will likely continue with PAL network expansion and product improvement. Quite interested how this will develop in the coming weeks!

[Eurest]

It's a bit tricky as well to outfit the B77W with a space efficient J seat (PR has 28J from L1 to L2), which is why even EK operate a 2-3-2 J product

At the top of my head, to maintain that same number of seats, but with direct aisle they'll have to go for the Cirrus NG or something similar.
But can Zodiac supply PR when it failed with AA and UA?

The PR JJB situation baffles me, as much as CAPA's recommendation. CX and QF both had successful turnarounds and did nothing like what CAPA recommended for them, if I recall correctly.

LHR is basically new, how long has it been flying with the A350, in that time slot and at that terminal (which is my preferred LHR terminal because of its size)
Why change it to CDG? I mean back when this forum did EU to PH pax numbers wasn't it 350k UK visitors vs 65k FR visitors annually?

The PR ferry boats from KLO can still be moved to Sangley via the Mall of Asia to support the Q400 ops, so they're not a disaster.
I'd really want to know what prompted the "spend more time with family"
In North American corporations those only happen when the CEO and the board are not seeing eye to eye, is it the same for SEA conglomerates?
JJB not present in the most recent meeting speaks volumes, I don't care about the smiling pictures in their curated newspapers.
What prompted the seemingly out of nowhere move w/ a now uncertainty on the replacement?
Was it a PR-MH alliance ala AF&KL? Or a PR-VN because of NH?
JJB finally getting an alliance to take PR but the board saying No?
The board reneging on JJB's beyond 2020 plans which they agreed upon a few years back?

[Arianespace]

Guess what. You don't have to wait for weeks.

For the meantime, Tan is expected to steer the company in a new direction.

Asked if there will be big changes in PAL, Tan said: “Yes, a lot.”

Read more at https://www.philstar.com/business/2019/06/27/1929781/search-new-pal-president-coo#vk5epmEUmsyPDqym.99

[Arianespace]

Eurest wrote

I'd really want to know what prompted the "spend more time with family"
In North American corporations those only happen when the CEO and the board are not seeing eye to eye, is it the same for SEA conglomerates?
JJB not present in the most recent meeting speaks volumes, I don't care about the smiling pictures in their curated newspapers.
What prompted the seemingly out of nowhere move w/ a now uncertainty on the replacement?
Was it a PR-MH alliance ala AF&KL? Or a PR-VN because of NH?
JJB finally getting an alliance to take PR but the board saying No?
The board reneging on JJB's beyond 2020 plans which they agreed upon a few years back?

In this case however, the Board is OK with the President & COO. The COO however is at odds with the EVP who has different ideas with the COO. And the way things are in family corporations in the Philippines, the eldest child is more powerful than non-family member who holds the topmost position, particularly so when the CEO holds ceremonial title only. Some family members were not ready to let go of the COO but because some things are broken already that they have to make do and pretend everything is fine when clearly its not. The silence of JJB is deafening. The temporary appointment is troubling for Ms. Tan. How ironic it was indeed. Her own family does not trust her to do the job.

We will soon find out the answer to that fabled question "WHY". And from the way things are at the moment, this is probably the highest rating and accolade PAL can get as they prepare to go on the opposite direction. We should expect a downward spiral from here on.

[XWB_flyer]

 I will admit that I was skeptical about PAL achieving 5 star status by 2020 or 2025. Since it will required a lot of investment not only on there on product, but also on the ground experience such as airport and VIP lounge hence why only a few airlines truly deserve the 5-star rating, (like SQ and QR examples) while others just payed skytrex or showed renderings of there latest J class product that won't be introduced until 2020 or 2021! (I'm looking at you! Lufthansa). I guess PAL's Board of directors  throw the towel and simply quit the 5 star goal and considered 4-stars as sufficient. And now  I think the message now is PAL board will make cost cutting on some of the soft product which they hope will help them return to profitability. I know some will be dissapointed. But most won't bother and simply want to get from point A to point B. Nonthless I'm still hopeful they will still improve some aspects of the passengers experience despite the inevitable cuts to some services.

