MANILA - After announcing a plan to reduce workforce and international flight capacity to cut costs, flag carrier Philippine Airlines (PAL) will boost its domestic operations with new routes and destinations.

In a statement, the Lucio Tan-owned company said it will introduce a new Cebu-Davao and Davao-Cebu service using the wide-body Airbus A330 starting September 1.

Its budget airline, PAL Express, will add another daily Cebu-Iloilo-Cebu flight using the 76-seater Q400 turboprop aircraft. PAL Express will also launch daily flights to Surigao and a twice-a-day service to Naga.

PAL, which used to dominate local and international flights among local aviation players, now face stiff competition, especially from budget airlines.

Local budget carrier Cebu Pacific, for instance, has been able to mount 1,655 weekly flights as of June this year, higher than PAL's 1,566.

Cebu Pacific has also been aggressive in beefing up its own fleet with new and less costly to maintain Airbus planes.

Cost cutting

Last week, PAL announced it was right-sizing its workforce and trimming flight capacity to match demand due to heavy financial losses stemming from the global crisis.

PAL president and chief operating officer Jaime Bautista said they would reduce manpower costs, which accounts for 18% of the airline's total expenses, to single-digit level. Flights to the US, Canada, Japan, Hong Kong and Australia, meanwhile, would also be reduced.

For the fiscal year ended March 2009, the airline posted a $301.4 million net loss, a sharp reversal of the $30.6 million net income it recorded in the previous fiscal year.

Revenues grew 14% to $1.63 billion from $1.5 billion due to acquisition of additional aircraft and growth in the domestic market.

However, the cost of operating more aircraft, including maintenance and fuel, raised expenses to $1.9 billion from the year-ago level of $1.5 billion. Fuel comprised 44% of the airline's operating expenses.