The Philippine Airlines (PAL) is the national airline of the Philippine and Asia’s first airline. Philippine Airlines has been the dominant air carrier in the Philippines since its creation in 1941. Philippine Airlines rebranded itself as “Asia’s sunniest airline” to cap its new marketing and advertising trust.
We have identified the three (3) major competitors of Philippine Airlines which are Cebu Pacific, Cathay Pacific and Zest Airlines.
Our recommended strategy for Philippine Airlines is Product development strategy this includes providing more services to attract the customer as well as improving the products and services that they offer to gain more profit and to satisfy the customers. Many airline companies offer lower fares to gather customers. We suggest that PAL focus on differentiation by making their customers experience the “class” of flying to remind them the pleasure of taking flight in the skies. This strategy will require extensive employee training in proper etiquette and quality service, to ensure the portrayed brand image lines up with the experience of customers. Second to our priority is increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts to enhance market share especially for the local flights.
The Philippine Airlines must know the strengths and weakness of the management for the strategists to know what things to improve and maintain. Based on the result of the competitive profile matrix, Philippine Airlines fall behind the Cebu Pacific and this is due to the fall of its local flight segment. Garnering a decrease of total market share from 50% in May 2009 to 35.4% in late December of 2009
According to the SPACE Matrix that Philippine Airlines is financially a strong company that has achieved major competitive advantages in a growing and stable industry. Market Development, Product Development, and Horizontal integration is the suited strategy that can be used by PAL.
In the Boston Consulting Group Matrix, the Philippine Airline is in the position of “star” because Philippine Airline remains stable with the market growth and continues to be successful in the field of airline industry. PAL is in the quadrant II that represents the organization’s best long-run opportunities for growth and profitability. Horizontal Integration is appropriate strategies for these divisions to consider. PAL should increased control over their competitor and takeovers among competitors allow for increased economies of sale and enhanced transfer of resources and competencies.
Base on the internal- external matrix of Philippine Airline that the company should hold and maintain. The company should pursue Intensive (market penetration and product development) strategies which can be the best and most appropriate things to do.
With the standard of living of Filipino is improving gradually as well as the increase in tourism industry and lot of Filipino workers go abroad airline industry is stably increase, that is why given the rapid market growth of the airline industry. Philippine Airlines is in an excellent strategic position, for Philippine Airlines, concentration on product development is an appropriate strategy in terms of the specific circumstances that face the company.
II. COMPANY PROFILE
The airline was founded on February 26, 1941 by a group of businessmen led by Andres Soriano, hailed as one of the Philippines’ leading industrialists at the time, who served as its general manager, and former Senator Ramon Fernandez, who served as its chairman and president. The airline, headquartered in the Philippine National Bank Financial Center in Pasay City, was founded in 1941 and is the oldest commercial airline in Asia operating under its original name. Out of its hubs at Ninoy Aquino International Airport of Manila and Mactan-Cebu International Airport of Cebu City, Philippine Airlines serves nineteen destinations in the Philippines and twenty-four destinations in Southeast Asia, East Asia, Australia, Canada and the United States.
Formerly one of the largest Asian airlines, PAL was severely affected by the 1997 Asian Financial Crisis. In what was believed to be one of the Philippines’ biggest corporate failures, PAL was forced to downsize its international operations by completely cutting operations to Europe and eventually Southwest Asia, cutting virtually all domestic services excluding routes operated from Manila, reducing the size of its fleet and terminating the jobs of thousands of employees. The airline was placed under receivership in 1998, gradually restoring operations to many of the destinations it formerly serviced. PAL exited receivership in 2007 with ambitious plans to further restore services to its previously-serviced destinations, as well as diversify its fleet.
Philippine Airlines is the only airline in the Philippines to be accredited with the IOSA (IATA Operational Safety Audit) by the International Air Transport Association and has been awarded a 3-star rating by Skytrax.
