December 22, 2006

Personal Fortune: Back Onboard


By Ma. Stella F. Arnaldo
Special to BusinessMirror

MY favorite memory of Avelino L. Zapanta, recently appointed president and chief executive officer of Southeast Asian Airlines or Seair, took place in Guam. He was still Philippine Airlines (PAL) president then, dressed casually in shorts and a shirt, sneakers, and leaning on the side of our tourist bus, which had broken down while touring the island.

We were a gangly bunch of catty journalists on a familiarization tour as part of PAL’s reinstatement of its service to the island. Despite the heat and long time it took for us to get picked up by another bus, we were hardly irritated as “ALZ” went around, entertaining us with his stories, and gamely posing for photos with us.

It is exactly Zapanta’s personal touch, or people skills, that helped him implement massive cost-cutting measures meant to keep PAL afloat. It was a time when relations between labor and management were strained. Groaning under a weight of debt, which ballooned due to the Asian financial crisis in 1997, as well as a pilots’ strike, PAL briefly shut down in September 1998.

Appointed president in 1999, he oversaw the rehabilitation of the flag carrier, which finally broke even in March 2000 for the first time in six years. Zapanta retired in August 2004 confident that the airline was in better shape to carry out its refleeting and expansion.

In the two years he had been away from the limelight, Zapanta wrote a book on the airline industry, 100 Years of Philippine Aviation, and is currently working on another book on the same topic, this time with a global perspective, for publication hopefully by next year.

He has also been teaching airline management classes at the University of the Philippines Asian Institute of Tourism and the Philippine State College of Aeronautics three times a week, his students benefiting from his real-life experiences of working in the industry for 40 years. (He joined PAL in 1966, but worked also at Pacific East Asian Cargo for a time. “Seair is actually my third airline already,” he says.)

The respite gave him more time to spend with his wife of over 43 years, Nicole Lavides, his six grown-up children (Titus, Tugaris, John Rado, Avelino Jr., Ma. Salome, and Ma. Silvana), and his caboodle of 13 “beautiful, handsome, pretty, nice and sweet” grandchildren—which begs the question, why leave the comforts of retirement?

Over a hearty Japanese dinner, we had a freewheeling conversation with Zapanta, who discussed his return to where “the action” is, Seair’s expansion, several aviation issues, and on being—gasp!— a videoke king.

What made you return to the industry?

Of course, I thought the pace of life I’d create when I retired was something I would very much desire. And indeed it was a very easy way of life, out of the rat race and all, not knowing after two years, I kind of missed the action. Because at this age, in almost perfect health, and with the [airline] industry growing, multiplying in leaps and bounds, I was kind of attracted to go back. Fortunately here is Seair on the verge of expansion. And they were looking for an honest-to-goodness president for the airline and so somehow, a headhunter got to me, and I readily accepted it.

Did your family support your decision?

All the way! Perhaps they saw that I was kind of missing the action. Sila mismo naninibago na. They were used to my being out of the house all day ’til evening. Then after retirement, every day I was just at home writing. And then I would be with them at meal times.

Did you ask permission from PAL chairman Lucio Tan before accepting the job at Seair?

No, only from Jimmy [Bautista, PAL president], because I was a consultant of PAL until last month so I had to tell him. As a matter of fact, when I submitted my biodata to the headhunter, I told Jimmy: “There’s a likelihood I might be taken in by another local airline.” I needed to be back in action and obviously I cannot go back to PAL. He said, “Okay lang, pare, ayos lang.” Kumpare ko naman si Jimmy.

I can’t say for sure what Mr. Tan feels, but I think it’s okay. Our routes are different from one another. We don’t duplicate a single air service of Philippine Airlines today, but I cannot tell for the next month and the month after.

Whoa! PAL watch out? What particular experience are you going to bring from PAL that will be useful in Seair?

Everything. All my 38 years of experience. The experience I’ve had will be useful at this particular stage in Seair’s growth. The challenge is how I can help convert Seair into a major player in the industry.

