Philippine Airlines (PAL) is planning further rapid expansion of its international operation over the next few months as it launches services to Hanoi, New Delhi and Phnom Penh and adds frequencies to 12 of its 39 existing international destinations.
PAL’s international seat capacity will increase by nearly 10% this summer, pressuring yields and profitability as the airline tries to increase sixth freedom traffic. PAL is growing capacity to continental North America by nearly 50% this summer, supported by the delivery of A350-900s. As PAL introduces 17 additional weekly frequencies to North America it is trying to attract more transit traffic in the highly competitive North America-Southeast Asia market – leading to the decision to add Hanoi, New Delhi and Phnom Penh.
PAL’s expansion this summer will result in more competition with several North Asian airlines, including its new strategic partner All Nippon Airways (ANA). ANA Holdings announced the acquisition of a 9.5% stake in PAL Holdings, the parent company for PAL and the full service regional subsidiary PAL Express.
While the deal is strategically significantly for PAL, which has been trying to secure a foreign airline investor for years, the stake is small, and the USD95 million investment is pocket change for ANA. The fact that the transaction values PAL at only $1 billion, despite group revenues of over $2.5 billion and an extremely attractive slot portfolio at congested Manila, reflects the challenges PAL faces.