Confused by announcements of June 1 flights? Here's what really went down

Image from My Boracay Guide

THE CIVIL Aeronautics Board (CAB) on Saturday stopped Philippine carriers from selling tickets for flights, which were supposed to commence on Monday, June 1, as the National Capital Region shifts to general community quarantine (GCQ) status. 

This developed as reports reached the Inter-Agency Task Force (IATF) about complaints from local government units (LGUs) saying they were not ready for commercial flights. Pioneering flag carrier Philippine Airlines had announced late Friday it would commence domestic and international flights on June 1.

An advisory signed on May 30, 2020 by CAB Executive Director Carmelo L. Arcilla, a copy of which was obtained by BusinessMirror, said, “Please be informed that the IATF has yet to approve the routes for domestic operations in the first week of June 2020. Consequently, airlines are hereby advised to cancel their flights on June 1, 2020 and to stop selling tickets for the said date.” 

The advisory was released at around 7 p.m., and sent to the CEOs and other executives of the Air Carriers Association of the Philippines, Air Juan Aviation Inc., Air Philippines Corp., Airswift Transport Inc., Cebu Pacific, Cebgo, Isla Aviation Inc., PAL, Philippines Air Asia, and SkyJet Airlines. 

Following the CAB advisory, PAL revised its plans, and announced on Saturday evening that its domestic flights would resume on June 8. Aviation sources intimated CAB had actually approved the flights for June 1, but failed to inform the IATF. CAB officials did not respond to text messages from this paper.

Meanwhile, Undersecretary for Tourism Regulation, Coordination, and Resource Generation Arturo P. Boncato Jr. said several provinces in the south requested for a postponement of commercial flights to prepare their airports and resorts for hosting of tourists. Among these are Siargao and Boracay. 

“The provincial government of Surigao del Norte would like to prepare for the reopening of Siargao especially dealing with incoming flights and reopening of resorts, etc. They are working on their protocols,” he said. The province has requested the IATF for a “suspension of regular airport operations up to August 31,” and discourages the entry of tourists, as per the LGU’s Executive Order 20-018 issued on May 30.

Boncato added, “The province of Aklan and LGU of Malay are also doing simulations and dry runs for reopening and have yOn et to announce a reopening date.” Malay hosts Boracay Island, dubbed one of the best beaches in the world. The island is building a Covid-19 laboratory, in anticipation of the tourist influx, said the DOT official. 

Other provinces which have also declined to reopen for tourism were Bohol and Baguio. These provinces have been placed under MECQ and as per IATF regulations, are allowed to resume tourism activities.

On Saturday, the CAB also reminded airlines that they are not allowed to accept passengers going for leisure activities in areas under GCQ.

In an advisory signed on May 29, 2020 by Arcilla, the agency said, “Under the Omnibus Guidelines on Community Quarantine, movement in areas under GCQ for leisure purposes shall not be allowed.”

It also prohibited the travel of “persons below 21 years old,” as well as senior citizens, along with which have “immunodeficiency, comorbidities, or other health risks, and pregnant [women].… For purposes of compliance, airlines shall vet or screen departing passengers to confirm that the travel is for non-leisure purposes.”

The advisory, released Saturday morning, also reminded carriers on health and safety protocols to be followed in airports and onboard their aircraft, to protect crew and passengers from the novel coronavirus.

On Friday, the DOT clarified on Friday that under GCQ, tourism and leisure-related activities were still prohibited. (See, “No hotel operations, leisure travel allowed under GCQ,” in the BusinessMirror, May 30, 2020.) 

*This was my original story submitted to the desk, before it got wrapped with another reporter's copy. 

Seair International cleared for takeoff

MANILA, Philippines – The Civil Aviation Authority of the Philippines (CAAP) has finally given Seair International (Seair-I) the green light for its flight operations beginning this month. 

The company’s Vice Chairman Nikos Gitsis said in an interview Seair-I is launching its maiden flight from Manila to Basco, Batanes on December 7. 

“The plan is, we will fly Fridays and Mondays and we will go from there. It could become three times a week,” he said. The carrier will use a 32-seater Dornier 328 turboprop for this service. 

He said the carrier will also offer a “VIP charter service early next year for domestic and international routes” using a seven-seater Falcon 10 jet. 

“[Apart from the scheduled Basco flights] we will focus on charters for the time being, and we will explore and open up new destinations,” Gitsis added (Read the rest at InterAksyon.com. This piece was originally published on Dec. 2, 2012.)

