UAE-Philippines flights "will have to be cut back"

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Airlines are losing money on the UAE-Philippines route and will soon be forced to cut flights, a leading international aviation analyst organisation has warned.

The Centre for Asia Pacific Aviation (CAPA) said too many carriers had entered the once-lucrative market, with 24 flights per week added in the last quarter of 2014 alone.

Despite huge traffic between the countries – there are about 700,000 Filipinos working in the UAE, the Asian country's fourth largest overseas community – airlines including Dubai's Emirates, Abu Dhabi's Etihad and three Filipino carriers had saturated the market to the point that competition had become too great.

“While there is considerable traffic between the Philippines and UAE, yields are generally low and there are large seasonal fluctuations,” a CAPA report says.

“On a year-round basis the Philippines-UAE is not an easy market to turn a profit on, particularly without any ability to sell flights beyond the UAE.

“But December and January are peak months for the Philippines-UAE market, as Filipinos working overseas typically make their trips back home during the holiday season. February and March will be more challenging months, while April will see another peak for Easter.”

The route became overcrowded during the previous few months, with three Philippine carriers entering the market – low-cost airlines Cebu Pacific and PAL Express and flag carrier Philippine Airlines.

Emirates also launched services to Manila's alternative airport, Clark, on top of its three daily flights to the capital, having added the third frequency at the beginning of 2013.

Etihad also serves Abu Dhabi-Manila with two daily flights.

“Total capacity shot up by over 70 percent practically overnight from about 13,100 to about 22,500 weekly one-way seats,” CAPA says.

Fares between Manila and Dubai or Abu Dhabi have dropped as the three Philippine carriers have struggled to fill new A330s and CAPA said load factors have been sustainable only during peak periods.

Unless ticket sales were boosted during non-peak periods, frequencies would have to be cut.

“Losses for all the carriers are likely if current capacity levels are maintained year-round,” the report says.

Cebu Pacific's launch of the Manila-Dubai service was its first long-haul route, with the daily service launched on October 7.

But according to CAPA, the airline's performance on the route was “disappointing” during the first month, with its average load factor a dismal 36 percent (10,000 seats), despite selling tickets for nine months prior.

The airline also disclosed in its third-quarter results that forward bookings for December-February also were relatively weak, with only about 20 percent of seats sold.

Although CAPA said the route had been performing “much better” since late November, with significantly higher load factors and some flights completely full.

It is now offering cut-back prices of $167 Manila-Dubai one-way.

Flights to the UAE also are part of an ambitious expansion plan by Philippine Airlines.

CAPA says the full impact of the over-supply will not be felt until at least February because PAL Express did not launch its Dubai service until shortly before the peak period.

However, the report says Etihad has been smart not to increase its twice daily flights to Manila since the second flight was added in November 2011.

Manila is the airline's second busiest market after Bangkok but it would only be able to boost capacity by taking flights to Clark.

“Etihad would be smart to give Clark a miss,” the CAPA report says.

“There is risk of large losses as Philippine carriers start to realise it is not a market where new demand can be easily stimulated. Philippine carriers will need to rely on wooing passengers – or labour contractors – away from very competitively priced one-top products.

“But there are not enough of these passengers to go around outside the peak periods. At current capacity levels there will be no winners.”

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Please post responsibly. Commenter Rules

Posted by: turk971

@Marmita...Obviously you're not from the south nor from the middle east thus the comment. There is not much of them from the south as well? You are also not aware that visas are sent to the recruitment agency directly by employers and do require embassy stamps. Unless you can back your comments with official figures, please do not make such comments. The most popular airlines for NUMEROUS OFW's in the middle east from the southern part of the Philippines are CATHAY PACIFIC and SINGAPORE AIRLINES which the author forgot to mention in the article. Why they are favorites you may ask? These are the only airlines which can take them nearest to their native places without having to get tied up with the hassles of passing through Manila.

Posted by: Kathy Butterfiels

Perhaps airline abroad going to Philippines should consider cutting down their excessive high profit mark-up on airline tickets..that way they attract more customers and less competitors and stop wining..

Posted by: KMP

Aside from Manila and Clark, Cebu and Davao has no direct connections with any of GCC airlines which could help the Philippines and GCC carriers to add direct flights instead of Manila. This route are not popular but it has potential since Davao and Cebu could be a get-way to our Muslim brothers to travel in the Middle East not to mention the OFW's leaving abroad who opted to go direct flight instead of going to the congested Manila Airport. All carriers should not only consider Manila and Clark.

Posted by: A Marmita

Traffic between the Philippines and the middle east are mostly one way fed by labour contractors who have established buisiness relations with selected airlines over the years. They will always chose for the newly hired OFW's to fly out of Manila. Most of the time, it is very convenient and cost effective for them because their offices are in Manila and the visas for the newly hired OFW's are released in Manila by the middle east country's embassies. The return flights from the middle east to the Philippines are also determined by the employers who book their employees once they reach the end of their contract and are entittled to their holiday flights. Only those Filipinos given the option of encashing their holiday pay and choosing which airlines to fly can get to chose if they want to fly direct to Davao or Cebu and there is not much of them. The majority still depend on which airline their employers book them with and normally they will chose Manila because it is cheaper.

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