Trends and News

Gulf carriers vs Philippine carriers

Last year, I published an article on how Philippine Airlines used its fifth-freedom rights in order to compete with the Gulf Carriers namely, Emirates, Etihad and Qatar Airways.

READ https://frequentbyahero.com/2016/02/03/how-to-compete-wisely-against-the-gulf-carriers/

The point to point passengers on Manila-Dubai, Manila-Abu Dhabi and Manila-Doha routes were reportedly low yields and are seasonal with very large fluctuations such that the Gulf Carriers fill their planes with passengers that are bound for somewhere else especially to Europe. In fact, the only European airline flying to Manila right now is KLM because many of these airlines can’t compete with the Gulf Carrier’s one-stop approach that they offer to their Europe bound passengers.

Middle East's three dominant airlines - Emirates, Qatar Airways and Etihad - are collectively known as Gulf Carriers

Middle East’s three dominant airlines – Emirates, Qatar Airways and Etihad – are collectively known as Gulf Carriers

The response of Philippine Airlines was to utilize its fifth-freedom rights and decided to fly Manila-Dubai-Kuwait, Manila-Dubai-Jeddah and Manila-Abu Dhabi-Doha just to fill their planes. My article concluded with the following statement: “Philippine Airlines cleverly exercised this right in order to compete but whether this will work in the long run is something that we have to wait and see.”

Well, it looks like the waiting game is over. Philippine Airlines faced a lot of challenges and foremost of all was the refusal of Kuwaiti regulators to allow the airline to pick passengers travelling from Dubai to Kuwait and vice-versa. The airline pointed out that Kuwait should honor the existing agreements since Kuwait Airways also enjoy fifth freedom rights where they can pick passengers travelling between Manila to Bangkok and vice-versa.

Second, Philippine Airlines realized its passengers do prefer direct flights (who doesn’t?). Just recently, Philippine Airlines decided to suspend its Abu Dhabi flights and this comes at the heels of their decision to fly directly to Dubai (7x weekly), Riyadh flights (7x weekly), Doha (4x weekly), Kuwait (4x weekly), Jeddah (3x weekly) and Dammam (5x weekly).

Meanwhile, Cebu Pacific, the low-cost Philippine carrier, decided to ax its Riyadh, Doha and Kuwait flights citing overcapacity in these routes. To cut the long story short, the Gulf Carriers decisively won the battle. The Middle East-Philippine sector may be insignificant to the overall global aviation industry but the battle between Philippine and Gulf Carriers serves as a reminder that the latter could pose a serious threat to airlines everywhere.

In the United States, United Airlines, American Airlines and Delta are hoping and praying that the protectionist tendencies of the current American president would eventually result to policy change that will tilt the battle to their favor. Meanwhile, the European Union will not be sitting idly by as the Gulf Carriers continue their rampage. According to the Arab News, the European Commission (EC) is set to revamp a law enabling it to impose duties on non-EU airlines or suspend their flying rights if it finds they have caused injury to European airlines, as it seeks to counter rising competition from Gulf carriers. This should be a welcome news to Air France, KLM and Lufthansa but will definitely elicit protests from Emirates, Etihad and Qatar Airways.

As the Gulf Carriers continue to expand, it will meet resistance especially in the European Union and the United States. For now though, they are winning somewhere else. Recently, Qatar Airways successfully negotiated additional flight entitlements in the Philippines but the catch is that it will serve Davao within the next 12 months. The airline is already serving Clark. Emirates will most likely go back to the negotiating table as well. Last year, its additional flight entitlements to Manila comes with a requirement to serve Cebu. Gulf Carriers may threaten flag carriers but the good news is, they also improve connectivity and with it, more tourists and more trade.

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