PAL Express

[pack1]

PAL creates new low-fares unit for local routes
By Mary Ann Ll. Reyes
Wednesday, April 16, 2008



Flag carrier Philippine Airlines (PAL) has created a new, low-fares unit that will operate a fleet of turbo-propeller aircraft to mostly domestic island points under the brand name PAL Express.
The launch of PAL Express is considered a ground-breaking step for PAL, which is creating a sub-brand for the first time in its 67-year history.
PAL president and CEO Jaime Bautista said PAL Express will meet the growing demand of the traveling public for a high-quality carrier offering low fares.
“At the same time, it supports the government’s efforts to promote trade and tourism, particularly to our small islands, thus providing a much-needed lift to the local economy of these communities,” he added.
Industry observers view PAL’s latest move as a bid to compete heads-on with arch rival Cebu Pacific, which is positioned as a low-cost, no frills airline.
The creation of PAL Express is also aimed at expanding PAL’s network and protecting its market share.
According to Bautista, PAL Express will increase PAL’s profits by around P300 million a year, and revenues, by around P1 billion. Around one million passengers are expected to be added by PAL Express when its operation goes full blast next year.
During the fiscal year ending March 31, 2008, PAL carried a total of 7.5 million passengers, both domestic and international. Excluding PAL Express, the number of passengers carried is expected to increase by eight percent this fiscal year.
Meantime, PAL’s revenues reached $1.4 billion during the last fiscal year, compared to $1.2 billion during the previous fiscal year.
Bautista expects revenues to increase this fiscal year, but profits will be down mainly due to high cost of fuel.
PAL will acquire nine turbo-props, consisting of three Bombardier Q300s and six Q400s, to comprise PAL Express’ initial fleet which will be based mainly in Cebu.
Some flights will also operate out of Manila. Turbo props are ideal for short runways like those in Caticlan.
The cost of PAL Express’ initial fleet based on the list price of the nine turbo props is around $130 million. PAL is currently in talks with domestic banks to finance around $100 million of the cost of the new planes. The balance will be internally financed.
The new PAL unit will primarily fly intra-regional routes in Visayas and Mindanao from its Cebu hub, as well as secondary routes to small airports in island provinces that are not able to accommodate PAL’s regular jet aircraft.
“We will leverage on the strength of the PAL brand to make PAL Express the leader in the markets it serves. In turn, PAL benefits from the expansion of its network to areas it does not presently fly to, from where PAL Express aims to draw traffic to feed the main trunk routes,” Bautista said.
But the biggest beneficiary, he stressed, will be traveler, who is now able to tap into PAL’s extensive route network and enjoy seamless connections between erstwhile inaccessible provincial points and 43 destinations – and counting – across the Philippines, Asia, Australia, and North America.
The structure for PAL Express is similar to the setup found in several international airlines, where the “legacy” carrier establishes an operating division intended to serve a market niche distinct from the mainline operation.
The division, however, is still supervised by the parent airline, which also provides logistical and administrative support. Examples of this structure are those in American Airlines’ American Eagle, United Airlines’ United Express, Air Canada’s Jazz, and Lufthansa’s Lufthansa Cityline.
Bautista explained that PAL will continue to operate the trunk routes while the secondary routes will be operated by PAL Express. “There will be no competition between PAL and PAL Express since the latter will be operating mostly new routes,” he emphasized.
He added that PAL Express will also not compete with Air Philippines, the low-cost airline of the Lucio Tan Group. Air Philippines will transfer its Manila-Caticlan operations as well as flights originating from Cebu to PAL Express.
Because of this, Air Philippines will no longer proceed with plans to acquire Bombardier aircraft. This will now be undertaken by PAL Express.
PAL Express is scheduled to take off on May 5, 2008 with eight flights daily between Manila to Caticlan, gateway to Boracay. Fifty-seater Bombardier Q300 aircraft will be deployed on the route.
Services ramp up dramatically on May 19, when the new unit’s Cebu hub operations commences with flights between Cebu and five points in Visayas and Mindanao, namely Caticlan, Bacolod, Tacloban, Butuan and General Santos.
To introduce these new services, PAL Express is offering promotional fares of as low as P88 (excluding taxes and surcharges) for one-way flights between Cebu and Bacolod, Caticlan, Tacloban, Butuan, and General Santos.
Earlier, PAL announced that it would base its soon-to-be-acquired turbo-prop fleet mainly in Cebu, in order to better serve the growing intra-regional market in Visayas and Mindanao.
While some turbo-prop flights will also operate out of Manila, especially in the initial phase, Cebu will be the focal point of turbo-prop operations as PAL re-establishes the city as its main hub in southern Philippines.
PAL operated a bustling Cebu hub for most of its 67-year history, when it was the sole airline mandated to provide air services to far-flung rural communities. As such, turbo-props were an integral part of PAL’s fleet for decades.
When PAL entered receivership in 1999, however, its rehabilitation plan stipulated an all-jet fleet, forcing the airline to dispose of its then turbo-prop type, the Fokker 50, and close its Cebu hub.
With PAL’s successful emergence from rehabilitation late last year, Bautista said resuming turbo-prop operations became a key priority, in keeping with the national carrier’s historic mandate of serving outlying areas.
In this effort, the restored Cebu hub will play a central role, PAL added.