Get rid of carriers’ taxes, Aquino prodded

THE 30-strong organization of foreign carriers with routes to the Philippines has urged President Aquino to put more teeth to his tourism advocacy and boost other economic sectors by certifying as “urgent” a new bill that will be filed in the Senate. The bill aims to eliminate current taxes that supposedly hamper the carriers’ operations in the country.

Steven Crowdey, first vice chairman of the Board of Airline Representatives (BAR), told the BusinessMirror, “The repeal of these taxes will help accelerate the development of the secondary gateways of the Philippines under [Mr. Aquino’s] ‘pocket open skies’ policy to benefit both tourism and trade investments. We hope that this bill will be certified as urgent by the Office of the President and that the legislative process will be completed within the year 2012 under the current 15th Congress.”

(Steven Crowdey, BAR First Vice Chairman, and GM for Australia, Micronesia and the Philippines for Delta Air.)

Crowdey said an instruction from the President to the Senate to pass the new bill quickly would help the foreign carriers “plan for capacity in the next three to five years to service the needs of the tourists, exporters, importers, overseas Filipino workers and the general riding public.” Crowdey is also general manager for Australia, Micronesia and the Philippines for Delta Air Lines Inc., a US carrier.

Sen. Ralph Recto, chairman of the Senate Ways and Means Committee, is expected to file a new bill soon that would reflect results of a public hearing held February 2 this year on his earlier proposed legislation to remove the 3-percent common-carriers tax (CCT) and the 2.5-percent tax on gross Philippine billings (GPBT) imposed on foreign carriers, which he filed in November 2011. Recto, however, could not be reached for comment as of press time.

The Aquino administration has been pinning its hopes on the tourism sector as a major driver of economic growth for the country. It aims to attract 10 million foreign tourist arrivals by 2016, the year the President steps down from office.

The BAR, in a press statement on July 25, commended the administration for the aviation reforms it has adopted, foremost of which is the “pocket open skies” policy, which “proves” the government’s “global openness.” The policy allows foreign carriers to land in provincial international airports, thus bringing more foreign tourists and businessmen directly to their intended destinations, instead of having to pass through Manila.

Sang Woo Noh, regional manager for the Philippines of South Korea’s Asiana Airlines, said, “The airport infrastructure backlog is now being addressed by the [Department of Transportation and Communications]. The Economic Development Cluster of the Cabinet has already approved the implementation of the 24/7 operations by [Customs, Immigration and Quarantine] personnel. Again, this is a landmark policy reform happening for the first time under President Aquino’s office. The tax issue is the remaining stumbling bloc to realizing the expected benefits of open skies.”

In a letter to Mr. Aquino on April 13, Anthony Tyler, director general and chief executive officer of the International Air Transport Association (Iata), also appealed to the President to certify the new Senate bill as urgent as doing so will “send the signal to the global airline community that the Philippines under the leadership of your administration is finally open to global business and investments.”

Citing studies done by economic think tank Oxford Economics and the Iata, Tyler said “the aviation impact in the Philippines is comparatively lower than many other countries in the region, thus indicating the untapped aviation and tourism potentials…. Abolishing these taxes will reduce the likelihood that additional airlines will remove the Philippines from their network or further downsize their operations.”

The Iata is an international trade body representing 240 airlines around the world, which account for 84 percent of global air traffic.

The House of Representatives approved on third and final reading House Bill (HB) 6022 on May 21, which also removes the CCT applied on passengers and cargo and eliminates the GPBT as long as the home countries of the foreign carriers do the same for the Philippines. Entitled “Rationalizing the Taxes on International Air Carriers Operating in the Philippines,” HB 6022, sponsored by Rep. Jerry Treñas of Iloilo, seeks to amend Sections 28 (A) (3) (a), 108 (B) (6) and 118 of the National Internal Revenue Code of 1997, as amended.

Crowdey said the BAR was grateful that the President had certified as urgent HB 6022. Such certification, he added, pushed congressmen to speedily act on it.

(Qatar Airways terminated its Doha-Cebu flights in March, claiming it was burdened by Philippines aviation taxes. Photo from airline's web site.)

Meanwhile, Cees Ursem, regional manager for KLM in the Philippines, said in the same press statement issued by the BAR that recent developments on the airline-tax issue will “definitely help to reconsider our operations in the future and continue our 60 years of uninterrupted services to the Philippines.”

KLM stopped flying directly from Amsterdam to Manila in March this year, saying taxes were affecting the economic viability of the carrier’s operations in the Philippines. “There are no more direct connections [from the Philippines] to Europe today [compared to 22 frequencies per week a decade ago], and carriers with long haul and extensive global and regional connection have left the Philippines, citing these taxes as a major reason for their exit,” the BAR said.

