Philippine Airlines has called on Manila to suspend flights by US carriers into the Philippines, as a result of US Federal Aviation Administration restrictions which are causing major losses on trans-Pacific services.
The appeal came within days of PAL announcing it was abandoning some flights to the key US destinations of Los Angeles and New York from September. The row centres on the Category 2 status the FAA imposed on the Philippines as part of its controversial safety oversight programme in 1995, shortly after the two countries reached agreement on a new bilateral.
Carriers from Category 2 graded countries have their frequencies to the US frozen and are barred from launching new routes, although they can get round the restriction by wet-leasing aircraft from a carrier licensed in a Category 1 nation. Until now, PAL has increased its services by leasing jets and crew from US charter operator World Airways, using them to operate flights to Los Angeles via Seoul and to New York through Vancouver. But the Philippine flag carrier says these flights are now being abandoned because of 'staggering losses' incurred because of the additional wet-lease costs.
Under the contract with World Airways, PAL must retain the leased aircraft until the end of the first quarter of next year but will now operate only on the shorter route to Vancouver.
The Manila-based flag has written to the Civil Aeronautics Board (CAB) demanding it suspend US airline operations until Washington eliminates 'unfair competitive practices and artificial barriers'. At presstime CAB had not replied to PAL's request but the airline has asked it to turn down applications by US freight carrier Polar Air and by Northwest Airlines to operate extra cargo services to the Philippines.
PAL says it acted because the principles of reciprocity and fair play underlying the bilateral treaty were being 'grossly violated' by the US.
The airline's vice president Manolo Aquino argues the US has failed to meet the terms of the 1995 air treaty, which allowed Philippine carriers to operate an extra 17 weekly flights to the US, awarded unlimited services to Micronesia, and allowed PAL to set up a cargo hub in the US.
PAL said in a statement it had been forced into a 'classic Catch-22 situation' and was being penalised 'without regard for the airline's own safety and security standards, no matter how strict these may be, how impressive their records are in these areas'.
The Category 2 restrictions 'have only served to benefit US-designated carriers which have continuously enjoyed the liberty to exercise their rights to the Philippine market, as well as World Airways which gains financially from the wet- lease contract from PAL,' said the airline.
Problems on its key Pacific routes come at a bad time for PAL as it continues with an extensive restructure and modernisation programme designed to return it to the black after several years of heavy losses.
Despite these efforts the carrier recorded a net deficit of US$85.3 million in the year ended 31 December 1996, 7.9 per cent more than the US$66.1 million loss in 1995.
Management hoped to see a cut in losses during the current financial year but analysts believe ongoing problems such as losses on key Pacific routes could delay recovery. PAL is set to take delivery of 36 new aircraft valued at US$4 billion by the end of 1998, including 28 Airbus A340s, A330s and A320s and eight B747-400s.
Tom Ballantyne
Tom Ballantyne
Source: Airline Business