[pack1]

I guess it's bupak dictating the game now! On the regional front, first in Guangzhou, Hanoi, Macau and Kota Kinabalu. Now even ahead of PAL in turboprop operations! PAL playing catch up on some fronts? :D

[SKYHAWKER]

That is expected of CEBPAC and it is primarily attributed to their Culture of Professionalism. It all boils down to the concept of Leadership with Respect, from top to bottom. Their basic distinction from the rest.

They have shown you the big difference in just a matter of 12 years.

Watch out!!!


Peace :):):)

[Cessna1052]

Congratulations for both Companies, This only means more Jobs for Pilots.:ok:

[crash&burn]

Actually, it's a vision thing and taking advantage of growing opportunities. Bupak has done very well in identifying growth areas which is important if they are to continue growing revenues and profits.

PAL Express, as most MBA'ers will tell you, was the next logical thing for PAL to do unless it wanted to completely cede the domestic market to its competitors.

Whether it was planned or not is another thing, as rumour has it that the Q300/400 was originally slated for Air Phil, but was encountering financing problems, which coincided with PAL's release from rehab, leading to the latter's pursuing this option.

In the end, more jobs for pilots. Which is good...

Let the games begin.:D

[glide182]

March 11, 2008
SAS, Bombardier Seal Jet, Turboprop Deal | (http://www.avweb.com/avwebbiz/news/SASBombardierSealJetTurbopropDeal_197353-1.html?type=pf)

By Russ Niles, Editor-in-Chief


http://www.avweb.com/images-avweb/clearpixel.gif


http://www.avweb.com/newspics/q400.jpg A few months ago, SAS, one of Europe’s major airlines, announced it was grounding its fleet of Bombardier Q400 turboprops because it said its customers had safety concerns following three landing-gear emergencies. Tuesday, the airline announced it was buying 27 (with options for more) new Bombardier aircraft, including 14 new model Q400s and 13 CRJ900s. The change of heart has something to do with a deal reached between the planemaker, the airline and Goodrich Corp., which builds the landing gear. SAS said the “compensation” package was worth $167 million against the aircraft deal, which, if all options are exercised, will be worth $1.75 billion.


The three landing-gear incidents occurred over a period of seven weeks late last year. The first one prompted emergency inspections of gear parts for corrosion but investigators suggested maintenance issues were at least partly to blame for the other two. In the final incident in Copenhagen, which drew a lot of attention because of widely publicized video of the landing, Danish authorities determined a rubber ring got stuck in the works and prevented the gear from deploying. While Bombardier and Goodrich defended the design, SAS insisted maintenance was done properly.

[Centurion_210]

No harm in trying as long as you have CPL with IR. Just do well in the Panel Interview.

[pack1]

must admit it looks good! it should rekindle something from people's minds - pal's turboprop service in the past. obviously banking on the brand. interesting to witness the competition unfold....

great!

[crash&burn]

haljordan,

website says 500 hrs. for the Second Officer position. Maybe the same for the right seat of the Q300s/400s. Crew manning will be via Air Philippines FDC initially, I gather.

Eventual plan is to course PAL AvSchool graduates to the right seat as LFOs (Limited First Officers- a class of pilots from a bygone era) again. Will inquire from the grapevine....:cool:

[Centurion_210]

@haljordan

Most of the q3 and q400 captains are my good friends. I asked and thats the only answers Ive got.

