PAL sees threat from ME’s heavily subsized airlines

Middle East (ME) carriers that are being investigated by the US and European governments for receiving over $23 billion in government subsidies can use their unfair financial advantages against local carriers if they manage to secure new entitlements in the forthcoming bilateral air talks with the Philippines.

Philippine Airlines (PAL) predicts a repeat of the Philippines’ bitter experience with abusive Mideast airlines in the 1990s will wipe out the gains of the last two years when PAL reestablished service to the Middle East, Europe and the US East Coast.

PAL is always ready to compete energetically on a level playing field. In fact, PAL has been successful in operating at high frequency levels on many hotly contested routes between the Philippines and the US, Japan, China, Hong Kong, Australia, South Korea and others, the flag carrier said in a statement.

PAL also pioneered many new routes ahead of foreign competition, such as PAL’s routes to Toronto, Darwin, Brisbane, Shanghai, Cebu-Japan (Tokyo, Osaka, Nagoya), and the upcoming routes to Auckland (New Zealand) and Cairns (Australia).

The Middle East and Europe routes are, however, unique because the competitive field is distorted by the massive subsidies enjoyed by Gulf carriers, such as Emirates Airlines and Etihad Airways.

PAL stopped flying to the United Arab Emirates (UAE) in 1997, to Europe in 1998 and to Saudi Arabia in 2006 due to unfair competition, mainly because of massive and well-funded efforts by Mideast carriers to siphon passenger traffic via their hubs in Dubai, Abu Dhabi and other airports in the Gulf region.

Six European airlines also suspended their routes to Manila during the same period as Mideast carriers employed their multimillion-dollar advantage to devastating effect.

“Should the UAE airlines get the additional entitlements they seek during the coming Philippine-UAE air talks, this will undermine the investments PAL and other airlines have made for the country in opening new routes to serve Philippine tourism and overseas Filipino workers,” PAL President Jaime Bautista said.

At risk is the healthy state of competition in the Philippines’ global aviation network, after PAL launched vital new routes to London (reopened in 2013), New York (2015), Abu Dhabi (2013), Dubai (2013), Riyadh and Dammam (2014).

Other Philippine and European airlines have opened their own routes to Dubai, Kuwait, Riyadh, Doha and Istanbul, all of which are vulnerable to another ill-timed onslaught by Emirates and Etihad if the UAE government is able to secure increased frequencies between Manila and the UAE.

The current valid bilateral air pact with UAE already allows Emirates and Etihad a maximum of 28 weekly flights to Manila and unlimited flights to Clark, Cebu and other airports in the Philippines.

In 2014, Emirates canceled its Dubai-Clark route in anticipation of receiving permanent additional entitlements to the congested Ninoy Aquino International Airport.

Also, Emirates was penalized by the Civil Aeronautics Board in December 2014 for selling without prior authorization flights that exceeded their weekly maximum entitlement.

Emirates and other Mideast carriers have been lobbying for more flights into Manila to be able to carry passengers to destinations beyond the UAE.

When PAL and European carrier flights to the Middle East and Europe stopped in 1997, the monopoly of air service enjoyed by Mideast airlines led to higher air fares and constrained the growth of European tourists visiting the Philippines.

“We respectfully call on the Philippine panel to the air talks to promote fair competition and support our airlines who have invested much in reopening service to the Middle East and Europe,” Bautista said. Luis Leoncio