Fierce competition spawns airline crisis

by Eric Apolonio
August 8, 2010
ManilaStandardToday

The growth of no-frills airlines may be good for commuters but not for the local aviation industry which is starting to feel the pinch of an exodus of pilots and flight crew lured by better pay from Asian and Middle Eastern carriers.

 Capt. Jim Sydiongco, officer-in-charge of the Flight Safety Inspectorate Service (FSIS) and check pilot of the Civil Aviation Authority of the Philippines (CAAP), said “the poaching will continue because so many LCC’s (low cost carriers) are entering the airline industry.”

He said the problems that Philippine Airlines (PAL) is experiencing would be hard to address at the moment unless the flag carrier is able to match the salary offered by foreign airlines.
“PAL knows the situation and unless they could match the salaries offered to their pilots, then the airline should face the reality,” Sydiongco said.

A former PAL captain and A340 check pilot, Sydiongco said that “the growth of the LCC’s would continue in the years to come and the Philippines should prepare for the expected high demand for pilots, cabin crew, mechanics, fitters, and avionics workers.”

He said that there are about 1,000 pilots with the rank of captain in the Philippines, with many of them logging at least 1,200 hours of flying—a level of expertise Sydiongco calls “poachable.”
PAL has already adjusted its local and international flight schedules following the departure of 25 pilots last week, who were reportedly hired by Hong Kong Airlines Ltd. and Vietnam Airlines.
An entry-level salary for newly-hired A320 pilots starts at $10,000, and may go up to as much as $17,000 a month according to news reports.

PAL, on the other hand, pays only about $7,000 a month, with 32 percent of the pay going to the government in the form of taxes, according to PAL President Jaime Bautista.

Even Cebu Pacific (CEB)was not spared from the exodus: three of their pilots are also leaving for Hong Kong Airlines, according Elmer Pena, president of the Airline Pilots Association of the Philippines (ALPAP).

However, CEB appeared more prepared for the exit of some of its pilots because they have started training their own pilots at the Clark Aviation Flying School (CAFS), which has an A320 simulator, Sydiongco said.
Pilots who graduate from the CAFS are deemed capable of handling an A320.

CEB started the LCC trend in the country with its low cost fares to local destinations. The carrier has since opened international services to popular destinations like Hong Kong, Singapore, and Beijing.
CEB now claims it is the country’s biggest airline in terms of passengers transported in 2009.
PAL has countered by operating Airphil Express, which flies to Cebu and Davao, offering low-cost fares to the domestic destinations plus free 15 kilos in luggage allocation.


There are currently three LCCs operating in the country—CEB, AirPhil Express, and Spirit of Manila which flies twice weekly to Taiwan.

In the Asia Pacific region, there are 36 LCCs. China has three, India, eight; Sri Lanka, two; Malaysia, one; Singapore, three; Indonesia, four; Thailand, three; Japan, four; and Korea, five.
But even as a labor dispute threatens to erupt into a crippling strike, PAL said it would still proceed with plans to close down three departments and outsource “non-core” positions.

An approximate 2,700 positions will be contracted out, PAL spokesperson Cielo Villaluna.
The shift is expected to cut the airline’s labor costs, which are currently the equivalent of about 40 percent of revenues.

By trimming its workforce to just over 4,000 from its current 7,000, the company expects to save anywhere from P500 million to P1 billion in monthly salary costs, Villaluna added.

Meanwhile, PAL’s losses continue to mount, hitting P15 billion in its last two fiscal years. The flag carrier blames the slowdown in passenger traffic because of the global financial crisis, but high oil prices and cut-throat competition have also dampened its bottom line.