PAL puts European expansion on hold

8 Oct 2014 by Alex McWhirter

Philippine Airlines has decided to indefinitely defer its European expansion plans less than a year after starting flights into London.

Perhaps it's not surprising. General manager Jaime Bautista told Reuters that PAL intends to focus on more profitable North American routes. It could also be the fact that businessman Lucio Tan returned to PAL a few weeks ago.

PAL decided to return to Europe in November last year (see news, September 2013) after an absence of 15 years caused by financial problems and an EU blacklist (see news, July 2013).

The loss-making carrier amazed everyone by announcing it would fly into London Heathrow from day one. Normally, newcomers opt for a less convenient London airport and bide their time until a Heathrow slot becomes available. And that was what PAL did when it last served London in the 1980s.

After London, PAL had intended to expand over the course of 2014. Amsterdam, Frankfurt, Paris and Rome were all cited as future destinations by the carrier's then president Ramon Ang. But it never happened.

Indeed, the London route didn't get off to the best of starts as PAL has a shortage of long-haul aircraft. So, the service was started with an overly large (for the initial demand) B777-300ER.

The onboard accommodation featured business and economy class. But there were no fully-flat beds in the business cabin, while economy passengers found themselves sitting tightly in a ten-across layout.

But that wasn't the only minus point. PAL never secured a faster route across Russia; a situation that remains to this day.

It meant that its Manila to London flight takes an extra two hours using the "long and slow route to Europe" (see news, November 2013).

PAL's newish B777-300ERs soon proved to be too large for available demand and the route was later downgraded to a smaller A340-300.

Even though Europe has a strong Filipino community and there are trade, business and tourism links, PAL has not succeeded as it originally thought.

As Business Traveller noted last year, PAL faces intense competition — not just from KLM (the only European airline serving Manila) and Cathay Pacific (and other Asian carriers), but primarily from the Gulf airlines who operate many, many flights to the Philippines.

Indeed, only yesterday Emirates took its A380 into Manila as a "one-off" (see news, October 1). But as we all know, Emirates' A380 one-offs tend to be followed by a regular superjumbo service.

It is true that the Gulf carriers operate indirectly but, as we have pointed out many times, they operate from destinations across Europe and Scandinavia which compensates for the Gulf transit stop.

In the final analysis, PAL is a loss-making carrier. It appears to lack sufficient long-haul planes and cash reserves to fund European expansion.

Alex McWhirter

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