News Backgrounder
New Philippines president improves operations at Manila airport says Cebu Pacific
November 1st 2016
Congestion at Manila’s Ninoy Aquino International Airport (NAIA) has greatly eased since the election in September of the controversial new president of the Philippines, Rodrigo Duterte, the CEO of low-cost carrier, Cebgo, told Orient aviation last month. Read More »
Since September, after the election of the new president, said Alexander Lao, “this particular administration has put in place the policies we have suggested for the longest time, including the removal of general aviation from NAIA.
 |
| 'Since the election of the new president, said Alexander Lao, “this particular administration has put in place the policies we have suggested for the longest time, including the removal of general aviation from NAIA' |
| Alexander Lao Cebgo CEO |
“All of a sudden, airlines have improved their on-time performance from 40%-50% to approximately 70%-80%. Frankly speaking, a very simple move by the government brought big benefits.”
In the lead up to the president’s imposed policy changes, British consultancy, NATS, submitted more than 100 recommendations to increase capacity at NAIA, based on its experience of expanding Mumbai’s Chhatrapati Shivaji International Airport. Both airports have a major problem. They are contained by their urban sites.
Lao said NATS engineers increased capacity at Mumbai from 36 movements an hour to 50, so he “hopes to see the same at Manila where today we’re at 40 movements per hour. But maybe we can go up to 50 or even 60 movements”, he said.
The energetic CEO also is flexible about the site for the city’s much needed new international airport. “We don’t mind where the new airport is built as long as it’s near Manila,” he said. “Anywhere within 25kms of the city will be good for us. It can be in Sangley Point in Cavite or in Manila Bay. Both are perfect for us as long as the government makes a decision before the end of the year.”
Independently, it has been reported that the Manila Bay option, on reclaimed land, has been rejected by the government. Lao and his parent airline, Cebu Pacific oppose converting Clark Airport into the new Manila airport because it is 100kms north of downtown Manila. The former military base has no mass transit network to serve passengers.
“Clark is too far. In fact, if Clark was designated Manila’s capital airport it would be the farthest primary airport in the world,” said Lao.
NAIA’s limitations are not the only problems Lao has to manage in running Cebgo. “Seventy per cent of airports in the Philippines are not jet-capable,” he said. “We need the ATRs to service these airfields. The runway at Caticlan (Boracay) used to be about 1,000 metres long, so we needed a turboprop to fly there,” he said. Shuttles to Caticlan are Cebgo’s bread-and-butter business, with up to 12 daily flights from Manila and Cebu to the resort island.
Speaking to Orient Aviation after the arrival of the first ATR72-600 into the Cebu Pacific Air (CEB) group fleet, Lao, who also is vice president commercial at the parent airline, said he believed in the future of the turboprop and that it remains critical for the development of new markets for his budget carrier.
“Being in charge of a low-cost carrier (LCC), I have to focus, focus, focus on lowering costs,” Lao said. “We ordered the new high-capacity ATR because we could fit in six more seats and pass on those savings to our customers.”
CEB’s first ATR72-600 will be flown by Cebgo and is part of the airline group’s 2015 $673-million order for 16 of the type. All the aircraft have been bought under direct purchase agreements and will be fitted with a new high-density configuration and a seat pitch of 28 inches.
Lao added: “The Required Navigation Performance-Authorization Required (RNP AR) and Vertical Navigation (VNAV) capability of our new ATR 72-600 fleet will increase airfield access and facilitate more efficient air traffic management.”
Cebgo and parent CEB will progressively replace its fleet of eight ATR 72-500s, configured with 72 seats, with 16 ATR 72-600s with 78 seats. Deliveries of the -600s will run until 2020. CEB, now the Philippines’ largest airline, is continuing its quick growth trajectory with six A319s, 36 A320s, six 436-seater A330s and the eight ATR 72-500s. Between 2016 and 2021, CEB expects to take delivery of 32 A321neos, two more A330s and 16 ATR 72-600s.
To fill this current and future capacity, Lao believed CEB must be open to all revenue opportunities. “Our online sales have grown significantly. Today, we’re at 60%. We pioneered mobile check-in in the Philippines,” he said. Nevertheless, Lao is not ready to write off the traditional global distribution system (GDS).
“GDS are pretty expensive. We want to encourage as many direct sales as we can,” he said. “I guess the challenge for us is: ‘How can we make our brand more popular in non-Filipino dominated markets’?”
“In China we don’t use a lot of GDS, mostly because we see a lot of web savvy customers. We know there also is a lot of web savviness in Japan and South Korea, but the markets we are targeting there are mainly group markets, so we need the GDS.”
Ancillary sales account for 18%-20% of the carrier’s total revenue, Lao said, so GDS and CEB have opportunities to capture these extra dollars.
Challenges remain for both airlines. Intense competition fuels low fares and depresses yields. Philippines AirAsia has returned to expansion and full service carrier, Philippine Airlines (PAL), has reinforced its commitment to the domestic inter-island market with a Letter of Intent for “up to twelve” Dash 8-Q400s from ATR rival, Canada’s Bombardier.
Lao said the pilot shortage is challenging, but the situation has improved for CEB and his LCC since they invested in the Philippine Academy for Aviation Training, a joint-venture with simulator manufacturer, CAE, near Clark International Airport in Luzon.