1. Economic Forces
In 1997, Philippine Airlines rebranded itself as “Asia’s sunniest airline” to cap its new marketing and advertising thrust. In addition to its re-fleeting program, Philippine Airlines commenced service to New York City (using Newark Liberty International Airport) via Vancouver. However, this caused the airline to be financially unstable, having acquired too many aircraft while matching them to unprofitable routes. The re-fleeting program was about halfway through when the full impact of the Asian financial crisis struck the airline industry early in 1998. By March 31, 1997, at the end of the 1996-1997 fiscal years, Philippine Airlines had reported its largest annual loss of P8.08 billion.
PAL shareholders approved a quasi-reorganization plan, reducing the par value
of PAL shares to P0.20 from P0.80 per share. It will also increase its authorized capital stock from P16 billion to P20 billion divided into 100 billion shares at P0.20 per share.
Philippine Airlines income annual report showed an increase in revenues to US$1.634 billion, from US$1.504 billion the previous year, after carrying 17% more passengers due to acquisition of additional aircraft and growth in the domestic market.
However, the cost of operating more flights, which involved higher maintenance expense and compounded by record-high fuel prices, raised expenses to US$1.9 billion, from US$1.539 billion the previous year. Fuel comprised 44% of Philippine Airlines income operating expenses.
When the global crisis led to a travel slump in the latter part of the year, PAL’s passenger load factor fell to an average of 76.2%, three points lower than the previous year.
PAL also reported paying US$165.4 million in principal and interest to its creditors, bringing to US$2.4 billion the total paid from March 1999 to March 2009. Total assets decreased by US$60.6 million to US$1.971 billion, while total liabilities rose by US$239.5 million over the previous year.With the protracted recession, the International Air Transport Association (IATA) said its member-airlines are bracing for US$9 billion in total combined losses by the end of the current fiscal year.
2.1 Social forces
The Philippine airlines conduct a promo for there passenger especially who belong to there membership. They can earn miles points in every board with the code share partners (air Macau, Cathy pacific ,emirates, etihad , Malaysia airlines and other airlines that belong to that agreement. they also earn miles point in staying hotels around the Philippines and worldwide. example they can earn point rates vary between 250 and 500 miles per stay in hotel. The points they earn can be donated to UNICEF or in PAL Foundation. Security control is a significant contributor to service quality, but service is underperformed in terms of efficiency, relative to passengers’ desired levels. Security needs to follow a similar pattern to safety. It is already part of IOSA, but I’m sure more can be done to formalize industry requirements. IATA and the various agencies around the world must find ways to harmonize security requirements.
It is essential for the passenger experience, and it is essential for airlines. It would simplify operations considerably.At the same time, it is clear that security is a government responsibility. They should be paying for the majority of measures, especially at the airport. But airlines must show willingness too, and play their part. We can look again at security onboard the aircraft. Boarding -Airlines use a number of different group/zone boarding systems or boarding rules, the idea (there are numerous variations) it is significant to service quality. In-flight service is something that makes the passenger comfortable and relaxes while they are on board.
2.2 Cultural forces
Philippine Airlines (PAL) is the national flag carrier of the Philippines and the first and oldest commercial airline in Asia. It began operations in 1941 by making one flight daily between Manila and Baguio. From its main hub at Ninoy Aquino International Airport in Manila, Philippine Airlines now flies to 18 destinations in the Philippines and serves 26 destinations in Southeast Asia, East Asia, Australia, Canada and the United States. Mabuhay Miles is the Philippine Airlines frequent flyer program.
It was established in 2002 by merging all existing PAL frequent flyer programs prior to the Asian financial crisis: namely, PALsmiles, the Mabuhay Club and the Flying Sportsman, with PALsmiles and Mabuhay Club members being moved to the new program on August 1, 2002. The Flying Sportsman program was subsequently transformed into SportsPlus, a three-tiered, subscription-based program which gives extra baggage allocations for sports equipment on PAL flights, aimed specifically at golfers, bowlers, scuba divers, tennis and badminton players, anglers and cyclists.
