Philippine Airlines’ eyes further expansion in Australia thanks to increased range options

Philippine Airlines (PAL) plans to allocate most of its new sub-fleet of six longer range A321neos to Australia.

PAL has opted for two auxiliary centre fuel tanks for its first six A321neos, enabling flights of over eight hours. All of Australia is within range from Manila with the exception of Tasmania. PAL is intending to operate A321neos to Melbourne, Sydney and – potentially – Brisbane.

PAL has opted for a low density 176-seat two class configuration for its first six A321neos, including 12 business and 164 economy seats. Lie flat seats will be provided in business class, providing a premium product similar to long haul widebody aircraft. The economy cabin will be more spacious than typical narrowbody economy seats and feature seatback in-flight entertainment monitors.

PAL has 21 A321neos on order. However, the remaining 15 aircraft will not be fitted with extra fuel tanks and have the same or similar configuration to PAL’s existing A321ceos, which have 12 standard recliner business seats and 187 economy seats. These 15 aircraft will be delivered from 2019 to 2024 and mainly be used to replace 156-seat A320ceos.

PAL was initially slated to take its first two A321neos in 4Q2017 followed by four in 2018. However, delivery delays related to issues with the Pratt & Whitney issue have resulted in the first two deliveries being pushed to early 2018. PAL now expects to receive all six longer range A321neos in 2018.

PAL will likely allocate four of these aircraft to Australia while the other two may be used to launch services to India. With the four A321neos PAL could operate up to 28 weekly A321neo flights to Australia, which would generate 4,928 weekly one way seats.

PAL currently has 4,338 weekly one way seats to Australia. However, less than 4,000 weekly seats are available in the Philippines-Australia market because most of its Manila-Cairns capacity is used for passengers continuing to Auckland.

As Blue Swan previously analysed, PAL is launching three weekly nonstop flights to Auckland in Dec-2017 using A340-300s but dropping Cairns. PAL now operates four weekly Manila-Cairns-Auckland flights using A320ceos.

See related report: Philippine Airlines responds to growing demand with new nonstop service to Auckland

PAL also currently operates four weekly A320ceo flights on a Manila-Darwin-Brisbane routing. Manila-Sydney is now served with seven weekly A330 frequencies while Manila-Melbourne is served with three weekly A330 frequencies.

The 176-seat A321neo will have 133, or 43%, fewer seats than the 309-seat retrofitted A330-300 PAL recently began using on the Melbourne and Sydney routes. However, capacity will increase as PAL aims to increase Sydney from one to two daily flights and Melbourne from three weekly flights to daily.

Two daily A321neo flights will give PAL 2,464 weekly one-way seats to Sydney, representing a 14% increase compared to the 2,163 seats currently. Business class capacity in the Sydney market will increase by 33% from 126 weekly one way seats to 168 weekly one-way seats.

A similar lie flat business class product will be maintained. PAL introduced a lie flat business class seat in the Sydney market recently as it switched from the ageing A340-300 to the retrofitted A330-300.

See related report: Another carrier improves premium product to Australia, as the trend up continues

The increase in Manila-Sydney capacity should be absorbable as two daily flights will improve connectivity beyond Manila, enabling PAL to increase sixth freedom traffic to and from Sydney. For example, PAL will be able to offer a daily one-stop product to London. Currently PAL only has three weekly flights Sydney-Manila flights that connect with Manila-London and four weekly Manila-Sydney flights that connecting with London-Manila.

PAL could potentially also start to offer connections from Melbourne to London if it switches to a split schedule for Melbourne-Manila.  This could be achieved by launching three or four weekly morning departures from Manila to Melbourne, supplementing the existing evening departures. PAL has had a similar split schedule on the Sydney-Manila route since Oct-2015, enabling connections to London (but not every day).

The Manila-Melbourne market is unlikely to support double daily service as it is a much smaller local market than Manila-Sydney. However, Manila-Melbourne should be able to support an increase in capacity as PAL switches from three A330 frequencies to seven A321neo frequencies per week. Seven weekly A321neo flights would provide 1,232 weekly seats, representing a 33% increase compared to the 927 seats in the current schedule.

PAL is also looking at using the A321neo to launch nonstop services to Brisbane. PAL would likely drop Darwin if it launches nonstop flights to Brisbane. Most of PAL’s Manila-Darwin-Brisbane passengers do not disembark in Darwin. In 2016, PAL carried 32,000 passengers between Brisbane and Manila but only 12,000 passengers between Darwin and Manila, according to Australia BITRE data.

A nonstop flight to Brisbane would significantly improve PAL’s product in the local Brisbane-Manila market and open up one-stop connections beyond Manila, including to London (again this would require a split schedule). The improved product and opportunity to attract transit traffic should enable PAL to sustain four weekly nonstop flights on a 176-seat aircraft – and potentially grow the route over time to daily as demand in the Manila-Brisbane market continues to grow.

Resuming Perth is also an option for PAL’s new A321neo fleet but less likely. PAL briefly served Perth in 2013 via Darwin using A320ceos. A nonstop product would stimulate demand in the local Perth-Manila market and open up one-stop connections beyond Manila. However, the Perth-Manila market is likely too small to make a nonstop service viable.