Cebu Pacific budget fares lauded

Cebu Pacific Airline’s unprecedented marked-down of domestic fares to as much as 67 percent lower than standard rates, drew favorable reactions from various sectors in the tourism industry.

First on the list is Tourism Secretary Ace Durano who lauded the airline for this significant move which he expects will further boost domestic travel.

"I take my hat off to Cebu Pacific for lowering its airline fares to make it more affordable to the traveling public. This timely move which entices people to travel more frequently will benefit the airline and the country as well," he said.

Durano also commended the airline for being an active partner of the Department in promoting tourism. "Airlines like Cebu Pacific not just complement our programs and thrusts but they make our work easier. Without their cooperation and support, we cannot fully achieve our goal to enhance domestic and inbound travel to the Philippines."

Philippine Tour Operators (PHILTOA) outgoing president Leo Picaso also welcomed the new move of Cebu Pacific. He believed that the airline made the right decision at the time when many international low-cost carriers are coming into the country and attempting to get a share of the local market.

"It’s about time. They can afford to lower their fares, after all. A lot of the tour operators have thrown their support to the airline because the new budget rates will definitely be beneficial for domestic and inbound operators, boosting our businesses," he said.

He expressed hope that other airlines would follow suit.

Angel Ramos Bognot, president of the 850-strong National Association of Independent Travel Agencies (NAITAS), the largest travel organization in the country, echoed Picaso’s sentiments.

She said this move by Cebu Pacific has long been overdue. But it showed that the airline is really listening to the demands of its partners in the industry and to the needs of the traveling public.

"We tour operators are only middle men to our clients. In as much as we want to give good, affordable tour packages, we are unable to do this because of the very high domestic fares that are higher than international rates. The fuel taxes and surcharge alone (which goes to the government), amount to almost 50 percent plus the basic rate and 10 percent EVAT. So, we are very happy that despite these, Cebu Pacific still managed to lower its basic rates," she said.

But Bognot also stressed that not all adjustments and considerations should come from the private sector. "The government should address these issues that further impede the full development of the tourism industry. It should reconsider the huge taxes that it imposes on the airlines."

Even Cebu Pacific’s closest competitor Asian Spirit is also upbeat on this latest development.

Lingling Rodriguez, Asian Spirit’s Sales and Marketing consultant said this move is good for the travel industry and will definitely bring back the excitement of travel.

She believes it was a good marketing strategy by Cebu Pacific, reputed to be the low-fare pioneer in the country.

"Each and every airline has its own marketing strategies," she said.

Rodriguez, however announced that Asian Spirit would not do the same thing and reduce their own fares because they already have special discounted rates for a particular season.

She was quick to add that Asian Spirit is not competing with Cebu Pacific as they have their own separate market and routes like the missionary routes (usually with small airports) where only the former flies.

A regular sea transport passenger, meanwhile, still prefers to travel by sea despite the reduced fares of Cebu Pacific.

"Ultimately, what matters for a consumer like me is the total price that I have to pay. Although travel time is longer, I believe it is still cheaper to travel by sea. When you compare the rates of taxes for ships and airlines, the airlines certainly have bigger taxes so in the end you pay more. Plus, the luggage allowance for ships is obviously bigger, as much as two balikbayan boxes which is equivalent to 200 kilos for an airline baggage allowance," said the frequent ship passenger who asked not to be named.

Exactly a week ago, Cebu Pacific introduced its new pricing and fare structure to the public which are 50 to 67 percent lower than its standard rates, saving travelers R1,000 to R2,000 per trip. The year-round pricing scheme is composed of the Flexi fares or regular rates for business travelers and the Go fares, the budget fares that are 5 to 15 percent cheaper than fares of other airlines. The Flexi fare can be changed until 45 minutes before flight time but those flying on Go fares need at least 48 hours notice for changes before fight time. These, however, are basic fares and exclude the necessary gov’t and fuel taxes.

Through this new scheme, the airline aims to allocate seats that will be sold in advance at a discount while the remaining seats will be sold at regular prices. To avail of the Go fares, leisure travelers should only book early and be flexible with their travel plans. They can book a month or two ahead or even a year in advance and must be willing to travel midweek or on an early morning flight.

CEB president Lance Gokongwei said more than a million seats or 30 percent of the airline’s overall capacity for 2006 have been set aside for the Go fares. Of the one million, 300,000 seats will be made available for the lowest advertised fare levels.

He explained that according to studies, CEB’s pre-selling seats at lower prices would generate higher revenues and make the airline financially stronger. Moreover, it would also be able to sell discounted seats that are usually not sold during the lean months, thus smoothing some of the demand peaks and drops of the seasonal airline business. "This is the revenue model that made many foreign airlines successful. Among this is Southwest Airlines, on which CEB was patterned.

Gokongwei expects that this move would boost the airline’s revenue load factor by 75 percent in 2006, from 65 percent this year.

He said that another objective of the new pricing scheme is to stimulate the market and encourage them to fly more often. "Our Go fares promote local tourism and even closer family ties since travel to the provinces have now become very affordable. It will encourage people to fly more frequently while introduce to air travel those who have not flown before."

The "Go fares" range from R699 to R1,499. The lowest at R699 are one-way trips to Roxas City from Manila and to Iloilo from Cebu. For routes originating from Manila to Cebu, Tacloban, Bacolod, Iloilo, and Puerto Princesa, etc. the rate is only R999. Slightly higher rates are pegged for other Visayan and Mindanao routes.

The Go fares will be implemented in the airline’s regional routes next year. At present, Cebu Pacific is flying to 14 domestic destinations and in Hong Kong and South Korea.