PAL, tourism stunted by 'Category 2' status

PAL, tourism stunted by 'Category 2' status

The Philippine Star
July 31, 2012
By Federico D. Pascual Jr.

CATEGORY 2: It is ironic that Philippine Airlines already has three gleaming Boeing 777-300ER and awaiting delivery of three more of this aircraft of choice for long-haul flights, yet is barred from using them in the United States and Europe.

Reason: the Philippines is still languishing in the Category 2 cellar where the US Federal Aviation Administration consigned it five years ago.

As a consequence, the Philippine flag carrier is prevented from expanding its US network or even upgrading its Boeing 747-400 and Airbus 343 aircraft servicing the US West Coast or flying on to New York in the eastern seaboard.

Category 2 is actually not a rating on PAL but on the government’s oversight regulation of the local airline industry. The urgency of the government’s lifting itself out of FAA restrictions cannot be overstated.

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INNOVATIONS: Last week, PAL officials led by president/COO Ramon S. Ang and director Michael G. Tan (representing his father, chairman Dr. Lucio C. Tan), announced plans resulting from the synergy between PAL and San Miguel Corp. that has taken management control of the airline.
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Unveiling PAL’s refleeting and route expansion plans at the Shangri-la Makati, Ang said: “Our growth strategy for Philippine Airlines is simple: modernization of its fleet, expansion of its network, and improvements in passenger service.”

The innovations include new inflight menu prepared by top-rated guest chefs, Book & Buy ticketing kiosks in selected Petron gas stations, Apple iPads for onboard entertainment in trans-Pacific flights, and PAL’s third Boeing 777-300ER.

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MORE B777s: The first three B777s of PAL were delivered in November 2009, January 2012 and June 2012. The 370-seater Boeing jets now fly to Hong Kong, Japan, Australia and Vancouver.

The airline will soon take delivery of three more Boeing 777-300ERs. Per expansion plans, PAL wants to fly to Toronto, Paris, London and New York.

But a way must be found first to remove restrictions in the US and also in Europe where all Philippine airlines have been blacklisted since 2010.

Each B777 has two of the most powerful commercial jet engines — the GE90-115BL which has cleaner emissions to protect the environment and give passengers a quieter and more comfortable ride.

Each B777 will save PAL as much as $20 million annually in fuel cost. It has unmatched levels of payload (28 tons of cargo) and range (7,825 nautical miles), flying more passengers nonstop over longer distances.

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CAAP DOWNGRADE: The FAA downgraded CAAP to Category 2 after finding the agency not technically equipped to supervise Philippine airline operations.

The European Union cited the same reasons when it subsequently banned all Philippine carriers, not just PAL, from flying anywhere in Europe.

Under Category 2, PAL has been limited to a maximum 33 flights each week to the US. Other Philippine airlines are also banned from US airspace.

For its flights to Los Angeles (two flights every Wednesday and Sunday and one daily the rest of the week) PAL uses its older Boeing 747s and Airbus 343s. It uses B747s for its single daily flights to San Francisco.

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US EDGE: All because of Category 2, PAL is not allowed to even replace its equipment with its new B777s even if this modern jet gives safer service to passengers bound for the US.

In contrast, American carriers continue to enjoy unlimited rights to fly to and through the Philippines under an “open skies” arrangement.

Hawaiian Air, for example, has captured the Manila-Honolulu leg and gobbled up the Hawaii stop of PAL. Now PAL has been relegated to Guam for its stopover between Manila and the West Coast.

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ICAO AUDIT: In November 2009, CAAP also failed an ICAO (International Civil Aviation Organization) audit. Consequences:

• Per ICAO, only PAL was properly certified by CAAP, while 47 other Philippine carriers were not.

• ICAO issued a global “significant safety concern (SSC)” alert for the Philippines.

• Asia/Pacific countries imposed tighter surveillance, and demanded assurances from CAAP that Philippine airlines are safe.

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INJURY TO PAL: As if the FAA Category 2 was not bad enough, in April 2010 the European Union banned airlines of the Philippines from their airspace. In domino-like fashion:

• European travel agents warn Philippine-bound passengers that PAL is blacklisted and that their travel insurance may not cover flights on Philippine airlines.

• With PAL’s Europe sales pipeline cut off, some EU airlines suspended interline agreements, such as those under the IATA, with PAL.

• PAL is losing its traditional 120,000 passengers per year with no indication that it will regain them in the short term.

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EUROPEAN BAN: Because of the FAA’s Category 2 classification and the European Union’s blacklist, PAL suffers in other ways:

• Expected surge in insurance premiums.

• Costlier aircraft leases, tougher financing terms.

• Unfair portrayal as an unsafe, third-rate airline.

• Lost goodwill that could be a long-term stain on the flag carrier’s good name.

There is also the greater loss to the country: Missing out on the lucrative European tourist market, reduced business for hotels, tour operators, restaurants and retail establishments, and potential negative impact on trade and commerce.

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READY FOR AUDIT?: To help CAAP, we heard that PAL has hired and is paying millions of dollars for the services of US-based Tim Neel and Associates to help government craft a roadmap out of Category 2.

Tim Neel is also contracted to provide much-needed software and train CAAP personnel on key operational issues regularly audited by FAA and ICAO.

After three directors general (Ruben Ciron, Alfonso Cusi and Ramon Gutierrez), CAAP has inched closer to regaining Category 1 status.

However, it remains unclear when the full audit of the agency by the FAA will happen, which is the condition sine qua non before the Philippines could get out of Category 2

It now rests on the shoulders of Lt. Gen. William K. Hotchkiss III (ret.), the new appointee of President Noynoy Aquino, to ensure that CAAP is ready for the dreaded audit.