First of all, we know this is still far from happening especially with the ongoing crisis. However, we do see things hopefully returning to normal in 2025. Also, we do feel that travel demand may exceed pre-pandemic numbers in 2026 as people should have learned to live with the new virus. If travel demand goes beyond pre-pandemic levels, do you think it would be fitting for the Air Philippines brand to be resurrected as a full low-cost subsidiary airline of Philippine Airlines?
Before the pandemic, this topic was quite a discussion among us avgeeks. Some said that PAL and PAL Express should have distinct branding whereas some said that they are better working under one brand.
A few also pointed out that AirPhil Express, a rebranded Air Philippines with Airbus A320 jets, was catching with Cebu Pacific due to its ultra-low fares. It was even eating up some of the domestic market shares of sister company Philippine Airlines, which is why it did not sit well with the people on top.
Of course, nothing like this is bound to happen soon. Just for discussion purposes, do you think that the PAL group should operate with a two-brand strategy in the future? Should Air Philippines once again take to the skies?
Here is our take
Before the pandemic, the low-cost market in the Philippines has been growing with Cebu Pacific taking more than 50% of the domestic market share while AirAsia Philippines numbers in terms of passengers carried keeps on rising. Cebu Pacific created a very powerful “low-cost branding” where when we would hear “affordable airline tickets”, Cebu Pacific is the first airline that comes to mind. Philippines Air Asia offered ultra-low fares! They were poised to expand their fleet from 23 to 50, with the potential addition of the Airbus A321neo.
Currently, Philippine Airlines and PAL Express operate on a one-brand strategy where they both operate under one brand but adapting two types of services. Philippine Airlines is a full-service airline whereas PAL Express is a low-cost subsidiary operating as a full-service airline. PAL Express also entered into a codeshare agreement with PAL where the flight code 2P is no longer used for PAL Express flights. More so, the brand “PAL Express” is no longer used, just Philippine Airlines.
The PAL and AirPhil Express partnership
Way back in 2011 though, Philippine Airlines and Air Philippines under the brand AirPhil Express operated on a two-brand, two-service strategy. The branding of both was totally different. AirPhil Express operated domestic destinations and a few chartered international while PAL operated both international and domestic. The strategy at that time was similar to the Qantas – Jetstar model. AirPhil Express operated as a low-cost carrier made to rival Cebu Pacific’s dominance in the domestic market. Though they were not able to pass Cebu Pacific in terms of market share, AirPhil Express was catching up. They were the fastest-growing airline in the Philippines amidst the entry of Zest Air, another low-cost airline which was formerly Asian Spirit.
The combined domestic market share of both PAL and AirPhil Express reached 53%, brought by a 20% market share growth from AirPhil Express in less than a year!
Will a two-brand strategy work for Philippine Airlines and Air Philippines in the future?
Based on what we know, one of those reasons why Philippine Airlines and AirPhil Express were merged under one brand is to harmonize operations of both. PAL and AirPhil Express both flew domestic destinations and some international, hence, they were seen as competing with each other. The strategy was to make PAL take international destinations and PAL Express for the domestic side. For an airline to be considered a flag carrier, it must have both domestic and international operations.
What were the effects of this merge? Well, some of AirPhil Express’s loyal low-cost customers moved to other low-cost airlines, with an impression that the tickets of PAL Express will be higher as a full-service airline. Many also thought that there is no more AirPhil Express or PAL Express. At the same time, both airlines worked under one single brand with two types of service.
Also, the brand of Philippine Airlines may lose its foothold on the domestic sector if you would have Cebu Pacific, AirAsia, and if ever, Air Philippines compete head-to-head. Lets us not forget that the low-cost model really worked well for domestic travel in the Philippines.
Should Air Philippines branding be resurrected?
Our personal opinion would be yes, but not soon. Maybe in like 3 to 5 years from now as the airline industry and air travel demand still need to make a recovery.
Having a third low-cost carrier will give passengers more options especially if air travel demand goes beyond pre-pandemic levels. More choices would mean also lower fares and benefits.
However, this would indeed need good planning between PAL and Air Philippines for both to co-exist and complement each other. Air Philippines will have more independence when it comes to marketing and branding too. Yes, Air Philippines can brand themselves as an ultra-low-cost airline maintaining the same PAL Express service level they always had.
While Air Philippines had that reputation of operating old “run-down” Boeing 737-200s, they were able to later reverse this when they rebranded as AirPhil Express operating Airbus A320s. What more if they would be resurrected with a new livery on those Airbus A321 jets and DHC-8 Dash 8NG turboprops.
We feel that if PAL and Air Philippines were to follow the Qantas – Jetstar model in the future, we would say yes it will work with the PAL group regaining a bigger share for the domestic market. For as long as PAL operates as a full-service airline and Air Philippines operates as a full low-cost airline, they would be able to serve both kinds of markets in the Philippines.
More reasons why we feel that a 2-brand strategy may work in the future
The Philippines’ domestic market is indeed dominated by low-cost carriers. When we now think of low-fares, only two airlines come primarily to mind, Cebu Pacific and Air Asia. When we want to travel in style and full comfort, it is Philippine Airlines. If we look at it, the Philippine domestic market is price sensitive. They are not after the food or anything, all they want is to get from point A to point B in one piece when traveling around the country.
Both companies have the fleet actually. There are Airbus A321CEOs that looks more of a low-cost product in the PAL fleet. With the arrival of 13 more A321NEOs, all other CEOs may perhaps be transferred to Air Philippines.
As for branding, Cebu Pacific and Air Asia have been doing a great job in marketing themselves to Filipinos as low-cost carriers. Fun flights, “fun” marketing tactics, low fares, and all.
Our final word
Indeed we do see a 2-brand strategy similar to that of Qantas-Jetstar work for PAL and Air Philippines. Two distinct branding and services. Low-cost carrier with business class seats? Why not! There are low-cost airlines in the US that have IFEs on board! There is no such thing as a hybrid, a cross between a full-service airline and a low-cost carrier. You are either a low-cost carrier and a full-service carrier.
A resurrected Air Philippines with a whole different branding and marketing strategy may provide Cebu Pacific and AirAsia Philippines good competition in the low-cost sector.
Definitely, this is not happening anytime soon due to this pandemic. We have seen other airlines being merged to their mother airline such as Cathay Dragon merging to Cathay Pacific, and Singapore’s Silk Air being merged to Singapore Airlines.
However, we also still do not know how airline operations will be after this pandemic. Is having a low-cost subsidiary still be feasible? Time will only tell.
For now, let’s just hope for the best for PAL and PAL Express as they weather out of the chapter 11 bankruptcy protection. Just maybe, this strategy is being considered for the airline’s plans.
So how about you, do you want the Air Philippines brand to be resurrected? Do you think a two-brand strategy for the PAL group will work? Share your thoughts.
On a side note, Philippine Airlines domestic, or PAL Express, is operated by Air Philippines Corporation.