[Mustang]

I think PAL should consider the purchase of VIP configured A320 like these.  Doubt they have the customer base but considering they are cutting back on flights but adding new routes it might bring a new line of customers.

[seven13]

I was wondering why PR is very reluctant in pursuing JV/Code share with other regional carriers. Is codesharing part of ASAs between PH and Country X?

At present, it has very limited codesharing agreement with other carriers: CI, VN, GA, PG, NH, EY, TK, NX, MF, GF, WJ, HA. It could approach VA in OZ to help hold its footing in SYD/BNE/MEL or probably negotiate with QF to let PR fly SYD and just codeshare with it?

I've seen passengers transferring to AA and UA; HU, AC to NorthAm; SA and LH from Europe.

[Arianespace]

One word. Costs.

There are different code share agreements. All carry different cost structures to sharing airlines.

Almost all code-share agreements can be divided into three major types:

Parallel operation on a trunk route
An example of this is flights between MNL and HND, operated by ANA and PAL. On its own it is mutually beneficial for both airlines. Both carries miles accrual. Etihad deal is also on this category.

Unilateral operation on a trunk route
For unilateral operation, a carrier puts its code on a sector operated by another carrier, but not by itself, and not connecting to one of its own operated flights. Example of this type is usually found in airline alliances.

Behind and beyond route (connecting to a trunk route service)
Behind and beyond routes means, a carrier puts its code on sectors that is not operated by itself but operated by another carrier and provides connections with its own operated services. The classic example of this sort of code-share is, for example, when PAL sells a journey from MNL to Wennipig in Canada, via Vancouver, with the Canada domestic sector operated by Westjet Airlines.

They can s be distinguished from a traditional interline agreement, where the airline merely sells like a travel agent to the continuing or ending destination.

The term ‘online flight’ refers to all flights on an indirect route with the same airline ie SFO-MNL-DVO on PAL. A flight on an indirect route that is hosted by at least two airlines is known as an ‘interline flight’ ie MNL-LAX-IAH on PAL and AAL. This is what we call traditional code sharing that was first used in international flights.

Passengers prefer online to interline flights for a reason. This is why airlines try to offer online flights as much as possible.  

Speaking of online flights, they are also grouped into six main types:
pure online
non-allied interline
allied interline
traditional code share
 semi-virtual code share and
 virtual code share.

Having established that, you then have to consider  3 main types of code share relationships that airlines usually enter into. Each of these has its own rules and technical details which are usually the basis of lawsuits.

1. Free-sale
This is the most common type of codeshare, and perhaps the most difficult to manage/handle from an airline’s perspective. A free-sale codeshare is where both airlines enter an agreement to publish the other carrier’s flight as it’s own, with no or little restrictions as to the amount of seats it may sell on the flight, within capacity constraints. This is what you find in Value alliance, between Cebu Pacific and Scoot for a flight say Cebu-Mali.

The codeshare relationship of a freesale arrangement is somewhat less formal than the other types with regards to revenue sharing and culpability, the operating carrier retains most of the control when it comes to schedule changes, seat assignments, etc.

This type of codeshare is generally very broad and covers a large number of partners’ flights. When CEB delays your flight to SIN and misses your connecting flight to Mali, chances are you may have to pay rebooking fee with Scoot in Singapore.

2. Block-Space
This codeshare arrangement can be a convenient way for a carrier to provide access to a market without necessarily entering into a large free-sale agreement. In many cases a block-space arrangement is used where the participating airlines are not in the same alliance or don’t generally partner in any other way. It is rather complex as it includes ASAs, servicing costs, and personal liability among others.

The operating airline essentially ‘sells’ a specific block of seats on its flight to the marketing carrier. The marketing carrier in turn sells those seats to customers as if it were its own and keeps all the revenue from those sales. The marketing carrier retains FULL control over the booking from the time it is booked until the time it is transferred to the operating airline. It also has independent pricing from the operating carrier. The operating carrier actually has NO idea who has been booked under the marketing flight number, nor the number of passengers booked until a certain point before departure when the marketing carrier send the passenger name list  (PNL) message to the operating airline.

This type of arrangement was found before in Emirates code share with PAL and still existing with other ME airlines. Not nearly as common as free-sale, but is very useful for carriers in many cases.

