Think-tank sees few synergies between PAL, Japan’s All-Nippon

MANILA, Philippines - Think-tank Centre for Aviation (CAPA) said there are few synergies between Philippine Airlines (PAL) and All Nippon Airways (ANA) of Japan that has expressed interest in acquiring a stake in the national flag carrier.

In its latest aviation analysis titled “ANA looks for international acquisition: Talks with PAL productive but not end game,” CAPA said the proposed buy in by ANA in PAL would face headwinds as the national flag carrier has pulled out of the low cost carrier (LCC) segment and the Philippines has lack of economies of scale.

“The possible synergies between ANA and PAL are few. PAL has contentiously exited the Philippines’ key low-cost segment and its long-haul ambitions will be challenging given the competition, its lack of geography or scale for connecting traffic, and a low profile without a global alliance or numerous partners,” CAPA stated in the report.

With a war chest of $1.8 billion, ANA has set its sights on PAL which is looking for a buyer of the 51 percent interest of taipan Lucio Tan. The other 49 percent of the national flag carrier is owned by diversified conglomerate San Miguel Corp. (SMC).

“Marriages are seldom consummated without a decent period of courting. ANA has quietly flirted with Indian carriers and is now whistling sweet tunes to PAL, which is looking for foreign airline investors,” the think-tank added.

ANA said it intends to invest in foreign airlines in order to secure new channels of growth in population-declining Japan.

CAPA said SMC would welcome a stake from a high profile international carrier that could help manage PAL.

It added that the Philippines has a large but low yielding and congested low cost carrier (LCC) segment dominated by listed budget airline Cebu Air Inc. (Cebu Pacific) of tycoon John L. Gokongwei Jr.

However, CAPA said PAL and sister firm PAL Express has veered away from the LCC segment.

 â€œPractically, if ANA were interested in PAL to access the low-cost market in the Philippines, PAL would be a complicated choice as the carrier contentiously abandoned its LCC strategy to focus on the full-service segment. In the Philippines’ highly price sensitive market this segment is considerably smaller than in Hong Kong where Cathay Pacific is firmly focused on the full-service segment with apparently no intentions of entering the low-cost market with a separate entity,” it explained.

It pointed out that ANA is still learning how to operate a dual brand strategy of a full-service carrier and low-cost carrier operating alongside each other with its minority stake in Peach and majority control in AirAsia Japan.