Also in March, Qatar Airways terminated its Doha-Cebu connection for the same reason. The BAR, quoting Abdallah Okasha, Philippine country manager of Qatar Airways, said, “Cebu is a destination with tremendous potentials for tourism and trade. We closed our Cebu operations because our operations have become expensive relative to all other destinations where we have presence, particularly in emerging Asian markets where we are not burdened with such taxes.”

Crowdey said “there is no distinction between CCT for passenger and cargo on any passenger carriers’ financial bottom line. Removing CCT for cargo also goes toward the goal of easing connectivity for the Philippines for the betterment of tourism. The repeal of the CCT for both passenger and cargo will help improve our margins and therefore enable us to increase our capacity to the Philippines rather than to neighboring countries.”

He added, “Ease of access to a location is a critical factor in decisions about where to establish offices, particularly for shared services, and factories. Additional frequencies and capacity will be used by exporters and will tend to lower freight rates, thereby enhancing export competitiveness. Access to more non-stop destinations will provide new markets for exports, particularly for agribusiness and other time-sensitive commodities.”

(This piece was originally published in the BusinessMirror on July 31, 2012. Photo of Steven Crowdey courtesy Delta Airlines.)

KLM to reconsider Manila if aviation taxes are repealed

MANILA,
 Philippines
–
Netherlands-­based 
airline KLM
 will
 reconsider 
flying 
to
 Manila 
if 
the 
Aquino administration 
makes 
good 
on 
its 
promise 
to remove 
taxes 
currently 
hampering 
the 
economic viability 
of 
foreign 
carriers 
flying 
to 
the 
Philippines, an 
airline 
official 
said.

This 
developed 
even 
as 
the 
Board 
of 
Airline Representatives 
(BAR), 
an
 organization
 of 
some 30 
foreign carriers 
with 
services
 to 
the Philippines,
 commended
 the
 Aquino administration 
for 
implementing
 reforms liberalizing
 the
 country’s
 aviation
 sector.

Cees
 Ursem,
 regional 
manager 
for 
KLM 
in 
the Philippines 
and
 the
 Far 
East, 
said 
the 
airline “welcomes 
the 
developments 
in 
the 
tax 
issue 
and is 
looking 
forward 
to 
the 
final 
implementation 
of abolishing
 these
 taxes
 for
 the 
benefit
 of
 tourism, trade,
 and
 the 
network 
of 
overseas 
Filipinos. 
This 
decision 
will 
definitely 
help to
 reconsider 
our 
operations 
in 
the 
future 
and 
continue 
our 
60 
years 
of uninterrupted
 services 
to 
the
 Philippines.” (Read the rest in InterAksyon.com, July 29, 2012)

Continental Micronesia ready to hike Guam-Manila flights

(David Kendell, Director for Sales and Marketing for Asia and Micronesia, Continental Micronesia. Photo by Rhoy Cobilla)

CONTINENTAL Micronesia (CO) will likely increase its flight frequencies between Guam and Manila, as the impending US military buildup on the island attracts Filipino investors and contractual workers.

David Kendell, the airline’s director for sales and marketing for Asia and Micronesia, told the BusinessMirror: “You’ve got Filipino businessmen and women that may be looking at Guam to start up businesses. You also have a very skilled work force that will [become] contract workers…so you’ll have an influx in demand built up over the next four years. Continental is positioned well to add services. So if we see an increase in demand, we’re ready to act on that.”

About 8,000 US military personnel and their families are expected to relocate to Guam from Okinawa starting 2011. (Click BusinessMirror for the rest.)

On his own time daw

IT'S CHAKA-TIME!

1. Da who is this Cabinet Secretary running for an elective post in May 2010, who is rarely in his government agency these days? He claims that he is doing his campaigning on "my own time", and says the agency is not spending its funds for his visits to his home province. Hay naku, sino naman ang niloloko mo ateh? In fact, it's Friday today, still a working day, and he is already there in the province, accompanied by another govt official handling a major agency.

(Libre ba yang barong mo hijo? Of course the Cabinet Secretary in question is not this gwapo.)

Oh, and we are no longer surprised why he looks well-dressed all the time. Apparently his barongs are supplied free of charge by another govt agency. Employees of that agency mutter that they hardly have a decent budget to run their projects, and here they go having to finance the Cabinet Secretary's clothing needs. Yes, fellow taxpayers...we're paying for this guys' threads. As if he can't afford to buy his own clothes. Kakahiya! Tsk, tsk, tsk.

