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By Darwin G. Amojelar Reporter
Executives of local airlines said
they will not scale down expansion plans, despite the domestic and
global economic slowdown plus the soaring food and fuel prices that
are threatening the tourism and travel industry.
The economy, as measured by gross
domestic product (GDP) in the first quarter of 2008, grew 5.2
percent, lower than the government projection of 5.7 percent to 6.5
percent. GDP refers to the total cost of all goods and services
produced in the country within a year.
Inflation, on the other hand, has
risen to a nine-year high of 9.6 percent in May.
Jaime Bautista, Philippine
Airlines (PAL) president, told The Manila Times that the country’s
flag carrier will push through with the acquisition of more
aircrafts this year despite the rising jet-fuel prices.
“We have no plans to cancel or
defer aircraft orders this year. [Instead] we want to operate more
fuel efficient airplanes in response to the rising fuel prices,”
he said.
The airline executive said
Philippine Airlines expects delivery of four Airbus 320s from July
to November and four Q400 also within the year.
And from 2009 to 2011, a fleet of
six Boeing 777-300 Extended Range will be delivered to PAL.
Bautista had earlier announced
that PAL will spend about $1.4 billion to buy more planes.
Candice Iyog, Cebu Pacific’s
vice president for marketing and products, said her company is not
canceling any purchases either.
“All scheduled deliveries are
on schedule. We have completed our re-fleeting last year. We ended
2007 with 15 brand-new aircrafts,” she said, adding that by end
2008, Cebu Pacific will have a total of 25 planes.
Iyog said that of the 10 brand
new aircrafts, four are A320s and six are ATR 72-500s.
World, domestic routes
PAL and Cebu Pacific executives
have also said that they will not reduce domestic and international
operations.
The flag carrier operates a mixed
fleet of 14 narrow-body aircraft, comprising seven A320s, four
Boeing 737-300s and three Boeing 737-400s. It also operates eight
A330s and four A340s for regional flights and long-range routes.
PAL flies to 43 destinations—18
domestic and 25 international. PAL also serves the US, Japan, Hong
Kong, South Korea and the Middle East routes.
For its part, Cebu Pacific
operates flights to 21 domestic destinations and 16 international
destinations.
Budget fares
Budget carrier Cebu Pacific
earlier announced th at it has reduced domestic fare by 32 percent
by absorbing fuel and insurance surcharges to attract more people to
fly.
“Right now, what we are
avoiding is [for] the travel market to contract because of fuel,”
Iyog, said.
Iyog said the airline’s
business strategy is to entice more passenger traffic to offset the
rising expenses. “We want to grow the market amidst high oil
prices. It’s not about market share, but growing the entire market
. . . We cannot afford flying empty. Flying with an empty seat is
not good for the airline.”
She explained that if the company
increases fares, the discretionary traveler will stop flying and the
market will shrink, which is not good for the industry.
“It [the fare structure] is not
to undercut anyone . . . It’s really because that our kind of
business model can sustain this kind of fare structures,” Iyog
added.
The company expects domestic and
international passenger volume to reach seven million this year from
5.4 million last year.
Iyog added that the strategy
would not affect her company’s profitability. “We have factored
in all the other business elements . . . We have to properly manage
the [seat] allocations.”
The company’s new lower-all
inclusive fares include the fuel and insurance surcharge, aviation
security fee and 12- percent value-added tax.
Rival PAL, in comparison, offers
a one-way fare of P88 between Manila and many destinations: Laoag,
Legazpi, Puerto Princesa, Bacolod, Cebu, Iloilo, Kalibo, Roxas,
Tacloban, Tagbilaran, Butuan, Cagayan de Oro, Cotabato, Davao,
Dipolog, General Santos and Zamboanga.
Rolly Estabillo, PAL spokesman,
said the company’s promo will stimulate demand especially during
the lean season, protect and increase the market, and generate
additional revenue.
“The idea is that a small
margin on a single transaction will eventually translate to
substantial profit from strong sales spurred by lowering of the
price below the normal level,” he explained. “Higher revenues
mean higher profit, for as long as the price of a good [or] service
is pegged slightly over the unit cost of producing that same good
[or] service. Note that various firms producing the same product
have different means of production, thereby the differences in cost
structure. Price and profit level then are determined by cost.”
Bautista said PAL’s promo fare
offerings are expected to boost domestic tourism and attract more
tourists from other countries. “There’s really a demand for
low-cost tourism.”
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