PASAY CITY Philippines — The Palau government will likely approve the proposal of Cebu Air Inc. which does business as Cebu Pacific to fly between Manila and Koror this year.
In a phone interview Senate President Surangel Whipps Sr. told the Journal that Cebu Pacific “has asked [the government’s] permission to fly to Palau. Our Minister of Commerce has started to communicate with them and told them that we like their proposal.”
Cebu Pacific is the airline concern of JG Summit Holdings Inc. which is owned by the family of Filipino-Chinese tycoon John Gokongwei who made his earlier fortune in the snack food and flour milling business.
An official of Cebu Pacific who requested anonymity confirmed to the Journal “We’re exploring the possibility of flying to Palau three times weekly as part of our expansion plan.”
Tour operators in Koror welcomed the news as a number of them had lost out from investing in marketing and promotions before Asian Spirit another Philippine airline pulled out from the route on Nov. 5.
Sam Scott President of Palau Sea Ventures Inc. and Sam’s Tours; said “We welcome them with open arms since we were left so abruptly and with little warning by Asian Spirit.”
Surangel Samuel Whipps Jr. president and chief executive officer of Surangel & Sons Co.; said his travel agency Surangel Travel was interested in becoming a general service agent for Cebu Pacific like it did for Asian Spirit. The Whipps family also owns shares in Palau Micronesia Air which had earlier partnered with Asian Spirit in its service to Koror.
Many Palauans especially businessmen were dealt a blow by the loss of the Asian Spirit service. A number of them had begun investing in the Philippines and purchasing supplies for their companies. Palau officials were also working on securing a health referral service for Palauans with three hospitals in Cebu.
The proposed Koror service of Cebu Pacific even got a surprising endorsement from its local competitor. Asked for comment Jack Po executive vice president of Asian Spirit said “Good luck to them [Cebu Pacific]. I think they will do good.”
It was widely known that Asian Spirit was not earning much from the route partly causing its pullout from Koror. It had been flying a passenger load factor of only 40% using an 80-seater British Aerospace 146-100 since it launched its service to Koror in April 2006. To maintain a respectable stream of revenues airlines normally have to hit a passenger load factor of at least 60% meaning that 60% of its seats per flight have to be sold and occupied.
Meanwhile the source from Cebu Pacific said because the airline was in an expansion mode “we are looking at all possible destinations within a range of four to five hours from Manila using our current fleet.” He said the airline can use either its Airbus A320-200 a 179-seat plane or A319-100 a 150-seater for the route. Its current fleet is composed of five A320s and 10 A319s.
But he stressed that there was still no firm decision on when the airline would actually launch the service to Koror. “We just wrote them [the Palau government] a letter asking what were the requirements for us to be able to fly there.”
In an email dated Dec. 14 2007 to Palau’s aviation authority and Department of Transportation a copy of which was obtained by the Journal Inez Jose director for external affairs of Cebu Pacific said: “We are looking into the possibility of operating a three times weekly service to Palau [this] year. The Philippine Civil Aeronautics Board (PCAB) has already granted Cebu Pacific the approval to operate to Palau.”
Jose also requested “for a list of requirements [to be able to fly to Palau] as well as a copy of the Application Form for Landing Authorization.”
Sen. Whipps confirmed there was still no definite date of operation for the planned Manila-Koror service but that it is expected sometime this year. He added there were no major conditions required of Cebu Pacific to fly into Palau. “Our airways are open ” he said. There is an existing air service agreement between the governments of the Philippines and Palau.
For his part the senator’s son Whipps Jr. said before PMAir tied up with Asian Spirit he had already spoken with Cebu Pacific executives in 2006 asking them to fly to Palau. But the timing then wasn’t right. “They were still getting rid of their DC-9’s and Boeing 757s then. But now they’ve got new aircraft they’ve done most of Asia and are looking at Guam Palau and others within range [of Manila].”
