Cagayan de Oro-Manila air route: PAL still reigns but market share slips
Mike Banos
January 22, 2007
Data compiled by the Air Transportation Area IX office based in Lumbia Airport, this city, show PAL (PR) still retains the lion’s share of the market with 51% of the 529,442 passengers recorded for the period January-November 2006. However, discount fares offered by its main rivals appear to have made inroads into PAL’s market share which declined significantly from 63.8% in 2005.
Air Philippines (2P) and Cebu Pacific (5J) had already both exceeded their 2005 total passenger traffic on the route by the end of November, 2006, combining for 86,624 more passengers that represented a 52.5% growth over their total for 2005. Since growth for all three airlines during the January-November 2006 period was only 8.2% (+40,143 passengers) compared to 2005, this data indicates 5J and 2P attracted an additional 40,143 new passengers by themselves on top of the 46,481 passengers lost to PAL for this period from last year.
In fact, both airlines turned in their best performance on the route since 2000, with Air Philippines Cagayan de Oro Station being recognized as the “Most Outstanding Station” of the airline for the first semester of 2006.
Our performance was evaluated through a number of parameters including sales/revenues, customer service, and accounting, but attaining an 87% passenger load factor for the period helped a lot,” said Roland Salaver, Air Philippines Cagayan de Oro branch manager. In fact, 2P already exceeded its previous year total of 44,221 passengers by the end of November, 2006 with a 48% increase to 65,598 passengers, its highest since 2000.
Cebu Pacific Air (5J) was even better, booking 185,879 passengers for the first time ever and exceeded its 120,632 total in 2005 by 54% or 65,247 passengers in the first 11 months of 2006 alone.
Eleanor Lim, general manager of Summit World Philippines, Inc., the general sales agent (GSA) for 5J in Region 10, attributes their growth to the deployment of bigger capacity Airbus 319 and 320s (which can carry 40-70 more passengers than the phased out DC9-32s) since October 2005; the one week promos last year which offered from P1-10 fares; the year round “Go” promo fares which offered fares as low as P99; and the additional evening flight.
Industry sources indicate the cut-rate discount fares offered by the two airlines throughout 2006 could have been the key factor in accounting for the additional growth as travelers who usually took the boat opted to fly instead.
Air Philippines slashed its airfares by an average of 45 percent for all destinations nationwide in response to 5J'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.
Statistics from local shipping ticket outlets show the five inter-island shipping lines serving the Cagayan de Oro-Manila sea route only booked 95,671 passengers last year, which is approximately 1:3 in favor of the airlines 275,733 bookings for January-December 2006 on the Cagayan de Oro-Manila route alone.
PAL has traditionally dominated this air route, steadily increasing its passenger traffic to 324,446 by 2005, or by a cumulative 37% over the last six years. PAL also upped its market share from 50% in 1999 to 63.8% by 2005, not even once giving up the pole position with an average annual growth rate of 6.2% for the six-year inclusive period.
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 Licerio Cruz, Cagayan de Oro branch manager, said they are now exclusively fielding PAL’s A320-200s and A319s as the airline goes upmarket with its goal to offer business class in all domestic flights.
Cebu Pacific has fielded on this route its brand new Airbus A319-100 aircraft (which can carry a maximum of 150 passengers in mono class) and A320 (180 passengers max in monoclass) to replace the phased-out DC9-32s (limited to 110 max) while AirPhil uses the venerable Boeing 737-200 (118 passengers).
Air Phil's multi-tiered discount fares is part of a two-pronged market offensive crafted by the Lucio Tan Group of Companies which controls both PAL and Air Philippines. Air Phil has been positioned as a low-cost, budget airline to directly compete with 5J along its routes. In fact, both airlines coordinate their bookings in areas where both fly to.
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.
The year round availability of 5J'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 a damper on this party since the cut-rate fares offered by these two airlines would always be contingent upon the world prices of aviation fuel.
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