One more thing is that they are giving priority to PAL AV graduates for the FO position.

[EECEPR]

I have held my tongue (pen ) long enough. Boy oh Boy so PAL is taking another lesson from Bupac. But they bought THE WRONG PLANES, The Q400 are heavy, burn much more fuel than the ATR, and cost a heck of a lot more.

However, none of these issues truly matter as the planes were grounded by SAS for major landing gear issues and PAL is getting SAS's grounded planes. I can not imagine what will happen again when the PAL planes LG fail or they overrun for the fifth time in two years. Guys - please,:= all do yourselves a favour and come to work for the one and only profitable, fun, airline in all of Asia - Bupacccccccc. As in the next few years only the strong shall survive.

[pack1]

EECEPR,

I beg to disagree. PAL got them from an SAS arm, Wideroe; some of the newer planes in that group and got them at bargain prices. The troubled planes were from a much older batch. SAS was just saving face and had to let them go but other operators are happy with the aircraft. In fact Wideroe didn't want the planes to go but the parent company had to save face. And guess what did SAS buy to replace them: Q400s again.

It all boils down if the brand PAL Express will sell for this type of operations. Will the passengers put premium on the brand and the Q400s speed and quiet cabin? Let's admit it, the ATRs cabin is hot and noisier. The passengers have already noticed that so far. But yes, I agree, PAL took a lesson from Bupac by getting those turboprops. They can no longer say they're dictating the game! Looking forward to the marketing war to come!

:ok:

[crash&burn]

I have to concur with Pack1's observations. Other operators seem happy with the Q300s/Q400s. But let's look at the technical details which, though not official airline figures, do approximate the real thing.

Q300s probably for the much shorter runways like Caticlan and Busuanga have a listed MTOW of 19,505 kgs with payload of 5,100 kgs and about 50 passengers. Don't know what PAL Express variant will be yet.

Q400s for the CEB-DVO or CEB-BCD/ILO routes that used to be serviced by the 737-300s(of PAL) and -200s (of Airphil) have listed MTOW of 29,250kgs with max payload of 8670kgs for the HigherThrust PW engines. Passenger load varies from 68-78 per plane. Fuel cost for 300nm fight at $3.00/gallon is about $14/seat. I gather these units costs and consequent RPKs are better than Q300s.

Total cost for 3 Q300s and 6 Q400s (all firm orders) is at $150 million which gives an average unit cost of $16.67 million per aircraft. Of course, Q400s costs are higher than Q300s but I'm lacking one variable to compute each aircraft variant cost.

Taking a look at the ATR-72-500 which Bupak is getting, MTOW is at 22,500 kgs with payload of 7,850 kgs. Passenger capacity ranges from 62-74. Fuel cost are not stated but I'll try to look 'em up. With official press releases coming from Bupak of 14 aircraft at $250 million or another press release at 18 aircraft for $330 million, average unit costs range from $17.8-18.3 million per aircraft.

However, list prices are guesses as manufacturers do offer side deals and discounts. So it seems thet the 400s are indeed heavier than the ATR but carry more pax for the CEB-point-of origin routes. I can understand this as the Q400s were meant to challenge regional jets and Bombardier does advertise their near jet speeds (Max 360 kts or Mach.58).

The Q300s carry less pax than the ATR but is lighter and so may be utilized more for the shorter runways. PAL Express uses two variants for different ranges. Bupak using single variant to cover all bases for simplified operations. Which is the smarter strategy? We shall soon see.

Another unknown factor is operational costs once they reach our shores. Hopefully, the bean counters did their job.

As for pioneering these routes, while Bupak was smart to go this route ahead of PAL, let's give credit to where it is due-to Asian Spirit and Sea Air who steadily plodded on this path until it grew to where it stands now.:8

[Centurion_210]

Only Asian Spirit flies to Batanes from manila using BAE-146 Aircraft

[EECEPR]

Sorry but without going into your numbers the ATR blows away the Q's for all segments under 300 nm. Period - I do not have to spout my figures. Secondly, the q3/q4's are not interchangable cockpit/engines/equipment etc. This is good old fast plane but who needs it? It works in europe and the USA as people are willing to pay for the longer and thinner routes but not in Asia. So bring em on - 100% 5J will continue to be number one until the cows come home. Ask PAL's key people there (the smart ones) wanted the ATR but were over rulled (hm nothing to do with the lear jet ha?).

