RP bags biggest deal in smooth air talks with Malaysia

Posted at 10/30/2008 8:09 PM | Updated as of 12/17/2008 7:35 PM

CLARK, Pampanga - In a small room at the Lakeview Mimosa Leisure Estate here, 12 Filipino and eight Malaysian delegates sat down to negotiate crossborder air entitlements. The talks were supposed to run for two days but went so smoothly that they ended in one.

What makes the event a bigger success is that the Philippines was able to clinch the best deal in the series of air negotiations with various countries this year.

Clark International Airport Corp (CIAC) president and chief executive Victor Luciano, who was part of the home panel, said they got an additional 9,000 seats a week or seven flights a day to any airport in Malaysia for the Diosdado Macapagal International Airport (DMIA). The same allocation was given to Malaysian carriers landing on DMIA.

The parties also agreed on 2,300 seat entitlements to the Ninoy Aquino International Airport (NAIA) in Manila from any point in Malaysia except Kuala Lumpur, and 2,000 seats to any point in Malaysia from local airports excluding NAIA and DMIA.

"This is good news for the overseas Filipino workers (OFWs) in Malaysia. We are very happy with the outcome of the talks," Luciano remarked.

Currently, DMIA plays host to budget carrier Air Asia of Malaysia, which flies out of the airport to Kuala Lumpur and Kota Kinabalu. It currently has one flight a day for each of the two Malaysian destinations.

Air Asia is one of the two foreign budget airlines that operate at DMIA, together with Singapore's Tiger Airways, which flies out via Clark to Singapore and Macau.

Talks with Malaysia round up the list of promising accords to date that bring the government closer to its target of making Clark the premier international gateway of the country, next to the already congested Manila airport. The Philippines also earlier signed air agreements with Macau, Thailand, Cambodia, Finland, Hongkong, and Canada.

Only the air talks with Kuwait ended in a deadlock after Kuwaiti negotiators insisted on additional 9 flights to Manila. The Philippine panel did not give in since it wanted to develop the traffic for Clark.

Clark's potential

Why the government keeps promoting Clark as entry and exit point for other countries is simple.

“We cannot anymore accommodate more flights in Manila. It has reached its capacity and we must consider the safety and security of our passengers,” said Doroteo Reyes, Transportation and Communication undersecretary who was also chairman of the Philippine panel during the air talks.

Built in the 1940s, the NAIA, the main gateway to the archipelago, has two intersecting runways which could not accommodate big aircraft simultaneously. Because of this, operations in the Manila airport have been costly for some airline companies whose planes hover around the runway, wasting fuel, as they line up for take-off.

Luciano, in a separate interview, explained that NAIA has also been too crowded, with roughly 12 million international and 11 million domestic passengers flying yearly.

Clark's DMIA, on the other hand, is four times larger than NAIA because it was built for the aviation facilities of Americans before. Clark sports two runways that can even be expanded to four, noted Luciano.

The challenge now lies in "convincing" big-ticket players, like the Philippine Airlines (PAL), to locate in DMIA.

"NAIA is still where you can find the critical mass of businesses. Locating in Clark would also mean airlines have to maintain dual manpower and the big ones, especially those that have high load factors, don't want this," Luciano said.

But nonetheless, he noted, Clark has a lot of potential to attract more carriers as its burgeoning tourism industry spurs more foreign arrivals.

Local budget carrier Cebu Pacific is pioneering in daily international flights starting November 8 from DMIA to Singapore and Hong Kong. It will also mount four flights a week using the Clark-Bangkok and Clark-Macau routes.

Other domestic carriers South East Asian Airlines (Seair), Zest Air (formerly Asian Spirit), and Air Philippines will begin daily international and domestic flights at DMIA before the end of this year.

Healthy competition

That forging more air deals and allowing more players to come in would create tighter competition in the airline industry is no question.

In Clark, the entry of Cebu Pacific, which would fly the same routes as Singapore's Tiger Airways, would certainly spell battle between the two low-cost carriers for passengers. In case Cebu Pacific applies for flights going to Malaysia, it will likewise rival the latter's Air Asia.

But this should not be a cause for worry, said Luciano. After all, he added, "Competition is healthy. The more options there are for consumers, the more they would be encouraged to fly. The pie will become bigger."

"It (competition) will force airlines to improve their services, eliminate any inefficiency. It can also help bring down fares."

The Philippines, for its part, will benefit from having more airlines bringing in tourists.

Many countries in the region believe that tourism can be boosted by "opening their skies" to unlimited flights by foreign airlines. Flag carrier PAL and other local airlines are contesting the possible implementation of the policy at NAIA because they warned it could severely affect their financial health. Thus, the Philippine government is offering open skies, but only on flights coming to Clark.

For now, efforts are focused on accommodating as many flights as the country could, especially for Clark where a lot of tourists now reside and operate businesses.

"Tourism and aviation are really entwined. Aviation brings in investments," Luciano remarked.

From only 7,000 in 2003, passengers at DMIA have grown to about 700,000 this year.

Volume is expected to jump to over a billion by 2009, with not only tourists but also OFWs who hail from the Central and Northern Luzon patronizing the Clark airport.

Clark a full aviation hub

The government is positioning Clark as a full aviation complex, complete with logistics and aircraft maintenance facilities.

It admitted, however, it needs the help of the private sector in achieving this goal.

"The engine for growth will be the private sector. The capital will come from them, not from government funds. The dream for Clark can only be attained through public-private partnerships," he told reporters.

To start off, CIAC already signed agreements for a multi-billion-peso logistics park and a maintenance, repair and overhaul (MRO) facility in the DMIA.

Kuwait's KGL will establish the logistics park while SIAEC of Singapore, in a joint venture with Cebu Pacific, will put up the MRO center, which will be inaugurated next week.

"Clark will not just be an airport soon," Luciano said.