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    The Philippine Airlines Group is implementing a new strategy that involves its budget airline subsidiary, AirPhil Express, withdrawing from several major domestic routes. This move goes against typical practices at other Asian airline groups, where low-cost carriers operate alongside full-service carriers on trunk routes with minimal cannibalization. Most importantly, PAL Group needs AirPhil Express on these routes to compete with other low-cost carriers in the Philippines. While the COVID-19 pandemic exacerbated PAL's financial troubles, signs of difficulty had been emerging for several years as losses mounted from 2016 onward, culminating in a P71.8 billion loss for PAL Holdings in 2020.

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    The Philippine Airlines Group is implementing a new strategy that involves its budget airline subsidiary, AirPhil Express, withdrawing from several major domestic routes. This move goes against typical practices at other Asian airline groups, where low-cost carriers operate alongside full-service carriers on trunk routes with minimal cannibalization. Most importantly, PAL Group needs AirPhil Express on these routes to compete with other low-cost carriers in the Philippines. While the COVID-19 pandemic exacerbated PAL's financial troubles, signs of difficulty had been emerging for several years as losses mounted from 2016 onward, culminating in a P71.8 billion loss for PAL Holdings in 2020.

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    © All Rights Reserved
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    13 views1 page

    Document

    Uploaded by

    Zairalyne Gonzales
    The Philippine Airlines Group is implementing a new strategy that involves its budget airline subsidiary, AirPhil Express, withdrawing from several major domestic routes. This move goes against typical practices at other Asian airline groups, where low-cost carriers operate alongside full-service carriers on trunk routes with minimal cannibalization. Most importantly, PAL Group needs AirPhil Express on these routes to compete with other low-cost carriers in the Philippines. While the COVID-19 pandemic exacerbated PAL's financial troubles, signs of difficulty had been emerging for several years as losses mounted from 2016 onward, culminating in a P71.8 billion loss for PAL Holdings in 2020.

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    The Philippine Airlines (PAL) Group is implementing a misguided new strategy that involves its budget

    airline subsidiary pulling off several domestic trunk routes. AirPhil Express, which is planning to be soon
    re-branded as PAL Express, has redeployed capacity from trunk to leisure and secondary routes, which it
    has taken over from PAL following a surprising decision by the Group that the two brands should
    remove nearly all overlap in their route networks.

    The move, Implemented on 28-Oct-2012, goes against the grain of typical two-brand strategy at Asian
    airline groups, which have discovered that they can successfully use their LCCs to operate alongside
    their full service brand. As Philippine Airlines and AirPhil Express (soon PAL Express) brands cater to
    different sectors of the market, the two should be able to co-exist on trunk routes with minimal
    cannibalisation. Most crucially, PAL Group needs the second budget brand on domestic trunk routes to
    compete with rival LCCs. The Philippines has a crowded and intensely competitive LCC sector and it will
    be the Philippines’ four other LCCs that stand to gain the most as the PAL Group removes its budget
    brand from several of the country’s largest domestic markets. While the global health crisis worsened
    PAL’s financial woes, forcing the flag carrier to suspend debt payments as early as April last year, signs of
    trouble were long-brewing for the airline.

    After Tan regained full control of PAL in 2014, ending a two-year alliance with conglomerate San Miguel
    Corp., it pursued a new strategy to expand its international network, modernize its fleet and achieve a
    coveted five-star status by 2020.

    When it retired old planes and introduced next-generation Airbus A350-900s, the airline opened
    nonstop flights from Manila to New York and appeared unstoppable in its mission to connect the
    Philippines to more global gateways. Losses since 2016

    But financial losses began gradually mounting in 2016 and by 2019, PAL Holdings Inc., its parent
    company, had accumulated P22.9 billion in losses.

    PAL Holdings lost a staggering P71.8 billion in 2020 alone after flights were disrupted by recurring
    quarantines.

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