I think it’s going to work out well because all I have to do is to work with Iren [Dornier, Seair founder] and Nikos [Gitsis, cofounder], and they’re both good and very nice guys. Wala akong problema.

What steps are you going to take to become a major market player?

We will be coming up with specific brand products that Seair will eventually market out there. Of course, the current operation is a very successful product brand…these are leisure air sectors that are being operated to the most exotic tourist destinations. We fly to Baler [Aurora]; Clark; Manila; Busuanga, Taytay, Puerto Princesa, El Nido, Cuyo islands—five points in Palawan—and Camiguin. I haven’t even been to some of those places! From Cebu, we fly to Cotobato City, Zamboanga City, then Tawi-Tawi and Jolo. We fly seasonally to Batanes, Sandakan [North Borneo] and Siargao.

Then we’re opening another product line—a partnership between Seair and Tiger Airways. It’s our low-cost operation and for this, we will be acquiring two Airbus 320s. Initially, we’re planning to operate it, from Clark, to Singapore, Macau, Cebu and Davao. Then we’re looking at other points in the region for eventual expansion: Inchon or Busan in Korea, Okinawa [Japan], Kaoshiung in Taiwan.

Can’t you offer these regional flights from Manila instead of Clark?

We are helping in the development and progress of the DMIA [Diosdado Macapagal International Airport]. Seair is the first and only Philippine carrier based in Clark, Pampanga. We are placing our bets on Clark. That will be the eventual gateway.

But that Clark gateway plan has been in the works since President Ramos’ time!

Events will catch up in Manila because there is no room for expansion there. An A380 cannot operate in Naia [Ninoy Aquino International Airport] because of its very limited facility. It’s already been established that when an A380 lands and takes off from Naia runway 0624, nobody can use the taxiway. If there’s an aircraft on the taxiway there’s going to be a wing tip collision! At the DMIA there is unlimited space because it used to be a military airbase. There are two parallel world-class runways there, which can be independently used.

When are you acquiring the A320s?

As early as February 2007. It’s a lease arrangement with Tiger Airways [a subsidiary of Singapore Airlines]. We chose Tiger as a product because the brand name is already established and has a high name recall. So marketing-wise it’s got all the advantage. Basically it’s an interlining arrangement, we feed traffic to one another. There will be an additional 18 pilots and 36 flight attendants earmarked for the A320.

How do you describe the tourism market now? Are the tourists more budget conscious?

No matter what you do, no matter what generation, the reality of market segmentation is there—meaning that there will be always those on the high-end and on the low-end. Those on the high-end, no matter how you bring your price, they would want to be identified as the best, the highest quality, and they’re willing to pay the price. The reality is always there. And of course, there are those who are price-conscious. And again that’s a reality.

So where is Seair positioning itself?

We have the high-end product through the Seair special domestic connections. We are coming up with the Tiger brand for the low-cost low fare, no-frills operation. We’re addressing the entire range of the market. Not a bad marketing strategy huh?

Of course they will help us in marketing our flights, and we will also use their distribution system, to enhance our sales.

Do you think Cebu Pacific’s Go Fares have unduly disrupted the pricing structure of the market? Some airlines say those low fares are unsustainable without any subsidies from Cebu Pac’s parent firm.

No, it has a positive effect as far as the industry is concerned. When Cebu Pacific started in 1994, Philippine Airlines was prepared for it of course. Ang totoo, tuwang-tuwa kami sa kanila. They were expanding the market because they were capturing the surface travelers from the ships and buses who were starting to fly on their low fares. So our philosophy then, “let them do their job,” because those markets they were creating will eventually develop an appetite for the higher service. And eventually they’ll be flying PAL, they’ll be flying the business class. Teka, why am I talking about PAL? I’m supposed to be talking about Seair!

Old habits die hard? So what’s the biggest challenge of the local airline industry?

