PAL needs $50M for 2011 capex

Sunday, 07 November 2010 10:53 Lenie Lectura / Reporter
Business Mirror

CARRIER Philippine Airlines (PAL) will need $50 million to finance next year’s working capital, its chief financial officer said last week.

“We may have to raise some money for our working capital, maybe in the amount of $50 million,” said Jose Gabriel Olives.

He said PAL may tap local banks such as Land Bank of the Philippines and the Development Bank of the Philippines among others to borrow money.  These are the same banks the airline is talking to for the P2.5 billion needed to restructure operations.

PAL announced last week that the spinoff of its inflight catering, airport services and call center reservations will help the airline save between P500 million and P600 million a year but will displace 2,600 employees. PAL will be spending a total of P2.5 billion for the retrenchment process.

He said the airline will be taking delivery two Boeing 777s in 2012 and another two in 2013. Olives said PAL would have to post a downpayment for the aircraft by next year. “Normally, the downpayment ranges from 15 percent to 20 percent of the list price of the airplane which is $200 million each,” said the PAL official.  Olives added that PAL’s working capital for next year does not include payment for the Boeing planes.

PAL’s losses shrank to $14.3 million at end-March this year from $297.8 million a year earlier. It has posted losses of $312 million over the past two fiscal years.

PAL president Jaime Bautista said the airline’s performance was “a little better” in terms of revenues in the second quarter which ended in September.

The flag carrier controls about 47 percent of the domestic market. Bautista said PAL may end its fiscal year with 10 million passengers from 9.3 million in March 2010. “We are close to our projections. Of the 10 million, we are eyeing domestic passengers which is about 55 percent,” he added.

Bautista said while the aviation industry is showing signs of slow recovery, PAL remains focused on continuing efforts to generate more revenues and control costs. Moving forward, he said PAL must “swallow bitter pills” and handle its labor issues with “utmost care” to survive amid the difficult and cutthroat operating environment.

PAL reported a net income of $31.6 million for its peak months April to June this year which is lower by $3.9 million or 11 percent compared with the same period last year.

Despite encouraging numbers on account of the peak travel season, Bautista said PAL is bracing for lower passenger volumes during the airline’s “lean season” usually between August to November.
PAL reported revenues of $426.7 million for the first quarter of its fiscal year ending June, an improvement of 30 percent over the same period total of $327.7 million in 2009.

During the first three months of its current fiscal year, the airline benefited from improvements in passenger traffic as well as cargo. Higher yields generated per seat offering also complemented growth in passenger demand.