Cebu Pacific launched four weekly flights to Sydney in Sep-2014 using 436-seat single-class A330-300s. Cebu Pacific added a fifth weekly frequency to Sydney in Dec-2014 and since mid-2015 has served Sydney with four to five weekly services depending on the time of year.
Cebu Pacific had an average load factor on the Sydney-Manila route of only 50% in 2014 (covering the first four months of the operation). Its Sydney-Manila load factor remained a relatively low 64% in 2015 and 2016, according to Australia BITRE data. However, its load factor has improved significantly in 2017 and through the first four months of this year was 80%. In Apr-2017, the most recent month of available BITRE data, Cebu Pacific had a particularly strong 86% load factor.
The improvement on the Manila-Sydney route was driven partially by a change in Cebu Pacific’s distribution strategy in Australia. Cebu Pacific initially relied mainly on its own website for Australia point of sales but over the last year has started to embrace local distribution channels. The use of holiday focused travel agents has particularly helped the airline stimulate more Australians to holiday in the Philippines. Cebu Pacific initially had a tough time in this segment of the market as its brand is not widely known among Australians, limiting it mainly to Filipino ethnic or VFR traffic.
The improvement on the Manila-Sydney route was driven partially by a change in Cebu Pacific’s distribution strategy in Australia
Manila-Sydney was initially the worst performing of Cebu Pacific’s long-haul routes. However, over the last year Manila-Sydney has outperformed most of the airline’s other long-haul routes. Market conditions between the Philippines and the Middle East, the only other long-haul market Cebu Pacific serves, have deteriorated due to overcapacity from Gulf carriers while market conditions between the Philippines and Australia have improved. Demand between Australia and the Philippines has increased over the last year – driven partially by growth in the number of Australian visitor numbers to the Philippines. Meanwhile, Australia-Philippines capacity, which had been up significantly in prior years, was relatively flat.
Sydney was therefore only one of just two long haul destinations (along with Dubai) that avoided the chopping block as Cebu Pacific conducted a review of its unprofitable long-haul operation earlier this year. Services to Kuwait were suspended in mid Jun-2017 while Doha and Riyadh were cut in early Jul-2017.
Cebu Pacific recently received traffic rights from Philippine authorities to increase Manila-Sydney to daily. The granting of these rights was a formality as Philippine carriers have had unused traffic rights to Australia since 2015, when Australia and the Philippines forged an expanded air services agreement. Cebu Pacific always intended to eventually serve Sydney daily – and at some point in future also launch Melbourne – but was initially limited to five weekly flights to Australia due to the bilateral limitations.
While the bilateral restriction was lifted in 2015, Cebu Pacific decided to wait to seek more traffic rights to Australia given its initial lacklustre performance on the Manila-Sydney route. The airline now has the confidence to operate the route daily, at least during peak periods. Once the Sydney route is up to daily and performing well on a consistent basis, Cebu Pacific will likely look to launch Melbourne.
Cebu Pacific competes in the Sydney-Manila market against Philippine Airlines and Qantas, which serve the route with seven and six weekly A330 frequencies respectively. While PAL and Qantas have more flights, Cebu Pacific uses much higher density A330s, giving it more market share. In Apr-2017 Cebu Pacific captured a leading 42% share of passenger traffic between Sydney and Manila.
The Blue Swan Daily, recently caught up with the Philippine Department of Tourism to discuss the Australian market. The Philippines is experiencing record growth but tourism officials believe North Asia is an underserved market.