Deadlock

None of this should have come as a complete surprise. Local market leaders Philippine Airlines (PAL) and budget Cebu Pacific have constantly complained Manila has been giving too much away to their Gulf competitors. UAE-Manila entitlements were doubled in 2012 and increased by another 25% in 2015. Currently, Emirates flies 18 times a week from Dubai to Manila, while Etihad flies 17 times weekly from Abu Dhabi to Manila. That’s 35 weekly services compared to the 17 operated by PAL and Cebu.

PAL president Jamie Bautista has expressed fears his airline’s routes to the Middle East, Europe and the U.S. are at risk if the UAE secures increased frequencies. Like the big U.S. carriers, he has raised the spectre of government susbidies in the Gulf, alleging Emirates and Etihad enjoy government backing that give them “financial advantages” and contribute to “competitive distortions” on these routes, being able to offer cheaper tickets and “siphon passenger traffic” via their hubs in the UAE. It’s not a level playing field, he declares.

Of course, these are allegations the Gulf carriers continue to fiercely deny, saying they get no government subsidies and operate on purely commercial basis.

Be that as it may, the local airlines feel they are being hard done by. One major issue is that Manila’s main airport is one of the most heavily congested in Asia. Flight movements are restricted to just 40 take-offs and landings every hour. It’s so bad that last year PAL and Cebu had to sacrifice slots at Manila and operate more domestic and international services from secondary hubs such as Clark, Cebu, Palawan and elsewhere.

In the light of that they argue it will be discriminatory for the government to suddenly give more slots at Manila to Emirates and Etihad, which would also worsen the congestion problem.

During previous bilateral talks the Gulf carriers did get more capacity into Manila but only because they agreed to operate direct flights from the Middle East to Clark International Airport, located 80 kilometres northwest of Manila. Emirates launched a Dubai-Clark service but cancelled it in 2014 after less than seven months of operation for “economic reasons”. Philippines industry observers believe, however, that Davoa has far more prospects than Clark and they say the bilateral talks in Cebu on April 25 and 26 were expected to obtain “the commitment of the two biggest UAE airlines to launch a historic milestone: the first regular direct flights between the UAE and Davao International Airport”.

If agreed, new Dubai-Davao and Abu Dhabi-Davao routes would have been the first-ever international routes from Mindanao to destinations outside the ASEAN region and would help establish Mindanao as an emerging tourism hub and economic engine in its own right.

“There are around 930,000 Filipinos living and working in the UAE.”

Gatchi Gatchalian, President of the Davao Tourism Association, was adamant the government should stand firm in not offering more capacity into Manila, saying services to Davao offered a strategic opportunity for the Philippine Government.

“If airlines like Emirates and Etihad are so bent on putting up more flights to the Philippines and are claiming to offer contributions in the form of increased tourism, trade and OFW (overseas foreign workers) servicing, then the country should direct them to put these resources and investments where they can truly count and bear fruit – by flying to Davao instead.” For now, however, it is not to be.

And if anyone is wondering why the Gulf carriers are putting so much effort into pressing for more access to Manila, there is one underlying reason: There are around 930,000 Filipinos living and working in the UAE and around 1.3 million in neighbouring Saudi Arabia. Flights from the Philippines to the Middle East mostly operate at 100 per cent capacity, particularly in economy class. It adds up to rich pickings for anyone who can throw more seats into the market.