MANILA - Lucio C. Tan-led Philippine Airlines (PAL) said it was expecting "dark clouds" ahead after recording a significant decline in first-quarter revenues.

In a statement yesterday, PAL said total revenues fell by 12% to $394 million from April to June, its fiscal first quarter, from $446.9 million last year.

The airline said the drop in revenues had to do with a decrease in passengers brought about by fears over influenza A(H1N1), as well as weakening airline demand globally.

"This was due mainly to the 25% decrease in passenger revenues of $95 million, as passenger traffic and yields continue to decline. Other international carriers are also reporting weakening demand, with no sign of an immediate economic recovery. Fears over the spread of Influenza A(H1N1) are also contributing to the falling load factors of PAL as well as other global airlines," the statement read.

The airline said total expenses in the first quarter amounted to $358.5 million, down from last year’s $401.8 million, due to lower fuel prices.

The flag carrier said that for second quarter "PAL, like all the other global airlines, is facing the specter of extremely weak passenger traffic and cargo demand amid the protracted world economic meltdown."

It also pointed to lower projections for the airline industry by the International Air Transport Association. All member airlines are projected to lose a total of $9 billion, PAL noted.

The airline said it was implementing initiatives that would cut costs further, without going into details.

PAL also said it was aiming to boost revenues with reconfigured aircraft and enhanced cabin amenities, as well as an upgraded Web site.

In a notice sent to the PAL union on Sept. 9, PAL president Jaime J. Bautista said certain services needed to be outsourced or spun off "to prevent the company from incurring further losses and to preserve its remaining assets."

The services to be initially outsourced by Nov. 15 include catering, passenger handling, ramp handling, and cargo-handling operations, the notice said.

For the fiscal year ending March, PAL lost $301.4 million as a result of higher expenses brought about by the cost of operating more flights and last year’s record-high fuel prices.
Revenues went up slightly to $1.6 billion but were not enough to cover operating expenses of $1.9 billion, up from $1.539 billion the previous year. Total liabilities also went up by almost a fifth to $869 million.