Clue: the Cabinet Secretary's home province is synonymous to kisses.

2. DA who is the head of this newly-formed regulatory agency who is said to have hired as many as 100 consultants, some of whom are even husbands and wives? Businessmen who have to deal w/ this agency complain that there's even more corruption there than in the previous agency it had superseded.

Its inspectors, for instance, who are tasked to oversee the safety of the equipment falling under the agency's purview don't even have the skills to check said equipment's standards. So those new businessmen who want to have their equipment checked and are not aware of this, can just pay off the inpspectors to give them a passing mark. And bec. licenses and safety permits are given annually, can you just imagine the humongous amounts of money coursing through that agency under the table?!?!

Clue: The head of the agency is said to be the alaga of an ageing senator, and also of a military persuasion.

3. As early as 2005, the presidentita and the head of her transportation agency was already told of the need for Caticlan's runway to be extended by at least 200 meters more. The presidentita said, however, Boracay was already "overcrowded" and overrun by resorts. What she failed to realize however, is that Boracay is the only island saving the tourism industry of the country as even during times of economic downturns, Pinoys who can no longer afford to go on vacations abroad just go to Boracay.

Because of the shortness of the runway, however, two planes of Zest Airways were involved in crashes in January and in June this year, leading to temporary closure of the airport. (Of course, it's also due to the fact that Zest Air's Chinese-made MA60 planes aren't exactly made for short takeoffs and landings.) This led to the govt deciding to only allow Seair and lately, PAL Express to use the Caticlan runway. All other airlines have to land and takeoff in Kalibo. Consequently, most resorts and restaurants on the island have complained of a 20% drop in business, as tourists don't want to pay a premium for the convenience of landing in Caticlan, just 15 mins away from the island resort, compared to Kalibo, which is an hour and a half away.

Although the airport has been privatized and supposed to be developed by a group led by George Yang of McDonalds Phils. (Golden Arches), on our recent visit to Boracay, we didn't see any construction activity ongoing at the terminal nor the runway at all. With the recession still ongoing, and tourists not wanting to shell out more money to pay to land in Caticlan, we doubt that it would be a Merry Christmas for Boracaynons this year.

More chakahans next week!

CAAP doesn't solve problem

(CAAP Director-General Ruben Ciron is the man who holds your life in his hands whenever you fly in the Philippines. Photo from CAAP web site.)

WRITTEN on the web site of the newly-formed Civil Aviation Authority of the Philippines (CAAP), is its mission, foremost of which is "to provide safe and reliable air transport system and regulatory services, as well as promote the economic viability, develop and regulate the technical. operational, safety and security functions of civil aviation."

But the agency, headed by retired General Ruben F. Ciron, is turning out a bit as inutile as its predecessor, the Air Transportation Office (not the Civil Aeronautics Board as I earlier mentioned). In reaction to the most recent accident of Zest Airways where its Chinese-made MA-60 plane overshot the runway at the Caticlan Airport, instead of grounding the carrier and these planes, it decides to penalize other more professional and efficient airlines instead, by banning two-way traffic at the airport. Click here for the story.

Here's a video at the accident site on June 25, 2009:



Like many government regulations, this is another limp-wristed reaction to a severe problem that has been plaguing Philippine aviation industry – the lack of real a credible regulatory body that would actually protect the traveling public from careless carriers like Zest Air. CAAP should address the issue of Zest Air's use of these Chinese-made planes w/c I repeat, has not even been certified as airworthy by the U.S. Federal Aviation Authority. Sure the carrier's not going to fly to the U.S., but isn't the Philippine government supposed to promote the use of international regulations and airworthy standards in the country? After all, even our airports' safety is rated by the FAA.

So what is CAAP waiting for them to actually address this Zest Air problem? That another crash happens and passengers die? (Knock on wood!)

This is a video of another MA-60 of Zest Air which undershot the Caticlan runway in Jan. 2009:



Btw in a web site of worldwide aircraft disasters, there is only one crash on record of the MA-60, and that distinction belongs to Zest Air. (It hasn't been updated yet for the last Thursday's crash.) So obviously, that plane wasn't made for the short and rough Caticlan runway. Indeed, there are some extremely brilliant people on Zest Air's staff who don't know sh** about planes and Philippine runways. I know who they are but let's see if Gen. Giron can guess da who.

* * * *
BTW, I checked the background of Gen. Giron, and he did lead a colorful life apparently. Accdg. to several sources he is an "Enrile boy" just like Gringo Honasan and Red Kapunan and played a prominent role in the People Power revolution of 1986. A former officer of the Philippine Air Force, Giron's wife reportedly "stopped Gen. Tadiar from bombarding Enrile and Ramos in Camp Aguinaldo" during the People Power revolution in 1986." Giron was a member of the military advisory council of the presidentita when she became concurrent secretary of defense.

