AirAsia PH says expansion proves it's staying despite losses

by Coco Alcuaz, ANC

Posted at Jan 04 2013 05:04 PM | Updated as of Jan 05 2013 01:06 AM

MANILA, Philippines - Budget carrier AirAsia Philippines said it plans to increase its fleet from 2 to 5 Airbus A320s this year and add frequencies and destinations, reacting to an analysis that said one of the three smaller low-cost carriers operating in the Philippines could close this year.

AirAsia Philippines, an affiliate of Malaysia's AirAsia, first flew in March 2012. It is owned by businessmen Antonio Cojuangco and Michael Romero and president Maan Hontiveros, who once worked with AirAsia owner Tony Fernandes at Warner Music.

"You don't make money in your first 9 months,'' Commercial Head Alfredo Herrera said in a phone interview. "We're expanding. The fundamentals are there. You just have to grow it. The Philippines is crucial to AirAsia's regional strategy."

AirAsia, Seair, which is affiliated with Singapore's Tiger Airways, and independent Zest Air are the smaller low cost carriers operating in the Philippines. They are dwarfed by the Philippine Airlines group and Cebu Pacific. PAL is owned by Lucio Tan, one of the country's richest men, and San Miguel, one of the country's biggest companies. Cebu Pacific by John Gokongwei, another of the country's richest men.

"Consolidation is likely to hit the Philippines in 2013," The Sydney-based Center for Aviation -- known as CAPA -- said yesterday. "There are now five LCCs competing in the domestic market, which is clearly too many. Over-capacity and irrational competition already resulted in losses throughout 2012 at all Philippine carriers except Cebu Pacific."

"It is very price competitive," AirAsia Philippines' Herrera said. "Competition for seats is cut-throat. We have to be on our toes with ancillary products such as insurance, meals and baggage. We have to upsell there."

Competition may be intense for executives too: Herrera joined AirAsia last year after a few months at Zest Air after a longer stint in Air Philippines, Philippine Airlines' low-cost affiliate.

AirAsia Philippines is based in Clark, the former U.S. airbase north of Manila. It flies to Kuala Lumpur, Hong Kong, Singapore and Taipei. Locally it flies to Davao and Kalibo, a gateway to Boracay island.

Herrera says it plans to add Bangkok and Cebu in the second quarter, while increasing flights to Hong Kong and Kalibo. He said it's also studying resuming flights to Puerto Princesa, Palawan and launching flights to Tagbilaran, Bohol. The aim is to serve northern Filipinos who want to travel to "leisure" destinations in the south, Herrera said. 

The Malaysia-based AirAsia has a Kuala Lumpur flight to Clark. It will end its Clark-Kota Kinabalu route in February.