Flag Carrier Reigns on Cagayan de Oro-Manila Air Route
Mike Banos
July 24, 2006
Competitors of Philippine Airlines in the Cagayan de Oro-Manila air route have tried everything from giving away prizes in-flight to giveaway fare rates and fielding bigger aircraft, but the flag carrier has not only kept its dominance in terms of market share, but has actually succeeded in increasing its lead every year since 1999.
Air passenger statistics collated by the Air Transportation Office Area IX based at Lumbia Airport, this city, show PAL dominating since 1999 with 236,624 passengers, and steadily increasing this to 324,446 by 2005, a cumulative 37 percent increase over the last six years.
PAL also increased its market share from 50 percent in 1999 to 63.8 percent by 2005, not even once giving up the pole position in terms of passengers along this busy trunk line air route. It garnered an average annual growth rate of 6.2 percent for the six-year inclusive period.
This accomplishment is made even more remarkable despite a 6.6 percent contraction in total passenger volume last year compared to 2004, with incoming passenger volume dropping 5.7% and outgoing passengers even further at 7.5%.
"We had an average load factor last year of 85 percent," said Alberto Yu, PAL station agent at the Lumbia Airport. He is optimistic this will improve even further once PAL implements its plans to offer business class in all flights by the second half of the year.
PAL previously used a mix of B737-300s which could seat 120 passengers and the Airbus A320-200 which could seat 156 in mixed-class and up to 177 in monoclass, but Yu said all PAL A320-200s would be reconfigured to 156 mixed-class as the airline goes upmarket with its goal to offer business class in all domestic flights.
The flag carrier's main competitor on the route, Cebu Pacific Air (CEB) started out well with 145,394 passengers in 1999 and accounted for 30.7% of the total passenger volume that year using narrow body DC-9-32s aircraft with a capacity of 118 passengers.
However, its market share remains erratic following the crash of its Flight 387 on February 2, 1998 which killed all 104 passengers and crew aboard as passengers opted to either travel by sea or use competing airlines.
Last year, CEB's market share in the route had shrunk to 17 percent with only 120,632 passengers. Even when it attained its highest volume of 145,975 in 2005, its market share was only 27 percent. It reached its nadir along the route in 2001 when its volume was only 117,851.
However, the Cebu-based airline aims to gain lost ground this year with its GO Fares launched last November 2005, and touted as the lowest fares year-round.
May Obon, CEB Cagayan de Oro Marketing staff, stressed that the 'Go' fares are not promotional and are exclusive of surcharges and government tax. In addition to this, Obon said their load factors have also been considerably improved this year with the "Piso" and "P10" 10th anniversary fares offered by CEB to mark its 10th year.
"We have been averaging 150 passengers especially during this peak season," Obon said. CEB has fielded for this route its brand new Airbus A319-100 aircraft which can carry a maximum of 156 passengers in mono class to replace the aging DC9-32s.
The improving weather has also contributed to CEB's improving load factor, Obon said, noting there had been no flight cancellations for the first six months of 2006.
Previously, inclement terminal weather at Lumbia airport had forced the cancellation of as many as 80 flights a year (for all airlines) but the activation of the ATO's instrument landing system has considerably helped bring down this number even during the rainy season.
Not the least, another reason for CEB's shrinking market share could be the two-pronged market offensive used by tycoon Lucio Tan who controls both PAL and its affiliate, Air Philippines, which Tan has positioned as a low-cost, budget airline to directly compete with CEB along its routes. Air Philippines is 70-percent owned by Tan and 30 percent by William Gatchalian and his Wellex Industries. Tan acquired the majority stake from Gatchalian in 1999.
Air Philippines has seen its 17.2 percent market share along the route in 1999 shrink to only 8.7% as of 2005, the aggregate number of passengers lost during the six-year period totaling 37,416 or 45.8% of its total passenger volume in 1999.
A cursory glance at the figures show that its passenger market is best described as erratic, rising to 58,727 in 2001, then dropping to 42,159 two years later, then again rising to 55,943 the year after.
This is most probably due to the timing of its one daily flight which leaves last among the three (PAL, CEB) leaving for Manila every morning so its market consists mainly of passengers who either missed or don't want to take the first two early flights or those coming from further out Lumbia's service area such as Iligan, Gingoog and the provinces of Misamis Oriental, Lanao Norte and Sur, and Misamis Occidental.
This passenger trend may be expected to persist, because of its positioning despite Air Philippines slashing of its airfare by an average of 45 percent for all destinations nationwide less than two weeks after the expanded value added tax took effect on Nov. 1, but more in response to CEB's "GO" Fares. Dubbed "Super Tipid," the cheap fares are sold year round and applicable even during peak passenger season, but available only for limited seats.
The availability of CEB's "Go" fares and Airphil's "Super Tipid" fares are expected to perk up air traffic along this busy air route since the difference with boat fares along the same routes have become marginal.
