The Philippine Star
By Mary Ann Ll Reyes
October 01, 2011 12:00 AM
MANILA, Philippines - Philippine Airlines (PAL) president Jaime Bautista said yesterday that neither the company nor its controlling owner, business tycoon Lucio Tan, has received an offer from either the group of Manuel V. Pangilinan or San Miguel Corp. to acquire the airline.
“No investor in his right mind would invest in PAL at this time. A lot of things need to be done in order to make PAL attractive to investors. We have to change the way we do business. For instance, we have to streamline our operations and we need the right manpower complement. Any investor would ask what is our number of employee per aircraft and employee per passenger served. Right now, our numbers said are high compared to other airlines,” Bautista said on the sidelines of PAL Holdings’ annual stockholders’ meeting yesterday.
He emphasized that neither PAL Holdings, which owns 85 percent of PAL directly and indirectly, nor Tan is in talks for possible investments with any party.
PAL, currently beleaguered by labor unrest, is still optimistic on ending its current fiscal year with a profit, despite a loss suffered in the first half.
Bautista said for the first quarter of the current fiscal year (April 1 to June 30, 2011), the company suffered a $10-million loss, despite the fact that the first quarter is traditionally profitable.
“First quarter was a loss. In the same period last year, we made money. The second quarter is always a loss because it’s the lean season,” he said.
The first quarter was characterized by high fuel prices and depressed demand for travel especially in international routes.
He, however, said the third and fourth quarters are traditionally profitable months. “We are optimistic that we will able to recover during the second half and offset the losses during the first half.”
Bautista said they are cautiously optimistic that “we will continue our recovery this fiscal year.”
Part of PAL management’s optimism is due to the implementation of the company’s outsourcing of three non-core activities – catering, ground handling and reservations to third-party providers. A cost reduction of about $15 million is expected to be realized from outsourcing the three activities.
Despite its current problems, PAL continues to expand its aircraft fleet, with two Boeing 777 worth $200 million each and two Airbus 320 (on operating lease) scheduled for delivery next fiscal year, plus two more B777s in the succeeding year.
Bautista said the first two B777 deliveries are being taken in anticipation of the US Federal Aviation Authority (FAA) upgrading the Philippines back to Category 1 from its current rating of Category 2.
“President Aquino has instructed our Civil Aviation Authority (CAAP) to do everything to get the country out of Category 2 by the first half of next year,” he revealed.
The Category 2 rating has prevented Philippine carriers from mounting new flights to the US. Most of the issues raised by the US FAA involved lack of technical and qualified people and systems.
The European Union has also blacklisted the Philippines due to basically the same issues raised by the US.
Bautista told the stockholders that although there was an improvement in the performance of the aviation industry this period, the airline business is cyclical in nature. “Thus, efforts exerted last year in reducing costs and initiating revenue-generating programs are continuously being implemented and enhanced. Yet again, more problems plague the industry. The ongoing political crisis in the Middle East has increased oil prices, with jet fuel averaging $123 per barrel for the seven months this year compared to the same period’s average of $87 per barrel last year,” he said.
He added that the effect on demand for travel caused by the decline in the economies of both the US and Europe, the growth and expansion of low cost carriers especially in the Asia Pacific region, and the terrorism threat pose a greater challenge for PAL’s continued financial recovery.
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