Local low-cost carrier growth slows down in 2013 – CAPA
The growth of the low-cost carriers (LCCs) growth in the country has slowed down this year following a period of rapid capacity expansion which led to over-capacity.
The Center for Asia-Pacific Aviation (CAPA) noted that LCCs in 2012 accounted for 80% of domestic passengers in the Philippines, giving it the highest LCC penetration rate in the world among medium and large size markets.
However, CAPA said competition on many routes was irrational and four of the five LCCs were unprofitable – AirAsia Philippines, AirPhil Express, Tiger Air Philippiones and Zest Air.
CAPA said only the market leader Cebu Pacific which captured 46 percent of the domestic market last year, ended 2012 in the black.
Consolidation came in early 2013 as AirPhil Express rebranded as PAL Express and in the process transitioned to a regional full-service model.
AirAsia Philippines also entered into a partnership and cross-ownership deal with Zest, which gives AirAsia access to the Manila market.
Zest flights are now available on the AirAsia website and the carriers are in the process of integrating further, culminating in Zest adopting the AirAsia brand.
The deal means there are now a more palpable three LCC players in the Philippines – AirAsia (including Zest), Tigerair Philippines and Cebu Pacific, said CAPA.
CAPA noted that the consolidation has led to more rational capacity levels and an improved outlook for all Philippine carriers. The total LCC fleet in the Philippines is expected to grow in 2013 by a relatively modest 10% to 69 aircraft excluding PAL Express.
Cebu Pacific plans to expand seat capacity by 11% in 2013 as it adds seven aircraft for a year-end fleet of 48. The airline’s seat capacity was up by 16% in 2012 but its passenger traffic was up only 11% to 13 million with equal increases across its domestic and international networks. The drop in load factor was a reflection of the over-capacity in the market, said CAPA.
Cebu Pacific was able to improve its load factor in the first half of 2013 as it started to benefit from a more rationale marketplace. The carrier reported 8% passenger growth and 6% seat growth in the fist semester of the year.
AirAsia Philippines plans to add one aircraft in the fourth quarter of 2013, its first addition since launching services in Mar-2012 with a fleet of two A320s.
Zest plans to add two A320s in 2H2013 for a total 13 A320s but compared to the start of 2013, when it also operated turboprops which have since been phased out, its fleet has shrunk.
Tigerair Philippines was originally planning to add two or three aircraft in 2013 but the struggling Tiger affiliate is now expected to keep its A320 fleet at just five aircraft. The carrier has not grown its fleet since mid-2012, an indication of the challenging conditions in the market, said CAPA.