The Philippines: Restoring aviation status

The Philippines’ aviation sector is looking to regain the necessary accreditation that will grant its carriers access to lucrative routes, as well as encourage overseas airlines to add domestic destinations to their flight lists. While these aims are highly anticipated, much still needs to be done before these goals come to fruition.

Aviation officials are currently attempting to restore the country’s Category One status by the US Federal Aviation Administration (FAA), which in 2008 downgraded the Philippines’s rating following a safety audit. The safety report cited serious technical problems at the country’s airports, such as a lack of training for safety inspectors, weak electronic record-keeping and an inability of the regulatory agency – the Civil Aviation Authority of the Philippines (CAAP) – to provide safety oversight of its operators, keeping in line with the minimum requirements of the International Civil Aviation Organisation (ICAO).

The FAA downgrade was swiftly followed by a similar move from European regulators, who responded to the safety concerns by restricting access to new destinations in the EU, which cut deeply into the tourism and business trade. In December 2009, the ICAO echoed this sentiment by designating the Philippines as a significant safety concern.

To help the Philippines resolve its outstanding problems, in late April the ICAO offered to dispatch a team of experts to help the CAAP work its way through the industry’s significant issues, such as the drafting of a standard curriculum for inspectors and training for qualified personnel.

Ramon Gutierrez, the director-general of CAAP, said that if his agency is able to meet the ICAO’s personnel requirements, a major obstacle to regaining Category One status from the FAA will be overcome.

“After we have trained qualified personnel, we will be able to train other inspectors. From there, we will have a sufficient number of qualified personnel. Once we settle the ICAO concern, then the FAA will follow,” he said in an interview with Business World on April 30.

Of the 22 concerns raised by the ICAO in its 2009 assessment of aviation safety, Gutierrez said all but three have been addressed, adding that CAAP is hopeful it will be in a position to invite the FAA to conduct a new audit in the third quarter of 2012, the last major hurdle to a status upgrade.

Ramon Ang, the president of the food, beverage and packaging group at the San Miguel Corporation and the new president and COO of Philippines Airline (PAL), however, is banking on a return to Category One status. Having taken a 49% stake in the airline in mid-April, San Miguel and Ang have big plans for the national carrier, hoping to turn into a major competitor in the region and domestically.

Hard hit by the 1997 Asian economic crisis, PAL was forced to reduce its fleet size in the following decade to the point where it had less than 40 aircraft. The FAA then restricted access to new and traditional routes, thus eating into its potential revenue streams. Following Ang’s move to take control of the airline, PAL has announced it will add around 100 new planes to its fleet over the coming five years, most of which will be single-aisle aircraft serving domestic and regional routes. However, the carrier has also said it is looking at acquiring a number of wide-bodied planes for long-haul routes.

If the FAA does lift the Philippines’ rating, it means PAL will have greater access to routes into the US, and with the EU most likely to follow any change of direction taken by the FAA, the planned expansion of the carrier and the investments in new aircraft could soon pay off.

However, while CAAP may be able to reassure the FAA and other international agencies over safety issues, it still has other challenges to resolve. Firstly, congestion at some of the country’s major airports, such as Ninoy Aquino International Airport (NAIA), where delays have become more frequent, needs to be addressed. One solution to this problem is to have smaller aircraft use alternative airports close to the capital, thus freeing up NAIA for larger commercial flights.

Other solutions, such as expanding the operations of outlying airports and having NAIA operate around the clock, also appear to be viable options. Additionally, investment in the country’s secondary airports is required to improve domestic services. Funding for proposed projects in the aviation infrastructure pipeline has been difficult to come by, however.

Should the FAA restore the Philippines’ Category One status, there will be a rise in aviation revenue, as local carriers will be able to increase their flights to existing destinations and add new routes, bringing in more tourists and generating tax earnings for the government. With at least some of these earnings set to be ploughed back into the national transport infrastructure, the aviation industry could once again become a domestic, regional and international competitor.