Only time will tell ------------

[pack1]

crash&burn,

great post! not common to find posts here that are supported by data. makes the discussion worthwhile. hats off to you!:ok:

i think what will matter will be passenger reception. besides the type of aircraft, marketing and service will be major factors. in fact i won't be surprised if the last two will be bigger factors than aircraft type.

let the games begin!:D

[roboratski]

so are the pilots PAL crew and AirPhil pay? also benefits?

[crash&burn]

Thanks Pack1! :) I too greatly appreciate informative inputs from other sources.

I have no doubt that the ATR-72 is a beautiful airplane and that Bupak's bean counters have done their job. I hope that PAL's (or AirPhils?) technical people did their jobs as well in choosing the Q300s/400s and learned from the SD-360 and Fokker 50 experience.

However, I wonder if that decision had been made by people from AirPhil and momentum took care of the rest. Also, while insinuations of political pressure in purchasing different aircraft are always a factor, this is in the end still a business and makes no sense even for LT to lose money just to capture market share. Judging by the decision to purchase the 777s vs the A340s despite the intense lobbying and impressive after-market sales support offers of Airbus, I think it will also serve us well to be objective re this issue.

What I was differentiating was the slight difference in philosophies taken by the competing airlines in battling for the lucrative inter-island market. Bupak has focused on a single-fleet (turbo-prop) operation for simplicity.That has always been the mantra of an LCC. PAL has chosen two variants to service differing needs. Typical of a legacy carrier.

I do agree that marketing will play a big role in determining who wins this market. But I surmise that PRICE will still be the biggest factor. Tourist markets (which the new planes are intended to serve) are mostly price-elastic and willing to sacrifice amenities for cheaper airfare.

If PAL Express' pricing is marginally insignificant vis-a-vis Bupak's/Asian Spirit's/SeaAir's prices, and if PAL's marketing dep't. can annunciate the comforts of a newer terminal/easy transfers, etc., then it has a fair chance of capturing a big slice of that market. Will the synergies of a major carrier and its sub-brand be enough to capture the market? Indeed, only time will tell.


Perhaps Bupak's strategy, aggressive marketing, brand recognition (in terms of low costs) and headstart will prove to be an insurmountable advantage. But absent pricing and revenue data for routes/sectors (which I've tried to get from both offices and have been denied as these are considered proprietary data:ugh:), I had to work with figures that were freely available and am constrained in projecting the better modality. I would love to get the RPKs and fuel efficiencies for both aircraft and their prospective routes!

While I have always enjoyed the expressions of unbridled enthusiasm for a good company and its products, I had hoped to elevate the discussion into an objective evaluation of strategies akin to other fora like airliners.net. Using available and verifiable data was the only means of which I knew in pursuing this goal.

Happy landings!:ok:

[SlamBam]

Crash & Burn's figures are interesting. One needs to take another step and apply context.

The biggest reason why the ATRs and Dash 8s are there is Caticlan and the Boracay tourist market. It is not the only reason for their existence, of course, but both 5J and PAL Express clearly see the Boracay route as a premier route for their turboprop fleet, one that promises to be very profitable.

Actual operating experience now shows the ATR72 is weight penalized out of Caticlan. That was expected from the outset. Unfortunately, the penalty is much more than LG thought it would be, or was told it would be.:ugh:

While the ATR72 can haul 62-74 pax, how many pax can it really haul out of Caticlan's short and be-obstacled runway? It's in the 40s, if I heard right (but somebody else may know better). And that's not even taking a wet runway into account.

Now that operational reality has kicked in, is the route still as profitable as LG thought it would be when he was still counting those ATR beans so many moons ago?

In this context, does the ATR stack up better against the the Q300 or Q400 on the Caticlan route? This is not a rhetorical question by the way. I'm asking in case anyone knows the answer.

[EECEPR]

For Bupak it was quite simple lowest total cost plane and one A/C type. Catical is only one airport (albiet big numbers) and you can not buy an A/C for that location. It tooks many many months to crunch numbers and this is not done by bean counters but by smart operational people - at the end it was clear hav both Q300 + Q400 which are not compatabale full stop. Also ATR was much cheaper per seat.

Enjoy - Only time will tell let the goodtimes role............

