PAL Open-Lies Policy

Monday, August 23, 2010

Robert Lim Joseph, chairman of the Travel Cooperative of the Philippines and chairman emeritus of the National Association of Independent Travel Agencies, said the Aquino government should support PAL as it tries to overcome its problems, instead of looking at outside help and adopting an open skies policy.

“The government should support PAL and not act like they are operating PAL. It should leave PAL to work with its airline partners and implement its contingency measures in case a strike will happen,” Joseph said in a news release.

He emphasized that government should not intervene because if it does, interest groups or individuals will take advantage of the situation, to the detriment of PAL and the national interest.

Joseph recalled that when foreign airlines were allowed to service some PAL routes when it temporarily ceased operations in 1998, fares went up.

If somebody spent half a minute to think about what this guy said, you'd realize how senseless his statement is.

The basic idea for Open Skies is to promote competition among carriers for routes, than what's traditionally a monopolistic domain of national carriers. Basic economic theory states that competition will tend to drive prices down, or quality up in a periodic fluctuation function until it reaches homeostatic baseline overtime. Simply put: more providers = less price control = more bang for travellers buck.

Now, how can something like that lead to higher prices?

Let's keep in mind that for the last 50 years or so, Philippine Airlines has held a near monopoly of the local sky routes, at least until the entry of the Gokongwei's Cebu Pacific, which subsequently overtook PAL as the largest carrier in our country today. During the time before cebu pacific came about, prices for airfares were kept high, regulated only by a government that also had a stake in the then partially owned carrier, which kind of defeats the purpose. We had no choice!

While it's true that the fares when higher during the strikes, that's because there's simply no other competing airlines were interested in the routes that were surrendered before. The handling of the open skies policy was shoddy before, and airlines could afford to not take domestic routes. Essentially we replaced one local carrier with another foreign carrier per route, and then left it at that. That's why fares went up back then.

Ten years later, it's a whole different ball game. Cebu Pacific is a new big player, and the international carriers are now willing to microfacilitate even smaller domestic routes such as those in our country. This, plus a correct implementation of the open skies policy such as the more successful ones abroad such as that of the Trans-Tasman routes, will work opposite of what Robert said. A lot of budget airlines will kill prices to get those routes, and the second they want to start overpricing, other airlines will cut them loose. Short of anti-trust, I can't see how this can go wrong.

To make it short, I think there's a reason Robert is saying all this. Either he's got an interest against cheaper airline fares, or he's not looked at the whole picture yet. (I'm sure he has, more than me.) I'd say he's being asked by PAL to say all this, which would go to show how low PAL has sunk over the years. If PAL is indeed dying, we should let it go die in its course and screw national pride. Should we really be proud to have a national carrier that can't even profit even after being given all the advantage it can get from the government? I'd rather have no national carrier then.

If it's really something national, it should be owned by the people, non-profit, and for the people.

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