Another carrier improves premium product to Australia, as the trend up continues

13 September, 2017

Philippine Airlines (PAL) has improved its position in Australia's corporate travel sector by introducing a premium economy product.

All of PAL's flights to Sydney and Melbourne are now operated with newly retrofitted three class low density 309-seat A330-300s. These aircraft feature 18 lie-flat all aisle access business class seats, 24 premium economy seats and 267 regular economy seats.

PAL serves the Sydney-Manila route with seven weekly flights and the Melbourne-Manila route with three weekly flights. Melbourne was served with 368-seat two class A330-300s until Jul-2017, when all three frequencies transitioned to the retrofitted 309-seat A330-300s.

Sydney was previously served with 254-seat two class A340-300s. PAL transitioned its seven weekly Sydney flights to the retrofitted 309-seat A330-300 in phases during Aug-2017 and early Sep-2017. The last of the seven weekly frequencies made the switch on 6-Sep-2017.

The change in aircraft type has resulted in a 16% decline in total seat capacity for Melbourne and a 50% decline in business class capacity for Sydney. However, PAL has significantly improved its product in both markets, particularly on the premium end. Total capacity to Sydney, PAL's largest market in Australia by a wide margin, also has increased by 22%.

The ageing A340-300s previously used on the Sydney-Manila route had 36 recliner style business class seats in a 2-2-2 configuration. The non-retrofitted A330-300s used for Melbourne had 18 lie flat business class seats - the same number as the retrofitted aircraft - but in a less preferred 2-2-2 configuration and the seat was not generally well received by business passengers.

This represents the first time PAL has offered all aisle access in business class - on any aircraft. The retrofitted A330-300 also marks the first time PAL has offered a premium economy seat on any aircraft.

The premium economy cabin features 24 seats in 2-2-2 configuration with 38in pitch and a dedicated lavatory. PAL's new premium economy product also includes a priority check-in line, priority boarding and enhanced meals.

PAL executives are confident the new premium economy product will attract economy passengers who are willing to pay extra for additional amenities but cannot afford business class.

PAL executives are confident the new premium economy product will attract economy passengers who are willing to pay extra for additional amenities but cannot afford business class. It does not expect business class passengers to downgrade to premium economy.

PAL is now the only airline offering a premium economy option from Sydney to Manila. Qantas competes on this route with A330s, which do not have a premium economy cabin. Cebu Pacific also operates Sydney-Manila but uses all economy A330s.

Qantas has six weekly frequencies on Sydney-Manila while Cebu Pacific currently has four weekly frequencies but is increasing to daily at the beginning of Dec-2017. PAL is the only airline operating nonstop flights from Melbourne to Manila.

PAL is offering premium economy fares from Sydney to Manila that start at only AUD1100 return including taxes. Regular economy fares are approximately AUD300 cheaper. Melbourne-Manila fares are generally higher as there are no nonstop competitors on this route.

PAL is only the second Southeast Asian airline to offer a premium economy seat in the Melbourne and Sydney markets after Singapore Airlines. However, there are several premium economy options from Melbourne and Sydney to North Asia.

The new premium product introduced with the retrofitted A330-300, which initially debuted on the Manila-Honolulu route in Jun-2017, is part of an overall initiative at PAL to improve its position at the top end of the market and secure a five-star rating. PAL will have a similar business class and premium economy product on its future fleet of A350s, which will be delivered from 2018 and used on flights to the US.

As part of its drive to improve its inflight product, PAL also has opted for lie fat business class seats on its initial fleet of six A321neoLRs. These aircraft will be delivered in 2018 and used primarily for Australia services. Blue Swan will examine PAL's Australia plans for the A321neoLR in a subsequent report to be published later this week.