However, the inexorable rise in aviation fuel prices could put the damper in this party since even at their present levels, the discounted fares offered by these two airlines are still expected to increase as a result of the continued rise in the world prices of crude.
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Air passenger statistics collated by the Air Transportation Office Area IX based at Lumbia Airport, this city, show PAL dominating since 1999 with 236,624 passengers, and steadily increasing this to 324,446 by 2005, a cumulative 37 percent increase over the last six years.
PAL also increased its market share from 50 percent in 1999 to 63.8 percent by 2005, not even once giving up the pole position in terms of passengers along this busy trunk line air route. It garnered an average annual growth rate of 6.2 percent for the six-year inclusive period.
This accomplishment is made even more remarkable despite a 6.6 percent contraction in total passenger volume last year compared to 2004, with incoming passenger volume dropping 5.7% and outgoing passengers even further at 7.5%.
"We had an average load factor last year of 85 percent," said Alberto Yu, PAL station agent at the Lumbia Airport. He is optimistic this will improve even further once PAL implements its plans to offer business class in all flights by the second half of the year.
PAL previously used a mix of B737-300s which could seat 120 passengers and the Airbus A320-200 which could seat 156 in mixed-class and up to 177 in monoclass, but Yu said all PAL A320-200s would be reconfigured to 156 mixed-class as the airline goes upmarket with its goal to offer business class in all domestic flights.
The flag carrier's main competitor on the route, Cebu Pacific Air (CEB) started out well with 145,394 passengers in 1999 and accounted for 30.7% of the total passenger volume that year using narrow body DC-9-32s aircraft with a capacity of 118 passengers.
However, its market share remains erratic following the crash of its Flight 387 on February 2, 1998 which killed all 104 passengers and crew aboard as passengers opted to either travel by sea or use competing airlines.
Last year, CEB's market share in the route had shrunk to 17 percent with only 120,632 passengers. Even when it attained its highest volume of 145,975 in 2005, its market share was only 27 percent. It reached its nadir along the route in 2001 when its volume was only 117,851.
However, the Cebu-based airline aims to gain lost ground this year with its GO Fares launched last November 2005, and touted as the lowest fares year-round.
May Obon, CEB Cagayan de Oro Marketing staff, stressed that the 'Go' fares are not promotional and are exclusive of surcharges and government tax. In addition to this, Obon said their load factors have also been considerably improved this year with the "Piso" and "P10" 10th anniversary fares offered by CEB to mark its 10th year.
"We have been averaging 150 passengers especially during this peak season," Obon said. CEB has fielded for this route its brand new Airbus A319-100 aircraft which can carry a maximum of 156 passengers in mono class to replace the aging DC9-32s.
The improving weather has also contributed to CEB's improving load factor, Obon said, noting there had been no flight cancellations for the first six months of 2006.
Previously, inclement terminal weather at Lumbia airport had forced the cancellation of as many as 80 flights a year (for all airlines) but the activation of the ATO's instrument landing system has considerably helped bring down this number even during the rainy season.
Not the least, another reason for CEB's shrinking market share could be the two-pronged market offensive used by tycoon Lucio Tan who controls both PAL and its affiliate, Air Philippines, which Tan has positioned as a low-cost, budget airline to directly compete with CEB along its routes. Air Philippines is 70-percent owned by Tan and 30 percent by William Gatchalian and his Wellex Industries. Tan acquired the majority stake from Gatchalian in 1999.
Air Philippines has seen its 17.2 percent market share along the route in 1999 shrink to only 8.7% as of 2005, the aggregate number of passengers lost during the six-year period totaling 37,416 or 45.8% of its total passenger volume in 1999.
A cursory glance at the figures show that its passenger market is best described as erratic, rising to 58,727 in 2001, then dropping to 42,159 two years later, then again rising to 55,943 the year after.
This is most probably due to the timing of its one daily flight which leaves last among the three (PAL, CEB) leaving for Manila every morning so its market consists mainly of passengers who either missed or don't want to take the first two early flights or those coming from further out Lumbia's service area such as Iligan, Gingoog and the provinces of Misamis Oriental, Lanao Norte and Sur, and Misamis Occidental.
This passenger trend may be expected to persist, because of its positioning despite Air Philippines slashing of its airfare by an average of 45 percent for all destinations nationwide less than two weeks after the expanded value added tax took effect on Nov. 1, but more in response to CEB's "GO" Fares. Dubbed "Super Tipid," the cheap fares are sold year round and applicable even during peak passenger season, but available only for limited seats.
The availability of CEB's "Go" fares and Airphil's "Super Tipid" fares are expected to perk up air traffic along this busy air route since the difference with boat fares along the same routes have become marginal.
However, the inexorable rise in aviation fuel prices could put the damper in this party since even at their present levels, the discounted fares offered by these two airlines are still expected to increase as a result of the continued rise in the world prices of crude.
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