PAL sees clearer skies ahead as recovery holds

First posted 00:49:58 (Mla time) July 19, 2010
Paolo Montecillo
Philippine Daily Inquirer

MANILA, Philippines—Flag carrier Philippine Airlines (PAL) is seeing clearer skies ahead as a result of a steady, albeit modest, recovery in the local and international aviation market.

PAL president and chief operating officer Jaime J. Bautista said the company has experienced a slight rebound, in line with the recovery of airlines around the world as a result of the improvement in global economic prospects.

The resulting improvement in the company’s cash flow, Bautista said, helped PAL repay $46.5 million in loans that matured last month.

“We were able to pay that entire amount because we have implemented a lot of initiatives to raise cash and reduce costs,” he told reporters.

“The projection of the industry is a better 2010 and 2011. We are seeing a semblance of the market moving toward that direction,” Bautista said.

But he said the Lucio Tan-led firm would remain cautious due to the several challenges the local airline industry continued to face.

“We don’t want to call it a full recovery. We still have a lot of problems. There is the category 2 status and the European blacklist,” he said.

Bautista was referring to the US Federal Aviation Authority’s downgrade of the Philippines to category 2 status due to concerns over the country’s air safety standards. The downgrade bars Philippine carriers from expanding operations in the United States, which only affects PAL, being the only airline that flies to North America.

The European Union has also put the Philippines on a blacklist of countries whose airlines are banned from flying to the continent due to poor safety procedures.

“Although the market is improving, we still have to look for ways to cut costs and boost revenues,” Bautista said.

One way the company plans to reduce expenses is by sub-contracting its non-core tasks, including catering and airport services, to third party providers.

The labor department earlier ruled the controversial move, which will affect close to 3,000 employees, as a legal exercise of management prerogative. PAL workers have appealed the decision.

PAL posted a $40.2-million net loss in the April-December period of 2009, which is the first three quarters of the company’s fiscal year. Bautista said PAL would release its full-year financial results this week.