Philippine Airlines (PAL) plans to come out of bankruptcy a leaner airline with a different route network. As part of the restructuring, the airline is looking to cut down on ultra-long-haul flying, which would see destinations like Toronto and New York cut in favor of a focus on the West Coast, which comes at less of a financial risk for the airline.
Philippine Airlines looks at long-haul route restructuring
In a filing associated with its bankruptcy proceedings, Philippine Airlines discussed how it sought to restructure its route network in the years to come. In recent years, Philippine Airlines has expanded its long-haul network, powered by the delivery of newer long-haul jets like the Airbus A350.
However, PAL is now looking to alter its North American offerings. The airline has stated its strategy is to consolidate capacity in West Coast gateways and cancel ultra-long-haul routes. This primarily includes Toronto in Canada and New York City in the US, which are almost certainly out of the carrier’s route network due to “structural issues impacting profitability,” according to PAL.
PAL will maintain those flights on the West Coast, namely to gateways like Los Angeles and San Francisco. Vancouver is also likely to stay on the carrier’s map. There may be frequency changes. Another route that was mentioned was London-Heathrow, but it is unclear if PAL is looking to cut it, as it was not explicitly indicated in the filing. Fleet changes are going to be a significant part of determining where PAL can fly.
Focusing on partnerships
Philippine Airlines is looking at a codeshare agreement with American Airlines and interlining relationships to support connections. The West Coast is a great gateway to offer connections to cities like Chicago, Houston, Phoenix, Atlanta, Washington D.C., and even cities like Toronto and New York. With American Airlines, this includes some one-stop options.
Flying from Asia to the East Coast of the US is a more challenging market. For flights to New York and Toronto, this was mostly an endpoint or origination point in the network, which adds more risk to a long-haul route. Plus, there are few East Coast destinations where New York or Toronto would be a better connecting point than San Francisco or Los Angeles, and itineraries where PAL could also gain the revenue advantage to make a Toronto or New York to Manila flight profitable.
New York to Manila is the seventh longest nonstop route out of the US. While a key route for prestige, profits on such flights are not always guaranteed. Especially when the airline is going through a restructuring, cutting routes like these are essential to get back to profitability.
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Changes back at home
The changes are continuing back in Asia. Domestically, Philippine Airlines aims to consolidate flying from Clark International Airport (CRK) to Manila International Airport (MNL). The airline views this as a short-term move due to market demand. The goal is to leverage MNL, which is the carrier’s most profitable hub, and by increasing capacity there, serve as a way to protect MNL slots while international capacity is down and put some distance between PAL and the competition. The carrier did not rule out a return to Clark if demand justifies it.
Meanwhile, from Cebu, the carrier wants to “maintain profitable opportunistic flying.” The core focus is on MNL, but if there are opportunistic routes, PAL will serve them, but the growth has to be more organic. As PAL describes it, “if Cebo flying can utilize fleet in the short term and achieve positive contribution [financially],” then the carrier will maintain those routes.
Regionally, the strategy is to grow capacity in short-haul regional routes. China was highlighted as a high-growth market of interest. The carrier has seen success in regional markets, which it describes as being typically high-growth, strong performers. While there will be an initial rationalization, PAL will monitor growth opportunities and utilize narrowbody aircraft to add capacity and launch new markets.
By pulling some flying down out of Clark and potentially freeing up some planes previously devoted to Cebu, it can use those aircraft to add more flights to the high-priority destinations and start to rebuild Manila as a connecting hub. This could, in the future, lead to profitable organic long-haul growth and potentially a return to a city like New York or Toronto.