And then there is also a ‘soft’ blocked-space arrangement in which the marketing carrier can return unsold seats to the operating carrier, which is normally the case for PAL agreement found with ANA and MAS. Other airlines are not quite receptive of this and considered them as sold, ie Delta, American Airlines, Lufthansa, Air France, British Airways, KLM and Qantas. At least that is the norm and not the exception. So you don't see them partnering with PAL until it agrees to that stipulation.

3. Modified Free-sale or Capacity Purchase (aka capped free-sale)
Another form of ‘codeshare’ is actually very common in the Philippines, but most people wouldn’t recognize it as one. This is where the operating carrier is selling seats on its aircraft for the sole benefit of the marketing carrier (the operating carrier does not sell seats).

You can find this deal with AirAsia Philippines, Cebgo and PAL Express. The one selling is Airasia, CEB and PAL. There are varying forms of this agreement with regards to revenue sharing, but essentially the marketing carrier is ‘leasing’ the aircraft and its crew to fly on behalf of the marketing carrier. AAP has a separate revenue sharing deal as compared with Cebgo and PAL Express.

There are also cases where this is simply a free-sale arrangement with restricted limits to the number of seats the marketing carrier may sell on the operating flight but you cannot find this in the Philippines. This arrangement is usually found in interline agreements of legacy carriers on international flights.

Having said that, it can further be divided to two:

1. STRATEGIC ALLIANCE. These are the code share agreements found in Star, One World, and Skyteam.

2. TACTICAL ALLIANCE. This agreement is most notable in Emirates-Qantas agreement.

additional reading can be had here.

Code share is good when you benefit from it. Not when it adds more cost to your operation.

[Eurest]

I've skyped a few friends still in the SEA/HK/TWN area and heard a few things, wonder if you could comment

To stay the course JJB wanted, PAL Holdings needed more funds, which necessitated the talk of another Int'l partner. Board feared it would take another 3 years ti find one.

It was the NH agreement that facilitated the financial "introspection"

Issues that supposedly went against JJB that PR needs to solve

The Damen SG sourced fast crafts. Not profitable, why 3 class when Boracay is VFR?
Even if they are moved to support Sangley ops in November, still facing a bleak 3 mos

OZ SYD&MEL A330 to A321Neo
PR apparently lost market share as move to single body on a 10hr flight gave perception of "budget carrier"
Pacific flyers not as keen on longhaul single aisle unlike Transatlantic where it is more accepted

India
Was route marketed to Indian citizens in an effective manner?

Long-haul A321 Neo
Configured for routes that failed, might work for secondary cities in OZ to support China-OZ interconnect but no NAIA slots?

AFI-KLM getting GE90 overhaul
HAECO was cheaper but AFI-KLM gt it in exchange for CDG "assist"

Vivienne really smart, spearheaded CBA with employees and impressed with efficiency and effectivity of the entire process.
Given PALEA brought PR down in the past, showcasing the ease with how she dealt with the labour union this time showed she could be ready to spearhead PR

Recent Skytrax awards derailed her, Bong got to argue JJB's plans starting to work.
Vivienne not experienced enough in aviation they argue, board got cold feet with investor sentiment

I asked about B777 refurb, reply I got was salacious
"If PR saw themselves keeping the first few ones for the next 10-12, they would have refurbished them, especially adding Y+ for Mabuhay Miler upgrades"
Same holds true for high density A330s apparently
PR needs more than 241 Y seats for US mainland, B77W capacity slightly edges out A359 efficiency

[Arianespace]

Most of your questions can be answered straight from the horses mouth

https://centreforaviation.com/analysis/video/a-last-interview-with-philippine-airlines-longtime-president-jaime-bautista-1096



As for the rest of the question, this is what I know:

Funds yes, additional partners no. EY is the only other partner interested in PR and is not comfortable working with NH. Its either or strategy. In the negotiations ANA offered more on the table. You can actually see that in their codeshares, so they were the ones chosen. EY not so. NH wanted to be sure that their investment is safe before putting more money to the airline. Who wouldn't. It could be the woman wanting EY because its offered more dollars for the shares but doesn't bring something on the table to help the airline grow. Makes you also think from the management and owners perspective.