With such a background, let's hope he implements more courageous regulations to protect the flying public.

Zest Air na naman!

AT about 10:30 a.m. today, I received a text message from a media colleague telling me that another MA-60 plane of Zest Airways overshot the runway at the Caticlan Airport, the gateway to Boracay. Mercifully, no one was hurt. Strangely enough, none of the online media sites carried the news. Strange ano? Or tanga ba to even wonder there's no news about it?

(Zest Air owner Fred Yao)

Another strange thing, despite this being the second landing accident of Zest Air in less than 6 months, the gov't-run Civil Aviation Authority of the Philippines, which replaced the inutile Air Transportation Office, hasn't grounded the airline. The CAAP pala is even more inutile than CAB. Or maybe it's because they're afraid of Zest Air's owner Fred Yao of the Zest-O fame, who is reputedly very close to the presidentita? Hmmm. (Click here for photos of the first crash in Jan. 2009, and the story in Manila Standard.)

CAB didn't even bother to lift a finger to investigate the airline, still called Asian Spirit then, flying w/o insurance last year, the now infamous Ipis incident, and didn't ground Zest Air despite the first incident of undershooting the runway resulting in injuries.


Now, this is an appeal to the riding public: Just bec. an airline offers cheap flights, it doesn't mean you should jump at the chance. Check out the background and track record of the airline first before making that final booking and reservation. Don't take chances w/ your life and with the lives of your loved ones. It pays to google. In cyberspace, there are a number of bloggers who've written about their travails of riding in this or that airline. It pays to be well-informed. And yes, the life you save may be your own.

Seair revives talks with investors

(I've been on vacation so this is another lazy post...a story I wrote for BusinessMirror for its May 9/10 issue.)

SOUTHEAST Asian Airlines (Seair) is reviving talks with international investors following the rejection of a purchase offer by the group of industrialist Alfredo M. Yao. Yao is the founder of Zest-O Corp.

A highly-placed source from the local carrier told BusinessMirror “these talks were stalled when we thought we were already going to have a deal with Yao by June. So we’re just reviving them.”

The source declined to identify the foreign groups only saying that these were “from Singapore and Brunei,” for possible “capital infusion” into the local carrier.

Seair owners headed by co-founders Iren Dornier, Nikos Gitsis and the Filipino group led by marketing guru Tomas B. Lopez Jr., declined the offer by Yao to purchase their shares for $2 million (or P84.63 million). This was $1.75 million (P74 million) lower than the “original consensus price” of $3.75 million (P159 million), before Yao’s group conducted due diligence on the airline.

Yao said he still intends to pursue the purchase of the carrier.

Sources familiar with the matter said the $2-million offered by Yao’s group will only pay for the cost of the brand and takeover of employees. The group does not intend to buy the 10 aircraft Seair is currently leasing from Dornier’s Aviation Enterprise Inc. (AEI) and spare parts. Yao’s group will also not cover the debts of the carrier including the payables on the aircraft leases to AEI. “All of the liabilities of Seair will have to be paid by Gitsis [and company],” the sources added.

In the proposed share purchase agreement, “[Yao’s group] will lease aircraft from AEI on a “power-by-the-hour” basis, the same sources added. This means that Yao’s group will pay only for the actual use of the leased aircraft, even if these are parked in the airline’s hangar. With this commitment to lease AEI’s planes, “it’s like the offer price is still the same as what we had initially discussed,” explained another source from the Yao group.

There is also a non-compete clause in the proposed share purchase agreement between Yao and Seair shareholders. This means that Dornier and Gitsis, who are both pilots and who currently own 40 percent of Seair, cannot put up another carrier to compete with Yao’s airline.

BusinessMirror sources observed that “this clause was not present in the initial agreement between Yao and Asian Spirit’s former owners.” Yao said he intends to merge Asian Spirit and Seair into one airline company.

Yao bought Asian Spirit for about P1 billion but turned over a check amounting to only P700 million because his group was taking over the debts and liabilities of the airline.

In an earlier interview, Gitsis said Seair was “open to all possibilities” in terms of investments either through capital infusion or selling the owners’ shares “lock, stock and barrel.”

“We’re still open to selling [even just the shares owned by the foreign group]. In the long run, the airline needs partners that can help in [our] growth, to keep us up with the growth opportunities that are still open in the market,” he said.