The SportsPlus program is available only to Mabuhay Miles base members, as Mabuhay Miles members on higher membership tiers automatically receive SportsPlus privileges. Mabuhay Miles members earn miles that can be redeemed at face value on most Philippine Airlines-operated flights, as well as on code-shared routes of partner airlines. Some promotional fares and all flights operated by Airphil Express, however, are ineligible to earn miles. Miles may also be earned by patronizing the services of Mabuhay Miles partners, or by purchasing miles. Membership tiers include Mabuhay Miles Base, Elite, Premium Elite and Million Miler.
2.3 Environmental Forces
In recent years, much attention has been given to the role of automobile emissions in climate change. But air travel—which has been rebounding since 9/11—is equally damaging to the climate, per mile of travel. Flight is one of the most fuel-guzzling forms of passenger transportation. Airplanes’ fuel use (and resulting emissions of carbon dioxide), per passenger and per mile, is almost as heavy as driving alone. Beyond their emissions of carbon dioxide, aircraft release other gases that have disproportionate but short-term effects on our planet’s climate
. And data suggest that north westerners fly more passenger miles per capita than residents of most other states. Carbon dioxide has the same effects on the climate no matter when or where it is injected into the atmosphere. But other aircraft emissions-such as nitrogen oxides-have potent, climate-changing effects because of the elevation at which they are released. Over the short term, they more than double the effects of the CO2 alone Over time, these other pollutants disappear, but the carbon dioxide remains aloft capturing heat for decades.
These short-term climate-altering effects of air travel are concentrated, along with the residents of affluent nations, in the mid-latitudes of the northern hemisphere, which includes the Pacific Northwest.
The airline industries are responsible for about 11% of greenhouse gases emitted by the transportation sector. An aircraft engine contributes a global warming and global dimming even though it is least polluting forms of travel in the world. The rapid growth of air travel in recent years can contributes to increase the total pollution attributed to aviation and the reduction of achieved automobiles. The jet fuel can burned per passenger on a average 3200 kilometers airline flight about 353 kilograms.
2.4 Demographic Forces
The population of the Philippines was 88.57 million people as of August, 2007. The 2009 projected population is 92.23 million people. This is an inflation rate of +1.5%. The 2008 population was 90.348.437, making it the 12th most populated country in the world. The Republic of the Philippines is an archipelagic nation located off the coast of Southeast Asia.
Filipinos are descended from Austronesia people from Taiwan over a thousand years ago. The Aboriginal inhabitants consist of the Ati and Aetas, referred to as Negritos. Most of the country is comprised of Malayo-Polynesian ethnic groups including, the Tagalog, Visayans, Ilocano, Kapampangan, Bicolano, Moro, Pangasinense, Igorot, Lumad Ibanag, Mangyan, Badjao, Ivatan, and Palawan tribes.
There is a significant group of other ethnic descendants including the Spanish, British, American, Japanese and Chinese due to the Spanish colonization and Americation occupation after World War II. These intermarried descendants are referred to as Filipino mestizos There are Twelve major regional languages each with over one million speakers: Tagalog, Cebuano, Ilocano, Waray-Waray, Tausug, Bikol, Kapampangan, Pangasinan, Kinaray-a, Maranao, Maguindanao and Hiligaynon. English and Spanish were both imposed on the country as official languages at one time in its history, so the languages can still be heavily felt within the country.
The airline’s first flight took place on March 15, 1941 with a single Beech craft Model 18 NPC-54 on daily services between Manila (from Nielson Field) and Baguio. On July 22, the airline acquired the franchise of the Philippine Aerial Taxi Company. Government investment in September paved the way for its nationalization. PAL owns 30 Airbus aircraft and four Bombardier airplanes. The airline has also reconfigured its in-flight service to include first, business, and economy classes. PAL additionally offers flights to India and China, both among the world’s fastest-growing travel markets. The carrier offers almost 30 weekly flights to US destinations. In 2008 the company launched its low fare carrier unit, PAL Express, which serves mostly domestic island destinations.