As to the boat, it was supposed to be packaged with their flights to and from Kalibo Airport to Boracay, with services also offered to non-passengers. They were supposed to operate 4x a day per catamaran. The plan was good and marketable and ticket prices reasonable to half of the lowest fare, until the government closed the island and limit the number of tourists to 6,400 per day on re-opening date. Airlines are then being told to reduce their flights schedule to keep to the new tourist caps. So what would JJB do? IF things don't go as planned, is that your fault?



The amortization is running and management is not happy. Now they are running 1 trip per day. IMO that is simply irregular business risks that no one foresaw to which JJB should not be made responsible. That is simply beyond his control, and I'm sure LT understood, but things do happened and he failed after MMTI finances bled profusely. I nevertheless don't see it enough to cost his head.



From the grapevine, LT does not want to give up LHR when JJB wanted it dropped, from the time he assumed back to office ex SMC in 2014. That's why I said it will always be there despite his earlier plans to do so. LT always see something we don't and ends up being right most of the time.

By the way, CBA with PALEA is still JJBs work. Just saying.

[Evodesire]

Arianespace wrote

Most of your questions can be answered straight from the horses mouth

https://centreforaviation.com/analysis/video/a-last-interview-with-philippine-airlines-longtime-president-jaime-bautista-1096



As for the rest of the question, this is what I know:

Funds yes, additional partners no. EY is the only other partner interested in PR and is not comfortable working with NH. Its either or strategy. In the negotiations ANA offered more on the table. You can actually see that in their codeshares, so they were the ones chosen. EY not so. NH wanted to be sure that their investment is safe before putting more money to the airline. Who wouldn't. It could be the woman wanting EY because its offered more dollars for the shares but doesn't bring something on the table to help the airline grow. Makes you also think from the management and owners perspective.

As to the boat, it was supposed to be packaged with their flights to and from Kalibo Airport to Boracay, with services also offered to non-passengers. They were supposed to operate 4x a day per catamaran. The plan was good and marketable and ticket prices reasonable to half of the lowest fare, until the government closed the island and limit the number of tourists to 6,400 per day on re-opening date. Airlines are then being told to reduce their flights schedule to keep to the new tourist caps. So what would JJB do? IF things don't go as planned, is that your fault?



The amortization is running and management is not happy. Now they are running 1 trip per day. IMO that is simply irregular business risks that no one foresaw to which JJB should not be made responsible. That is simply beyond his control, and I'm sure LT understood, but things do happened and he failed after MMTI finances bled profusely. I nevertheless don't see it enough to cost his head.



From the grapevine, LT does not want to give up LHR when JJB wanted it dropped, from the time he assumed back to office ex SMC in 2014. That's why I said it will always be there despite his earlier plans to do so. LT always see something we don't and ends up being right most of the time.

By the way, CBA with PALEA is still JJBs work. Just saying.

Sooooo...

1. What is happening now in PAL is basically a squabble for control on PAL within the family? LT Sr., Bong Tan, VS. Vivienne Tan?

2. Sr and Jr like the 5-star benchmark goals of JJB whereas the latter wants to water down everything and even pull out of Skytrax?

3. Basically, it was the woman responsible of JJB's earlier retirement but she is unsure if she will replace him as President and COO as both Chairman and Vice Chairman do not like her future plans which will basically derail PAL from a long term solution into a short term bandage problem that may do bigger damage later on?

[Arianespace]

No. They already owned it. The issue is who will stir it to even greater heights.

Well, lets face it. Skytrax ambition ain't free.

She is, until the Board rebuff her. Remember she just assumed in March executive vice president, treasurer and chief administrative officer after the retirement of Stewart Lim. An audit was supposedly done in April and by June all hell broke lose.

This is supposed to be the face of PAL after Bautista's departure.

[Evodesire]

So how is PAL doing now while Vivienne Tan is OIC? Any potential candidate as JJB's replacement?

Just noticed something. During the CAPA interview, JJB seemed to talk as though he did not retire, discussing his future plans and all. Do I smell something brewing here? Is JJB still part of the PAL board too?