Airphil Express

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II. STATEMENT OF THE PROBLEM

Airphil Express, which also has been called PAL express, is PAL’s budget airline. PAL's transfer of its pilots to its budget airline is the alleged reason for the resignation of the pilots. PAL had to beef up its operations in order to compete with Cebu Pacific. However, instead of hiring new pilots for Airphil, PAL came up with a different strategy. PAL offered the pilots “another job” --- to be pilots but this time for Airphil Express where they would receive lower salaries and fewer benefits. Not all pilots accepted the “job offer”. Instead of waiting to be declared as redundant or to be offered a job at Airphil and thus meet the same fate as the other pilots, the others decided to resign. Enticed by higher-paying jobs at foreign airlines, some 26 pilots left the PAL wing. The mass resignation took a toll on PAL flight schedules on the last Saturday of July. PAL cancelled several 150-seater Airbus A320 Manila flights en route to Bacolod, Iloilo, Cagayan de Oro, Cebu and Hong Kong because there were not enough pilots to fly the planes. These problems which affected the public’s perception about PAL also affected the image of its budget airline, Airphil Express. Because of these events, public’s impression about Airphil Express is substandard as related to Philippine Airlines. With all these issues they affect the position of AirPhil Express in the airline industry. Another thing, the Philippines lists many registered airline companies mostly chartered; there are only five competing commercial airlines with scheduled flights serving the domestic market. Leading among the five is Cebu Pacific which has captured 45.6 percent of the market, followed by Philippine Airlines-Airphil Express group which has flown a combined 4.9 million passengers in 2008. Next after PAL-Airphil Express group is Zest Airways which has already overtaken South East Asian Airlines.Zest Air which is formerly Asian Spirit has been acquired by Alfredo M. Yao of the Zest-O juice drink fame. AMY Holdings which owns Zest Airways has been planning to acquire South East Asian Airlines but the Lopez-Gitsis-Dornier tandem refuses to badge Yao's offer of merger. Recently, Spirit of Manila Airlines launched purely international flights to Middle East andEast Asia. Despite of its low cost and good quality services offered, still AirPhil Express remains as market follower to Cebu Pacific. The development of promotional strategies for Air Phil Express to be the leading low cost carrier in the Philippines is needed which will encourage Filipinos to travel locally through its best deals and services thus will make AirPhil Express as the leading service provider in airline industry.

III. SITUATION ANALYSIS

Air Philippines was incorporated on 13 February 1995, with the base of operations being the former Naval Air Station Cubi Point. Flight operations started on 1 February 1996 with a Boeing 737-200between Subic Bay, Iloilo and Zamboanga.

In 1996 six NAMC YS-11 and four Boeing 737-200 aircraft were acquired by the company. In 1997 an additional one Boeing 737-200 was acquired. In this same year the airline carried over 675,000 passengers and over 773,000 in 1998. In September 1998 the airline was temporarily grounded by the Philippine Air Transportation Office, but was reactivated when U-Land agreed to purchase a stake.

It was in 1999 when Lucio Tan Group took over management of the Company. In March 1999, Air Philippines was granted approval to operate international services to Hong Kong, Japan, South Korea, Taiwan and the USA.

In May 2001 two Boeing 737-300 aircraft were delivered. In mid-2002, charter flights were started from Subic Bay and Laoag City to Hong Kong. Passenger numbers carried rose to nearly 881,000 in 2002. In July 2004 charter flights started from Subic Bay to Guangzhou.

Air Philippines significantly increased ties with Philippine Airlines (PAL), including the merging of frequent flier plans,...
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