ASEAN KEY DESTINATIONS
Air price war in Philippines?
Last week, AirAsia, through its fully owned subsidiary, Air Asia International Ltd., formed a new budget airline that aims to raise the stakes in a price war among Philippine players. AirAsia partnered with Antonio Cojuangco Jr., Michael Romero and Marianne Hontiveros to form an LCC in the Philippines based on the Malaysian carrier's business model.
Cojuangco is a former chairman of Philippine Long Distance Telephone Co. (PLDT) and cousin of President Benigno Aquino 3rd, while Romero is the chairman of Harbour Centre Port Terminal Inc.(HCPTI).
"Any competition will add some threat to existing operators," Porvenir Porciuncula, deputy executive director of the Civil Aeronautics Board (CAB), said, adding that local airlines should adjust so they can withstand the onslaught of the new carriers.
The country's leading LCC, Cebu Pacific, however is taking things in stride.
"We are lean-and-mean efficient, with a very young fleet of Airbus aircraft and a highly motivated team.
This year, our financial performance ranks among the best in the world. We are ready for more competition in our own country and in theirs," Candice Iyog, marketing and distribution vice president of Cebu Pacific, said.
Iyog said that Cebu Pacific's Airbus fleet will increase in size by 2014, "positioning us for further growth and stronger output, and of course for fair and legitimate competition, which ultimately benefits the public."
"We will remain consistent in offering the lowest year-round fares in all [the] 33 domestic and 16 international destinations we operate in, and provide our passengers fun service and a high-quality travel product," she added.
But for the Philippines' flag-carrier, the entry of foreign players comes at a bad time, faced as it is with a labor strife.
Jaime Bautista, Philippine Airlines (PAL) president, warned that the entry of new players would lead to overcapacity and subsequently a price war, which "may lead to huge losses for everybody."
Tony Fernandes, AirAsia chief executive, however belied PAL's worries.
"Jimmy is wrong. History has proved that I'm right. There's plenty of space. There will be competition but this is a massive market," Fernandes said.
"The low- cost airline will also help the economic growth of the country as evident in other regions where AirAsia is currently serving," Fernandes said.
He said greater connectivity across Asean would not only boost economic growth by providing better access to markets but also enhance travel, trade and tourism.
The executive said there are huge opportunities in the Philippines, citing Europe and America, where LCCs contribute 35 percent to 40 percent of traffic, as against Asia's 25 percent. "In the Philippines it's very small," he said.
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