Referring specifically to the negotiations with Yao, Gitsis said: “If the need for capital and aircraft is the main motivator, [we] don’t want to sell out. Our hearts are in the company and we are more than willing to stay, and more than willing to work another 13 years. [Dornier and I] love this country and we no longer consider ourselves foreigners. On the other hand, everything has a price in business.”

He said the airline sees massive potential growth in local tourism “and we can contribute to that in many ways.” But he said he hoped the Civil Aeronautics Board (CAB) would allow the airline to do just that by approving its lease purchase agreement with Tiger Airways.

In January 2007, Seair signed a lease purchase agreement with Tiger Air, the low-cost carrier subsidiary of Singapore Airlines. The deal was for the lease of two Airbus 320s from the regional carrier which would enable Seair to fly to Singapore and Macau, as well as other Asian destinations. Local carriers have opposed the agreement saying the partnership would give fifth-freedom rights to Tiger Air, thereby allowing it to transport passengers to a second country and onwards to a third country.

Due to opposition by local carriers, the CAB has yet to approve the agreement, preventing Seair’s efforts to expand its routes to international destinations using the Clark International Airport as a regional hub.

“Tiger Air gave us a challenge. We thought we could live up to the challenge and we’re still optimistic that we can overcome that challenge,” said Gitsis. He admitted that the regional carrier has also expressed interest in buying into Seair, “but we [foreign shareholders] would have to sell out.”

- - - -

P.S. I flew to Caticlan and back to Manila over the weekend via Seair and noticed that the drinks served to passengers were made by Zest-O. Hmmm...

Seair ‘rejects’ Yao offer, but talks ‘active’

(Seair owners: Iren Dornier, Nikos Gitsis, and Tomas B. Lopez Jr. representing Filipino shareholders. Photos of Dornier/Gitsis from the Iren Dornier Project. Photo of Lopez from AIM.)


THE owners of Southeast Asian Airlines (Seair) said they have rejected the offer of industrialist Alfredo M. Yao to purchase the airline, but the fruit-juice king’s camp stressed the two sides are still “actively talking.”

A highly placed source in the carrier told the BusinessMirror: “The deal is off. The offer is $2 million. [It's] too low from the original consensus price [between the owners and Yao’s group].”

Contacted for comment, Yao said, “Their group and ours are still talking. Nick [Gitsis, co-founder and director of the carrier] is still in the States, so we haven’t spoken to each other.”

While Yao did not wish to confirm how much his group’s offer price was, the Seair source said the owners had agreed to sell their shares to Yao at $3.75 million (or roughly P158 million at P42.315 to the dollar).

The price only covers the cost of the airline brand and the takeover of the staff, but not the planes. The 10-plane fleet of Seair — composed of three Dornier 328s and seven LET-410s — are turboprops currently leased from Aviation Enterprise Inc., a company owned by Seair founder Iren Dornier.

The source added that the notice to formally reject the deal has already been transmitted to Yao’s group.

Yao is widely known for having developed the fruit-juice drinks under the Zest-O brand, now the largest-selling ready-to-drink fruit-juice brand in the country. His recent purchase of Asian Spirit boosts his interests in the tourism sector, where he also owns a hotel in Subic Bay. (See my profile interview of Yao in the blog entry below.)

Despite the rejection of Yao’s offer, the Seair source was confident that the airline would continue operating. “We have a good safety record. We are No. 1 in our market.” He added that Dornier will continue to infuse capital in the airline even if the local shareholders won’t.

Gitsis earlier said a deal with Yao’s group could be announced before the end of June. (See “Yao bucks tide, may buy 2nd airline,” BusinessMirror, April 14.) The two parties have been negotiating Seair’s purchase since July 2007.

(Industrialist Fred Yao)

Meanwhile, aviation analysts who requested anonymity said that with Yao’s recent purchase of Asian Spirit, he doesn’t need to purchase another carrier. “He has his own airline already, with its own staff and planes.

Both of them [Seair and Asian Spirit] serve almost the same markets, so he [Yao] really doesn’t need another airline.” The analysts added that unlike Asian Spirit, Seair does not have a congressional franchise and is not a designated flag carrier.

A source in Yao’s group confirmed this. “Strictly speaking, we don’t need them [Seair]. It’s not imperative that we buy them. But we can learn from their expertise and benefit from their niche marketing.”

Yao has already successfully lured Seair’s operations manager, Eli Tabora, to join Asian Spirit, but is still keen on recruiting Avelino Zapanta, current president of Seair and former president of Philippine Airlines, to be head of a merged airline company. Yao’s group is also impressed with the marketing savvy of Patrick Tan, Seair’s vice president for commercial affairs.

