Faltering deregulation in the Philippines will receive a boost this month with the startup of the first serious domestic competition for the country's flag carrier.
Grand International Airways (GrandAir), set up by a group of former senior Philippine Airlines officials, will operate two Airbus A300s on a four year lease from General Electric Capital Aviation Services. The carrier will compete with PAL on two of the country's major trunk routes, offering three weekly services from Manila to the central city of Cebu and daily flights from the capital to the southern trading city of Davao. Based on the capacity offered by the two carriers on these routes GrandAir will be chasing 15 per cent of the market.
The arrival of GrandAir should give the deregulation process a significant boost. Until now, only two independent operators had taken advantage of the liberalisation. But one, Silangan Airways, suspended operations last June, only a month after startup. The carrier, which operated one Yak 42, is still looking out for new investors.
But the second, Star Asia Airways, is still operating on secondary routes using a de Havilland Dash 7 and is planning to expand with the addition of two Boeing B737-300s. However, analysts in Manila believe GrandAir is the first serious contender to PAL to emerge, mainly because its executives are all experienced airline managers. The carrier will be headed by Dante Santos, who was chairman of PAL from 1986 to 1990. The chief executive is Leslie Espino, executive vice president and CEO of PAL during the same period.
According to documents filed with the Civil Aeronautics Board (CAB), GrandAir is capitalised at PHP300 million ($9.5 million). The airline expects to lose PHP5 million in its first year of operation but projects it will recoup these losses in its second year with a net income of PHP47 million, rising to PHP164 million in its third year.
Espino argues that the demand on routes the airline will serve is not being met by PAL. 'We believe that the true level of market demand for seats is 110 per cent to 130 per cent of the traffic accommodated by PAL. It has become clear that PAL, for one reason or another, will not by itself be able to cope with the demand,' he says.
GrandAir is also looking into the possibility of building its own terminal at Manila's Ninoy Aquino International Airport and says it is not ruling out intra-regional flights in the future. In the meantime, the carrier intends to focus on Cebu and Davao. 'Instead of spreading ourselves too thin and operating to too many places, we're concentrating on these two points,' says Espino. 'We intend to build an airline that is going to be here for a very long time.'
GrandAir is also looking into the possibility of building its own terminal at Manila's Ninoy Aquino International Airport and says it is not ruling out intra-regional flights in the future. In the meantime, the carrier intends to focus on Cebu and Davao. 'Instead of spreading ourselves too thin and operating to too many places, we're concentrating on these two points,' says Espino. 'We intend to build an airline that is going to be here for a very long time.'
Source: Airline Business