The biggest challenge will still be the shortage of mission-critical skills because the availability of pilots and mechanics in relation to the number of aircraft that has been purchased by the airlines didn’t dovetail. Hundreds of aircraft have been added and yet no pilots and mechanics have been earmarked for those.

The low-cost carriers aggravated that problem because before, airlines would buy big aircraft so the demand for pilots were not that huge. Now smaller planes are being bought, and by the hundreds. So the requirements for pilots and mechanics have multiplied.

Some carriers are complaining that they are losing their pilots to the higher-paying foreign airlines. How are you going to deal with that issue?

I heard PAL has already increased its pilots’ salaries. We will go along with the industry trend, which is to calibrate all the salary levels, kasi ’di maiwasan ’yan. And of course, they will have to be made to appreciate the value of their own airline by fostering a well-knit close, almost family-like relationships. We will have constant dialogue.

Is Seair considering an employees’ stocks option plan as way to make them “appreciate” the airline?

That can also be considered, because part of the plan of the existing stockholders [Dornier, Gitsis and Tomas B. Lopez] is to expand the capital base of the airline for future expansion, so there will be more Filipino investors that will be attracted into the airline.

Are you considering an initial public offering to widen the Filipino ownership of the airline?

That’s always a possibility but we will have to be able to register attractive levels of returns for three consecutive years. So we will have to wait for that time. But we will work very hard in order to achieve that. [Revenues are projected to grow to P1 billion by yearend from P600 million in 2005.]

What’s your timetable to achieve this continued profitability?

Every year there will be gradual growth and development. The two A320s can virtually double the capacity of Seair. Remember, it’s a 180-seater aircraft against the 32-seater Dornier 328 and 19-seater LET-410 aircraft.

We will add more domestic routes. When we operate the A320 for the Manila-Cebu route, we will upgrade the Dornier 328 and introduce a linkage between Palawan and Iloilo. There is a high familial affinity between both provinces as many Ilonggos migrated to Palawan.

Seair has been operating for 11 years, since 1995. This year we will end up with a positive income.

Do you have any plans to change your turboprop fleet?

No. How can we change them when the domestic airports have not caught up with the march of technology and aviation? We have 13 aircraft—nine LET 410s, and four Dornier 328s. They are modern aircraft.

Some politicians in Pampanga are pushing open skies in Clark to supposedly bring in more tourists. Has your stand on a liberalized aviation policy changed from when you were at PAL?

The modern trend is to liberalize in order to really help improve our tourism even the economy. It cannot be denied that it’s been accepted globally that tourism is the biggest industry in the world today because of its multiplier effect. And those who have liberalized their skies have become successful, like Singapore, for example.

But if you have open skies, there must be reciprocity. We have to get the same benefits in return. Di naman makikinabang ang Seair doon kung i-open ang Philippines, then the same privilege is not available to us. Seair is on the verge of expansion, where are we going to fly?

So will you keep on teaching?

I intend to finish the semester [until April]. I have about 80 students. Perhaps I will just maintain one subject because I will lose a lot of time. But it looks like the attitude of Seair’s owners is for me to continue with my teaching because it helps in the promotion of the airline. So I’ll play it by ear.

How do you spend your leisure time?

I don’t have any except for that one hour of brisk walking and calisthenics every morning. I’ve lost 30 pounds—no more beer belly. Basically I take out my wife on Sundays, to church, then with some two or three young kids, we go to the mall, we eat or watch a movie.

Every now and then, we have parties on the third floor of our home in Taytay, about 20 minutes away from Makati when there’s no traffic. On the fourth floor is my gym. But on the third floor is where we get together especially when someone has a birthday. We have food, beer and sing on the videoke.

Really? What do you like to sing?

Madalas kong banatan simple lang, ’yung “A Certain Smile,” “Portrait of My Love,” “Perhaps Love”…. Every now and then, nagma-“My Way” din. Pag hawak ko na mikropono, nobody would dare take it away from me. Hahaha.

(Personal Fortune is a magazine published every Friday by the BusinessMirror. Photos by Nonie Reyes, BusinessMirror)

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