Despite the rejection of the offer, a source in Yao’s group said the businessman is still pursuing his plan to buy Seair. “The upside for us buying Seair is, they have good people, and we can do single administration [of routes and ticketing], and let’s face it, they have a good reputation in the niche market they are serving. The downside to us, of course, is there is a cost to all of that.”

The source stressed that both groups are still “actively talking. There are just some areas of confusion [with regard to the offer price]. I think it just wasn’t explained to them very well why the offer is such. They may have interpreted it differently.”

While he declined to go into specifics, he noted that since Seair’s planes are not included in the purchase price, “why should we pay for the spare parts? But essentially, our offer to them is still the same.” Other sources said the carrier also has debts which are going to be taken over by Yao’s group.

This was essentially the same tactic Yao used in taking over Asian Spirit. While the purchase price for that carrier was P1 billion, the actual check turned over to its former owners was only about P700 million because of the debts and liabilities of the carrier that Yao’s group would be assuming.

As for Yao’s offer to Seair’s owners, the source said: “We didn’t offer an inordinately low price. I think we just have to explain to them how we came up with this figure.” The offer to purchase Seair for about $2 million (or P84.63 million) was made after Yao’s group completed its recent due diligence of the airline.

In an interview on February 13, Gitsis admitted to BusinessMirror the pinch the carrier has felt with the entry of larger carriers in its major routes: “We’re still the fastest flight to Boracay (Caticlan). We still have the most modern planes. But we have felt a reduction in revenues, and a softening in the market prices.”

The Manila-Caticlan route, a major revenue earner for Seair, is now being serviced by major carriers such as Philippine Airlines through its subsidiary PAL Express/Air Philippines, and Cebu Pacific. Current fares to Caticlan have dropped to about P588, one-way, excluding insurance, taxes and other surcharges.

The carrier’s plans to tie up with Tiger Airways so it could lease two planes from the regional airline to service more domestic points, and enable Seair to fly to Macau, Singapore and other regional routes from the Clark International Airport, have also been strongly opposed by other local carriers.

“We’ve had delays with the CAB (Civil Aeronautics Board) in trying to lease planes from Tiger Air to put in service in the Philippines. We have had no approval for that. It’s been a long process. We’re surprised why we’re getting this reaction from larger companies when we’re a small company,” Gitsis said of the other challenges Seair has had to overcome.

Dornier and Gitsis own 40 percent of Seair while the rest of the shares are owned by a Filipino group led by marketing guru Tomas B. Lopez Jr.

(My story on Seair was published on the front page of the BusinessMirror on May 6, 2008. Blog entry contains corrections with regards to the offer price.)

PAL to upgrade B747s

By Ma. Stella F. Arnaldo
BusinessMirror July 5, 2007

I’VE always loved traveling business class, especially on long-haul flights that require a great amount of leg room to stretch your limbs so your blood doesn’t stop circulating to your lower extremities, offering me a more restful flight. Of course, the wider choices in in-house entertainment, as well as fine cuisine and wines, provide a definite boost to one’s morale when you’re 35,000 feet up in the air, and outside your window is a sea of blackness as far as the eye can see.

At the turn of the millennium, a number of air carriers in Asia also started improving their services in the coach class, giving economy passengers a taste of privileges once held by only those who could afford the upscale cabin classes. While seating may still be tighter, the discomfort is more than made up by sumptuous dishes and a wide array of in-house entertainment just a click away.

So I’m glad to hear that after slowly paring down its debts and boosting its finances back into black, flag carrier Philippine Airlines is now focusing on giving its passengers a comfortable lifestyle whether they are booked on business or economy class.

In a recent lunch tête-à-tête with a select group of reporters, PAL president Jaime “Jimmy” Bautista told us that the airline will be spending close to $50 million to reconfigure its four Boeing 747-400s beginning next year. “We will be eliminating the first class section and expand the business and economy sections.”

Wow! I thought, this can only mean more space for jetsetting travelers on PAL’s international routes. Jimmy, in between forkfuls of new divinely inspired creations of Gaita Fores at Pepato, told us that the airline is just following the global trend of concentrating more on the business traveler which, as a group, is on the rise. While no local statistics are available, according to a paper last year on tourism megatrends in East Asia and the Pacific by the World Tourism Organization, business travel is now the fourth-ranked reason for travel in the region.

(This is how a cocoon-type lie-flat seat looks like.)

