Discount Air Carriers in the Philippine Grow Domestic Travel by 96%

Discount Air Carriers

Low-cost carriers (LCCs) in the Philippines contributed to approximately 96% of total domestic air travel growth from 2006 to 2011, said Cebu Pacific Air, the Philippines’ largest low-cost carrier, during a BIMP-EAGA (Brunei Darussalam-Indonesia-Malaysia-Philippines East Asean Growth Area) Summit held in Davao last week.

CEB VP for Marketing and Distribution Candice Iyog said, “Philippine LCCs contributed about 96% of total domestic air travel market growth from 2006 to 2011. Full-service carriers on the other hand contributed 4% growth in that six-year period.”

“This is mainly driven by the low fares offered by LCCs such as CEB. By unbundling services such as baggage and meals, customers are given the choice to buy only the services they want to pay for. Full service or legacy carriers continue to bundle all their services into the fare, something new air travellers have rejected. Cebu Pacific continues to remain focused on stimulating travel demand in the Philippines. We’ve seen this in every market we operate and call this the Cebu Pacific effect,” Iyog added.

Despite the rising cost of fuel, average fares are now 30% less than 10 years ago because of discount air carriers, allowing people who never flew before to travel 3-4 times a year. Promo fares and seat sales allow even minimum wage earners to fly.

In 2006, one out of every two domestic passengers flew on LCCs. In 2011, LCCs dominated the domestic market with 76% market share, or three out of every four domestic passengers, indicating how many have benefit from the entry of LCCs in the market.

The Cebu Pacific Effect can also be seen in international destinations, especially those with a dense population of global Filipinos. CEB first flew to Hong Kong in 2005 when the Philippines-Hong Kong passenger count was at 1.99 million. Six years later, 2.75 million passengers were recorded for all airlines, indicating a growth rate of 38%.

The same is true for Singapore, where passenger traffic jumped by 175% after CEB’s entry into the market. Similar patterns can be seen in Jakarta, Kuala Lumpur and Kota Kinabalu, routes that CEB currently operates to via Manila. In Kuala Lumpur, Filipino tourist arrivals to Malaysia more than doubled within 5 years of Cebu Pacific’s entry.

“CEB continues to work closely with private stakeholders and key government offices to ensure continued airline growth for the benefit of its passengers and the economy. Despite this phenomenal contribution of discount air carriers to inbound and domestic tourism, the industry continues to face hurdles such as safety concerns and infrastructure limitations, among others,” Iyog said

As an example, she cited that many of the 81 airports in the Philippines remain unequipped for night landing or and even those night-rated airports do not extend operating hours. Airlines currently operate most domestic flights during the day, leading to air traffic congestion or cancelled flights due to daylight limitations.

“CEB, as one of the fastest growing discount air carriers, is already planning for an even wider route network in 2013 with long-haul flights, and an estimated passenger growth outlook at 10-15% per year. We expect delivery of 56 brand-new Airbus A320 A321neo and A330 aircraft until 2021, so we can offer more route, flight and destination choices to our passengers,” she said.

CEB currently operates 10 Airbus A319, 20 Airbus A320 and 8 ATR-72 500 aircraft. Its fleet of 38 aircraft – with an average age of 3.6 years – is largest and youngest aircraft fleets in the Philippines. It flies to 32 domestic and 19 international destinations, such as Beijing, Osaka, Seoul, Siem Reap, Hanoi, Xiamen, Shanghai, Taipei, Brunei, from hubs in Manila, Cebu, Clark and Davao. (Cebu Pacific Air)