PAL plans $200-M loan to upgrade fleet

Manila Bulletin
April 19, 2011
By Lee C. Chipongian

MANILA, Philippines – Flag carrier Philippine Airlines (PAL) plans to raise up to $200 million or P8.5 billion via a syndicated loan this year to partly fund its ongoing re-fleeting program, central bank sources said.

The Lucio Tan-owned PAL has informed the Bangko Sentral ng Pilipinas (BSP) of its borrowing plans to finance the acquisition of new fleet. The syndicated loan with banks will partly fund the airline's ongoing expansion program which started in 2009 and will include purchases until 2013.

Sources said with the loan, PAL will purchase one 370-passenger, long-range Boeing 777-300ER jet aircraft which will be delivered by June next year. The plane costs about $284 million.

According to earlier reports, PAL signed a deal with Boeing in 2006 for a re-fleeting program and bought two Boeing 777-300ER aircraft in 2009 for its Manila-US and Manila-Canada routes/flights plus two more planes for delivery this year and in 2012. The first Boeing was purchased in 2009. The two-engine long-haul plane has 42 fully flat business class seats and 328 economy class seats.

A reported disclosure to the Securities and Exchange Commission said PAL posted an income growth in the third quarter last year of $15.1 million, reversing a loss recorded in the same period in 2009.

PAL President Jaime J. Bautista was quoted as saying he was still cautiously optimistic about income growth this year. In 2010, the airline was able to manage costs despite jet fuel price hikes and labor issues because of a significant reduction in maintenance expenses. Expenditures were reduced by 36 percent in the first half of 2010 alone. Fuel expenses account for 40 percent of PAL's budget.

PAL, the oldest airline in the region, has a current fleet of 36 aircraft, including two Boeing 777-300ER, five 433-passenger Boeing 747-400, and four 264-passenger Airbus A340-300. It serves 19 local destinations and 24 destinations in Southeast Asia, Middle East, Oceania, East Asia and North America.

The BSP regulates foreign loans of both the public and private sectors and imposes a ceiling or cap for foreign borrowings every year. Corporations regularly inform the BSP of its foreign loan program whether they intend to source the foreign exchange locally or not, or even if they do not intend to register the transactions with the central bank.