PAL seen ending 2011 in the red

Philippine Daily Inquirer
December 19, 2011
By Paolo G. Montecillo

MANILA, Philippines—Flag carrier Philippine Airlines is expected to end the year in the red due mainly to labor woes and high fuel prices.

PAL president and chief operating officer Jaime J. Bautista said making matters worse for airlines across the world were the economic woes in the United States and Europe and the natural crises in Japan, which have dampened demand from developed markets.

“Our numbers are down by an average of 20 percent for the months affected by the strike,” he told reporters.

Bautsita said the strike by PAL Employees’ Association (Palea) in late September, in protest of the company’s plan to retrench 2,600 workers, forced the airline to scale down flights for several weeks.

The workers who went on strike have since been retrenched, but the sub-contractors hired by PAL have not been able to replace the fired employees.

Bautista said the airline had been suffering from the impact of the strike since October and this might continue up to early next year.

He said the unannounced strike by Palea had led to a slowdown in bookings, with many potential customers scared off by the possibility of further disruptions in flights.

As a result, he said the company’s average load factor had slumped to about 70 percent, which meant that close to a third of seats in every PAL flight is vacant.

Most affected are PAL’s domestic flights, which make up a third of PAL’s operations. Demand for international flights remained stable, Bautista said.

Last month, PAL, owned by taipan Lucio Tan, reported a net loss of $39.4 million for the three-month period ending September, a reversal from its $27.6-million profit a year ago.

The cost of fuel, which accounts for about 40 percent of the company’s expenses, also continues to threaten PAL’s profitability.

“The jet fuel price assumption in our budget is around $120 per barrel. Right now, it’s at about $126 per barrel,” he said.