He said he met with some Cebu Pacific representatives in Manila in November and asked them again about the possibility of the airline flying to Palau and his travel agency becoming its general sales agent. “They haven’t come to Palau so I think they’re still at the stage where they’re gathering information researching and evaluating Palau as a possible destination.
“I told them to come and visit. I don’t think they knew just how close Palau is to the Philippines. It’s about two hours and 15 minutes by jet [using an A319 or A320] ” Whipps Jr. explained.
He also said that although there is an existing partnership between PMAir and Asian Spirit he sees no problem with his company functioning as GSA for Cebu Pacific if and when they are chosen as such. “I don’t think it matters. We’re a travel agency. So we sell even Continental tickets.”
Ironically despite its unfavorable experience servicing Palau Asian Spirit expressed optimism that Cebu Pacific would be successful in flying the route. Po said “Number one — they will introduce their low-cost pricing scheme [called GO fares] and they will be flying direct from Manila. I think a lot of people will shift from Continental Micronesia. Number two — they will be using their Airbuses which are very cost-effective planes. That’s why it’s the most in-demand plane right now.”
He estimates that a direct flight from Manila to Koror using an A319 or A320 will be about two hours and 45 minutes shorter than a flight from Manila to Hong Kong which is a popular tourist destination for Filipinos.
According to its Web site Continental’s lowest available round trip fare from Koror to Manila is $539 per person. Cebu Pacific is mulling a round trip fare of $250 per person which is even lower than the $330 Asian Spirit had offered for its service.
Cebu Pacific is one of the more aggressive airlines in the Philippines and has virtually bucked the declining trend in airline revenues due to its savvy marketing strategies such as selling seats at only 10 pesos (24 U.S. cents) each exclusive of government taxes.
In a report to the Philippine Securities and Exchange Commission by its parent firm Cebu Pacific earned a profit of 2.48 billion pesos ($60.2 million) from January to Sept. 30 2007 up a staggering 954% from the 235.64 million pesos ($5.72 million) it recorded in the same period last year. The jump in net income was primarily due to a 197%-increase in foreign exchange gains and a 61%-rise in revenues to 10.9 billion pesos ($265 million) owing to a hike in passengers over the nine-month period.
The airline recently acquired 15 Airbuses and will take delivery of four more A320s in 2008. In December it also announced the acquisition of more Avions de Transport Regional 72-500s which are 70-seat turbo props for their deployment in the smaller provincial airports in the Philippines. “From our current fleet of 15 Airbus aircraft we could have a fleet of up to 50 aircraft composed of 32 Airbus and 18 ATRs by the end of 2012 if all [order] options are converted into firm orders ” Lance Gokongwei president of Cebu Pacific; said in a press statement.
Aside from its local destinations Cebu Pacific also flies 10 international routes: Bangkok Thailand; Hong Kong SAR; Guangzhou Shanghai and Xiamen in mainland China; Jakarta Indonesia; Kuala Lumpur Malaysia; Macau; Singapore; and Taipei Taiwan.
It would be recalled that Asian Spirit dropped its Davao-Koror route in favor of a Cebu-Koror service that it had launched in May 2007. The airline then cancelled the service just six months after the relaunch leaving many dive operators and travel agents in Palau — who had been marketing their services using the route — in a lurch.
Asian Spirit officials said that it was pulling out its Koror service so it could concentrate on protecting its “bread and butter” route to Caticlan Aklan the gateway to Boracay Island known internationally as having one of the best beaches in the world. Cebu Pacific and Air Philippines the budget carrier subsidiary of Philippine Airlines — both larger capitalized airlines — will be mounting its regular services to Caticlan this year. But it said it hoped to return to Koror soon “when conditions are more ideal.” (See “Asian Spirit drops Koror flights — again — for now ” in the Oct. 15 issue of the Journal.)
Even before the plans of Cebu Pacific and Air Philippines to fly to Caticlan Asian Spirit already made it known that it was earning poorly from its Koror service. While there were a lot of passengers from Palau flying to Davao then also to Cebu there were very few from the Philippines going to Koror airline officials had said. MBJ