Philippine Airlines (PAL) may join the SkyTeam alliance…but it is in no rush.
PAL Vice President of Sales Ryan Uy was asked about alliances at a conference in Cebu this week. He proceeded to give a rather detailed answer:
Star Alliance is big, but you see a lot of overlaps in the region. While oneworld tends to work with the strong carriers in each geographic regions. SkyTeam seems to have the least overlap, as they have limited members.
With Thai Airways and Singapore Airlines in Star Alliance, there is indeed a great deal of overlap. Furthermore, with Air China, Asiana, ANA, and EVA also in the alliance and serving Manila, the case for PAL joining Star Alliance is a difficult one to make. On the other hand, ANA acquired a 9.5% stake in PAL last month.
It is true that oneworld tends to work with stronger carriers in the region, but Cathay Pacific and Cathay Dragon alone (or even JAL) are not enough to block PAL. The problem is nearby Malaysia Airlines, which serves many of the same destinations via its hub in Kuala Lumpur.
SkyTeam may have the least overlap, but I’m not sure it is the best match with both Vietnam Airlines and Garuda Indonesia plus a handful of Mainland Carriers and China Airlines.
And that’s the problem. PAL is like the last person standing in a game of musical chairs. It’s investing in a new fleet, serves not only the region but the USA, Canada, and Europe. It may not be profitable (yet) but that is hardly an abnormality in that region.
So perhaps that is why Uy continued:
PAL is keen to enter an alliance, but we are not in a rush and will take our time. We know that you need to have a sponsor and to be invited to the alliance,” he said. “Our plan now is to maximize both our both international and domestic networks.
CONCLUSION
PAL is expanding…perhaps even too quickly. The airline is talking about new service to Paris, Rome, and Seattle and is already selling tickets to new flights to Hanoi, New Delhi, and Phnom Penh. While joining an alliance is certainly tantalizing, PAL is wise to take it slow and see how it goes. Prestige alliances, just like prestige routes, can turn into loss leaders.
image: Philippine Airlines
I always feel that it’s better to be invited to an alliance rather than ‘begging’ to be part of one. PAL has survived all these years without being part of any alliance so it’ll be fine without being part of any. Besides, nowadays I feel being part of an alliance is very 2000s. The trend nowadays tend to be partnering with individual airlines that can help both parties.
Even Emirates declined the offer in joining any alliance like the Star Alliance despite being having the largest flight network around the world.
I spend a lot of time in the Philippines for work. The issue with flying to any location other then Manila in the Philippines is you need two tickets from two different airlines. First ticket to get to Manila and then another ticket to go beyond Manila. The Philippines is a bunch of island and the only way to get beyond Manila is to fly. With the airport in Manila congested there are always plane delays so you have to give yourself a lot of time between flights. Big time waste and pain in th butt. If Philippine Airline joined an alliance it would make it so much easier to get around the Philippines. One ticket with smooth connection in Manila. My preference is Star Alliance. Lots of Star Alliance airline flying into Manila gives lots of options ( also United flies into Manila from Guam ) With ANA investing in Philippines Airline and doing a lot of codeshares.
If Delta is successful in obtaining five slots at Tokyo Haneda (HND) in the pending route awards for 12 additional daytime slot pairs at that airport, and then decides to eliminate operations at Narita where Northwest once had a formidable “Fifth Freedom” hub allowing for local traffic on intra-Asia flights, including Manila, which is among the last of two (2) remaining Fifth Freedom flights Delta still operates at Narita, then it might make sense for PAL to join “SkyTeam” over the other two (2) global alliance groups – or even offer code-share flights with Delta (assuming its anti-trust immunized Joint-Venture with Korean Airlines allows for code-share ops for destinations within the SE Asia-Pacific Islands region) – as Delta will lack the slots, and perhaps even the Fifth Freedom rights at Haneda even if it did have enough slots, to continue flying between Tokyo and Manila if it gains five (5) of the six (6) slot pairs it’s seeking and then shifts all of its ops to Haneda.
In fact, I’ve already booked family to/from Manila via Delta’s MSP-HND nonstops and interline connections with Philippines Airlines (PAL) at Haneda, which they’ve said have gone well in both directions.
I travel to MNL six to eight times a year. I used to exclusively fly PAL on my trips to MNL. However, after accumulating more than 700k miles on all business class flights, I gave up the convenience of direct LAX-MNL flights due to the disorganization, aging equipment, and lack of proper customer service care of this company. Since I turned my back on PAL many years ago, I have been enjoying my Delta Skyteam Diamond member status. I’m glad I made the switch. However, I noticed Delta’s flight in and out of MNL has been dwindling lately, as they are relying on KAL’s codeshare routes. I certainly hope PAL will not join SkyTeam as I will be forced to fly PAL due to the codesharing agreement. Then again, maybe they can learn a thing or two on how to handle their premium passengers from other SkyTeam airlines. There still might be some hope.