[powerstall]

Bupak's ATR's do fly to laoag and kalibo daily, and there are plans of stretching it's legs to other airports. And with an average of 600 kgs/hr fuel burn... and the add to that the rising cost of jet fuel... they must've done their homework.

If the Q400's do arrive it's gonna be one hell of a show.. Q300's + Q400's vs. ATR 72's

Let the show begin....
:D

[SlamBam]

Well, no question. If you have to have a turboprop, make it an ATR. It's hard to argue with the type's economics. The ATR42/72 just about killed the Fokker 50. The F50's sturdy build and long landing gear legs meant it would be heavier. The heft however meant higher landing fees, and for many operators that tipped the balance in favor of the ATR.

I don't have time on them, but I've ridden the ATR 72 and the Q400 as a passenger. Great planes, both. The Q400 is a hotrod! Deck angle on climbout is more like a jet's.

Anyone operating them in the tropics, or will PAL Express be the first?

[crash&burn]

I think PAL Express will be the first one to use the Q300s/400s in the tropics. The closest operators in the regime that come to mind would be Island Air (Hawaii) and Royal Jordanian.

Q300s/400s seem to be more popular in the N.American and European markets vs. the ATRs which are more popular in these areas.

ATRs seem more economical than the Q400 in terms of fuel burn as expressed in other threads and in other fora (no figures here though). Don't exactly know the relative numbers vs. the Q300. The Q400 is indeed a hot rod and some claim even way overpowered(don't they all use the same PW engines?).


However, we must consider the context and strategy being used here. The Q400's near jet speeds has been constantly marketed by Bombardier. Perhaps PAL 's strategy is to use them for the more the previous routes that used the 737-300s such as CEB-GES/ILO/DVO/PPS or MNL-LGP/VRC and the Q300s in the CEB-DIPOOG/OZC/CDO/ZAM/CATICLAN/TAC or MNL-BUSUANGA/CAUAYAN/SANFERNANDO/SUR routes. The Q300 would fly the <300nm routes while the Q400 would take the denser and longer routes.

Whether the economics of higher speeds and shorter flying time justifies the higher fuel burn for the Q400 another question. And yes, while it is important for smart, operational people to be involved in decisions, it is a fact of life that bean counters are still needed to crunch the numbers such as RPK, ASK and other mundane things like operational (fixed and variable) and financing costs.

In any case, turbo-prop prices are less regulated than they were before. Besides, airlines can always levy surcharges to their fuel costing and pass it to the consumer. :sad:

Truly exciting times...

[love_bus]

Yes, PALex will be utilising most of their Q operations down in Cebu, reopening their HUB for the first time since, well, the big bust.

if you look at the shedules of Air Phil and PALex, you will notice a ton of Air Phil flights ceasing operations and PALex launching routes the very next day. PALex is likely going to follow the path of its former glory days, reopening past routes once served by the Fukker fleet, just this time with haveulands.

Batanes is on that list makocoleta :ok:

But cebu is their primary selling point, and of course Caticlan. And its a matter of when, the bubble will burst on the Caticlan Route. Good luck to Asian Spirit and SeAir, which are actually expected to reach a merger agreement sometime soon thanks in part to the new CEO of RIT, mr Yao - Zesto-Juice King. ;)

[thrust clb]

600kg/hour fuel burn on the ATR? that is what the a319/320 consumes on the ground while IDLE.

[9ball]

Here comes the landing gear problems!!!!



A Philippine Airlines de Havilland Dash-8-400, flight PR29 from Manila to Catarman (Philippines) with 75 passengers and 3 crew, had safely landed on runway 04 at Catarman Airport and was going to taxi off the runway, when the airplane's nosewheel struck a soft spot in the runway's surface, the airline reported.

While doing a 180 degrees turn to backtrack the runway, the airplane's right main gear hit a soft spot in the runway's surface, causing the airplane's gear to collapse, the Civil Aviation Authority of the Philippines (CAAP) said.

No injuries were reported. The runway needed to be closed down for the entire Monday

[St. Ex]

Doesn't Catarman have a paved runway? How can a "soft spot" exist on a paved runway? Perhaps the concrete wasn't dry?

[OTSOOTSO]

I learned the airplane nosewheel had to be lifted out of a rut and immediately flew out later that day without any issue. Like on most remote news source the info was more of a sensational rumor.