PAL warns against entry of foreign airlines

Cutthroat pricing seen causing heavy losses
By Paolo Montecillo
Philippine Daily Inquirer
First Posted 21:43:00 12/12/2010

MANILA, Philippines—The entry of major foreign carriers into the Philippine market may cause disruptions in the local air travel industry, the country’s flag carrier Philippine Airlines (PAL) said.
It said the recent announcements of regional aviation giants such as Singapore’s Tiger Airways and Malaysia’s AirAsia to enter the Philippine market might result in cutthroat pricing losses for companies such as PAL and other players in the country.

“The question is, will the market be big enough for more players as big as them,” PAL president and chief operating officer Jaime Bautista said.

He warned of the possibility of overcapacity in the industry where there would be too many airlines for too few passengers.

“If there is a price war, this will mean losses for all airlines in the country, not just PAL,” Bautista said.

At the moment, he said he believed that the local industry was adequately served by local carriers and other foreign airlines that fly to the Philippines.

He said that while the increased competition and lower prices would be good for passengers, the lower profits for airline companies might lead to a decline in new investments and the slowdown in the industry’s expansion.

Constitutional restrictions limit foreign ownership in transportation companies, which have congressional franchises, to 40 percent. As a result, partnering with local entities is the only way for foreign groups to gain a foothold in the local industry.

Earlier this month, Singapore’s Tiger Airways announced that it would let local carrier Southeast Asian Airlines (SEAir) to lease two of its Airbus A320 jets as part of a marketing deal between the two firms.

Under the arrangement, the Singaporean budget carrier will also be allowed to sell SEAir flights on the Tiger website.

Tiger Airways is partly owned by government-backed Singapore Airways and is one of the region’s largest low-cost airlines.