Will the airlines sink RP’s shipping industry?

by Malou Liwanag-Aguilar/AJPress

LOS ANGELES – Choosing the airway over the nautical highway.  The recent sea mishap in the Philippines involving Sulpicio Lines’ Princess of the Stars has further confirmed that traveling via the sea is not the preferred mode of passengers wanting to reach the other islands in the archipelago.

According to a report by ABS-CBN.com and Newsbreak, in the past, overloading was the primary cause for most sea tragedies, like in the case of the M/V Dona Paz which sank in 1987 after colliding with a small oil tanker. M/V Dona Paz had a capacity of only 1,518 passengers, but when tragedy struck, investigations showed that it was overloaded – carrying up to more than twice what it was allowed. The result, 4,375 people onboard died, making it as the worst maritime disaster during peacetime.

However, Princess of the Stars, which was plying the Manila-Cebu route had a capacity of over 2,000 passengers, but had only over 800 onboard when it encountered rough waters during typhoon “Frank.” This means that the ship sailed with just about 40 percent load. Also, the M/V Dona Paz tragedy in 1987 happened during the Christmas holidays, which was a peak season, while the M/V Princess was traveling during an off-peak season.

Still, the 40 percent load factor during an off-peak season is low, according to transportation industry observers.

Sky over water

Setting aside what has happened with the M/V Princess and other sea mishaps, the apparent changes in the inter-island transportation are not due to competing passenger liners, but from substitute mode of traveling. Local airlines have changed its business model and has converted to a low-cost, no-frills airline.

Local airline Cebu Pacific, which used to be a full-service airline started a new trend in 2005. Other local carriers soon followed after the deregulation of the aviation industry during the Ramos administration in the 90s.

Going for volume, fares were dropped for various domestic destinations by reducing turnaround time. Other costs were reduced by taking out other services such as complimentary food, as well as computerized ticketing and offering lower fares for early bookers.

At present, Cebu Pacific is offering 400,000 free seats for domestic flights for anyone traveling until December 31, 2008. Passengers who book for these flights will only shoulder non-refundable taxes, fuel and insurance charges.

PAL has followed suit with their PAL Express, which was launched last May 2008. The low-fare unit of Philippine Airlines, it mainly serves domestic island points throughout the Philippines from hubs in Cebu and Manila. It is even offering its popular ‘Buy 1, Take 1,’ promotional fare scheme that gives a free one-way domestic ticket for every such ticket bought.

Other airlines in fact are part of this trend like Asian Spirit and Southeast Asian Air, by offering affordable fares to local and even international destinations. The public seem to have embraced this, as the rate of flying passengers has increased. This increase not only accounts for ‘new’ fliers, but also regular flying passengers who were on a budget and now have a choice to choosing budget over luxury.

A round trip plane ticket between Manila and Cebu go as low as P3,000, and in the past boat fares ranged from P4,000 to P8,000. But even at reduced rates, the lowest a boat fare can go is P2,000 and the small difference in price against flying has been inviting enough for passengers to change their mode of transportation. Another factor to consider is travel time – a Manila to Cebu boat ride takes almost a day, compared to a little over an hour travel on a plane.

Still, shipping companies traditionally do not depend on just their passengers for revenue. Liners derive about 70 percent of their revenues from cargo and about 30 percent from passengers, according to Henry Basilio, a transportation expert from the University of Asia and the Pacific, in an interview with Newsbreak. The drop in revenues for sea travel has prompted shipping companies to convert ships to passenger-cargo lines to carry more cargo than passengers.

But passengers who cannot really afford to fly still opt to take the nautical highway. Shipping companies have joined together with the government-backed roll-on, roll-off (RORO) operations. Launched in 2003, RORO is provides a less expensive way for cargo business owners because of its multi-port approach.

However, the budget airline industry has taken most of the first and second class passengers of the shipping industry, said Basilio.

Improvement and upgrading of its sea fleets seem to be the solution, by introducing new facilities and amenities on board, as well as passenger accommodation and in the ticketing/booking process. But since the decline on its revenues and passengers, these investments might not materialize.

With latest sea tragedy, the continuing decline of passengers and the competitive fares offered by the budget airlines, it isn’t surprise why inter-island travelers have chosen to take the airway over the nautical highway.


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