PAL income expected to recover sharply

Financial turnaround comes despite weak market
By: Daxim L. Lucas
Philippine Daily Inquirer
1:22 am | Wednesday, June 15th, 2011

Philippine Airlines expects to report a profit for its recently ended fiscal year, marking a sharp turnaround for the flag carrier despite being saddled by persistent labor issues.

In an interview, PAL president and chief operating officer Jaime Bautista said he was expecting the airline’s bottom line to “land in positive territory” for its 2010-2011 fiscal year, which ended on March 31.

“The numbers look good and we are just waiting for the board to approve the figures later this month,” Bautista said, declining to provide more details.

According to airline sources, the Lucio Tan-owned airline will likely report “total comprehensive income” of about $80 million for the previous fiscal year—a turnaround from the $14.3-million loss reported in March 31, 2010.

“We would have beaten the $100-million mark [for last year], had it not been for all the unforeseen events we had in the first quarter [of 2011],” the source said, requesting anonymity because the numbers have yet to be reviewed by the company’s board.

In particular, the official pointed out that the effects of the earthquake and ensuing tsunami on the Japanese market and the spike in fuel prices caused by the unrest in the Middle East and North Africa dampened PAL’s net income toward the end of its fiscal year.

Bautista pointed out that the turnaround in PAL’s financial performance came despite an ongoing dispute with its labor unions, which have forced the airline to temporarily suspend its rationalization program.

“Given that we could save as much as $15 million annually with our planned streamlining efforts, the company could be a better contributor to the economy should we be allowed to implement our plans,” he said.

The PAL chief said the airline had recorded higher passenger traffic to and from key destinations, especially Hong Kong, Singapore, Bangkok and its recently inaugurated New Delhi service.

PAL had also experienced higher passenger traffic between Manila and the cities of Tokyo, Nagoya and Fukuoka, but this market fell off sharply in the wake of the twin tragedies that struck Japan in early March.

The airline’s overall load factor remained at the “high 70s,” Bautista said.

PAL flew about nine million passengers in fiscal year 2010-2011. This was slightly lower than the 9.3 million passengers it ferried in the previous year—a situation he attributed to active measures to shift domestic traffic to PAL’s Air Philippines subsidiary.

The planned shift in focus resulted in PAL reporting an increase in the number of international passengers but a slight decline on domestic routes.

“We didn’t renew the lease on six Airbus A320s for PAL, but instead took in new aircraft of the same type for Air Philippines,” he said.

Next year, however, PAL will add two new A320s to its fleet, plus another two Boeing 777s, which it hopes to finally use for its lucrative trans-Pacific service, should the country finally be upgraded back to Category 1 status by US aviation regulators.

Bautista emphasized the importance of bringing more B777s into PAL’s fleet—and maximizing their use with long-distance flights—as a key factor in improving the airline’s efficiency.

In addition, he said PAL must also be allowed to shed excess staffers and outsource non-core services from firms which can provide the same service more efficiently, similar to other airlines’ operations.