PAL says outsourcing key to new investors

Top Business News

Published : Saturday, October 01, 2011 00:00
Written by : DARWIN G. AMOJELAR SENIOR REPORTER

PHILIPPINE Airlines (PAL) on Friday said its outsourcing plan is key to attracting new investors, as the flag carrier braced for second-quarter losses mainly because of costlier jet fuel and weak passenger demand.

“We are doing this for the survival of the airline and to make it attractive to new investors,” Jaime Bautista, PAL president said on the sidelines of the stockholders’ meeting of parent PAL Holdings Inc.

He said the airline expects to save $50 million a year from the outsourcing of three non-core businesses, namely catering, ground handling and call center reservations.

The outsourcing plan takes effect October 1. Bautista told reporters that the July to September period is a losing quarter for the airline because of the lean season.

He also blamed the expected loss on rising jet fuel prices, which account for about 40 percent to 60 percent of the airline’s expenses.

PAL reported a net income of $28.2 million for the second quarter of its fiscal year in 2010, but incurred a net loss of $10.6 million in the April to June period, the first quarter of its fiscal year ending March.

This was a reversal from the $31.6-million net income in the same period last year. Revenues this year amounted to $454.1 million, up by 6 percent year-on-year.

Bautista said the company is “cautiously optimistic” that it will continue its recovery this fiscal year, but added that the disruption of its operations brought about by a labor union protest would affect its bottom line in the second half.

PAL Employees Association is protesting the flag carrier’s outsourcing plan, which would result in the retrenchment of 2,600 employees alongside savings of $10 million to $15 million a year for the carrier.

PAL has contracted Sky Kitchen for its catering business, Sky Logistics for airport services, and SPi Global for call center reservations. SPi Global is a unit of Philippine Long Distance Telephone Co. (PLDT).

PLDT and other companies chaired by Manuel Pangilinan recently formed an aviation firm, fueling rumors that the country’s biggest telecom concern is vying for control of PAL. PAL Holdings and Metro Pacific Investment Corp. had since denied they were in talks for the sale of the airline to the latter.

Both PLDT and MPIC are controlled by Hong Kong-based First Pacific Co. Ltd.