As for what Uy said at the interview, “oneworld tends to work with the strong carriers in each geographic regions” – Does this mean they have contacted OW and they have denied interest?
I think Skyteam stands to benefit from PR but PR doesn’t benefit a lot from Skyteam. On the other hand, PR stands to gain a lot from oneworld (and OW gains a lot too, but only if they are willing to take help!). I think that is where the confusion lies for PR. These are the reasons why I think PR should join oneworld:-
1. Oneworld offers the breadth and connections in regions that could be of strategic interest (growth-wise) to PR – mainly Australia/NZ and Americas.
(a) QF – PR has been trying to fortify its Australia network recently and QF could be a valuable partner.
(b) AA – PR has repeatedly cited interest in ORD and DFW; plus PR could give it some presence in Asia that AA seems to be really struggling with. Both DFW and ORD would open up connections to almost all the important cities in the US.
(c) MH – can provide PR with access to India which VN and GA cannot.
(d) BA – In Europe, PR flies only to LHR – BA could help if it is willing.
Honestly, I don’t see what VN or GA could offer except their domestic networks. Similarly CI or KE. I can hardly imagine DL’s hubs (MSP, DTW, SLC or ATL) to be of any interest to PR (SEA, yes) – they already fly to LAX and JFK. CDG and AMS could help with access to Europe definitely, but MNL is not strategically located to capture Europe to SE-Asia traffic. Nor do I see them growing to be a significant player on the Kangaroo route.
2. I think it balances out the alliances with 2 SE-Asian carries in each (Star – TG/SQ, ST – VN/GA, OW – MH/PR). I guess this is just from the point of view of an aviation enthusiast. Plus Star and SkyTeam are anyway flooded with carriers in the immediate vicinity.
3. I don’t know the relative cost of joining each alliance, but PR has to only partner with 14 carriers in OW, whereas in Skyteam with 19 carriers.
There are several points that make PR joining OW unlikely:-
1. CX is one of the largest operators into MNL and will most likely see PR eroding its market share.
2. It is far from given that BA and QF will be willing to work with PR – they do not work with MH. If at all someone in OW needs some help, it is MH and they don’t receive any. No wonder MH has been desperately trying to access EK’s and EY’s networks and this may be PR’s fate too.
3. AA doesn’t seem to know how to work with anyone except their JV partners. With United having multiple partners in the region and DL/KE being larger to Asia, I would have expected AA to scour for partners in the region, but they seem to be least bothered. I would imagine they are working really hard to decide which AAdvantage partner to kick out next 🙂
4. OW doesn’t have a presence in mainland China – though it could partner with CZ/MF.
5. Philippines is largely VFR and leisure which is of lesser interest to OW.
As you say Matt, PAL is wise to take it slow and see how it goes. I honestly think joining Skyteam would be a waste of money given the lack of premier partner airlines except a few, again not with very useful hubs for PR.
I agree to this. On the point about MH. Now that the airline is troubled that even its very existence as Malaysia’s flag carrier is in question, wouldn’t it be an apportunity for PAL to step in? Should MH be dissolved, PR could easily fill the void. And I believe PR enjoys better reputation at the moment than MH.
Sorry, Matt, can’t leave this alone. It’s “Philippine” Airlines. No “S” when used as an adjective. Anyway, thank you for alot of interesting articles recently, such as 121 pilot’s opinion re: the Max8 situation. Good stuff.
Thank you! I fixed it.
They need to join something as there are a lot of us who simply refuse to fly any airline that is not part of an alliance. PA often has the lowest fares but I always avoid them for that reason (among others). I don’t need orphaned points rotting in another program.
Now that Korean based Asiana Airlines is being merged with Korean Air and leaving Star Alliance Philippines Airlines would be a great replacement there would just have to be a few routes swapped or terminated
Agreed!
I strongly agree that PAL can surely do join Skyteam because it’s one of the airlines in Southeast Asia that doesn’t have any alliance aside from Royal Brunei and the MAI of Myanmar. But before that, for them to join that airline alliance, they’re aiming at being the 5-star airline and despite the big competition for direct European flights, European Skyteam members like Air France, KLM, Alitalia, TAROM, Aeroflot, and others to name could help out to have a codeshared flights just like what SriLankan Airlines did when they joined the oneworld.