He further disclosed that business travelers will no longer have to endure stiff backs as the airline will be installing new “cocoon-type” seats, which can not only give passengers individual privacy but also recline “flat like a bed.” While most cocoon seats are not the most aesthetically pleasing in terms of design and may make you feel like being half-enclosed in a fiberglass or plastic environment, it may lessen the chances of you being bothered by the chatty smelly old gent beside you while you’re trying to relax on a long-haul flight. Trust me. (This reminds me of a trip on a carrier bound for the Middle East a few years back, which its press releases always claim as having received recognition as the best international airline every year by some award-giving body. To my shock and disbelief, its business class felt like traveling in coach of an ordinary airline! Can you say bad food and stiff neck? Ugh.)

What is even more welcome news is that with the reconfiguration, travelers in PAL’s Fiesta class no longer have to suffer cramped positions as they will now have more room to maneuver and relax in their snug seats. “We will also put in individual entertainment audio-video screens with on-demand movies, taped television shows and video games,” says Jimmy about what’s commonly known in the airline industry as AVOD (audio-video on demand). The same screens, of course, will also be installed in what will be an enhanced Mabuhay class.

So as far as the multimillion-dollar reconfiguration goes, the business class located at the 747’s bubble top will soon have 42 seats, compared with the current, and likely extend to the front of the plane where the first class section is now located. The economy class will still have 383 seats but, as Jimmy says, offer more comfortable seating and entertainment features. Now that makes all the difference if you’re on a nonstop 12-hour flight to San Francisco. Isn’t that just a fabulous way to fly?

The reconfiguration is scheduled to start during PAL’s lean season, at the same time the planes are undergoing their regular six-year D-check involving heavy maintenance and overhaul. By 2009, the reconfigured B747 cabins will be unveiled to what I expect would be a very eager traveling public.

This dovetails with the projected delivery by the third quarter of 2009 of the airline’s brand-new Boeing 777-300 extended range fleet, about six of them I’m told, to last until 2011. When these babies arrive, they will already be installed with the latest in inflight entertainment features and state-of-the-arts seats, giving passengers a very pleasant flight. And with its ever-smiling and affable flight attendants, each flight onboard PAL promises to be a treat especially for world-weary travelers like myself.

Great things are happening at Clark! (3)

Clark airport to be No. 1 gateway by 2010
MA. STELLA F. ARNALDO, GMANews.TV
02/21/2007 | 10:29 PM

CLARK, PAMPANGA - Clark International Airport Corp (CIAC)will spend P18.5 billion to make the Diosdado Macapagal International Airport (DMIA) a world-class logistics hub and prepare it to become the Philippines’ premier international gateway by 2010.

CIAC president and chief executive officer Victor Jose I. Luciano said construction would take three years, beginning late 2007.

By 2010, the Ninoy Aquino International Airport in Manila will have reached full capacity and international flights will be transferred to DMIA.

Of the P18.5 billion, P13.56 billion will be used for civil and architectural works, P125.54 million for navigational systems, P55.96 million for a meteorological facility, P704.82 million for airport lighting, P3.99 billion for airport utilities and P75.62 million for airport maintenance equipment.

As part of civil and architectural works, CIAC will build a larger passenger terminal (Terminal 2) next to the existing terminal for P2 billion.

(More at GMA News TV.)

Great things are happening at Clark! (2)

Clark airport expansion to cost P160M
MA. STELLA F. ARNALDO, GMANews.TV
02/20/2007 | 08:37 PM

CLARK, PAMPANGA – With the increasing influx of tourists into this special economic zone, the government will begin expanding the Diosdado Macapagal International Airport this year. The initial phase of the expansion is projected to cost P160 million.

Victor Jose I. Luciano, president and chief executive officer of the Clark International Airport Corp. said of the total cost, P68 million will be for the rehabilitation and expansion of the DMIA passenger terminal I alone. The rest of the amount will be for the purchase of modern equipment such as X-ray machines, baggage conveyor belts, etc.

Announcement of the rebidding schedule for the passenger terminal I will be made “before the end of February," he told GMANews.TV.

In the first bidding held last January 27, the winning bidder was not able to meet certain important requirements of the CIAC causing the government agency to declare the bidding a failure. He declined to reveal further details of the failed bidding.

This time, Luciano expressed confidence that the rebidding “will not fail as there are many bidders…. So far we have 10 (interested bidders) and they have good track records."

(More at GMANews TV. Photo of Chicos Luciano by Tetep Marasigan)

Personal Fortune: Back Onboard

PLUCKED FROM RETIREMENT, SEAIR CHIEF AVELINO ZAPANTA IS READY TO FLY AGAIN

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)