Airline posts over P12-B losses at fiscal year-end

MANILA - Unlike most firms and individuals, the parent company of Philippine Airlines (PAL) is currently battling the effects of a different storm: an economic one.

The brunt of the economic crisis on the global airline industry was reflected in the financials of PAL Holdings Inc., which reported a total comprehensive loss of P12.26 billion for fiscal year ending March 31, 2009.

These losses are the holding firm's second in a row after losing P528.54 million in the previous year.

Just last week, PAL reported a 12% drop in total revenues from April to June, its first quarter for fiscal year 2009. Given this, PAL Holdings President Jaime Bautista said the airline's performance is likely to slow down in the succeeding quarters due to weak international demand.

"Management has taken initiative to reduce costs and boost production to survive. We're hoping for improvement next year," Bautista told reporters at the sidelines of the company's annual stockholders' meeting on Wednesday.

Early this month, the International Air Transport Association (IATA) said the global airline industry is likely to lose $11 billion this year due to the economic crisis, higher than its previous forecast of a $9-billion loss. IATA said this would be driven mainly by lower passenger and cargo traffic this year, which the group expects to drop by 4% and 14%, respectively.

For 2008, the industry group estimated a $16.8-billion loss.

Cost-cutting measures

The bleak outlook for the airline industry has driven PAL Holdings to support the airline's moves to cut costs and to boost production.

"We are currently reviewing our entire organizational set-up. We want to make PAL lean and mean so it will be agile and flexible enough to adapt to the new economic climate," Bautista said.

PAL is offering early retirement packages to its employees until end-October as it plans to reduce its 8,000-strong workforce by at much as 10% this year. At present, the company said manpower accounts for 18% of the company's total expenses.

"We now have lower capacity, so we need to reduce manpower," Bautista explained.

Bautista made it clear, however, that the airline is not urging PAL employees to take a one-week leave per month starting August 17 until the third week of December, as claimed by one of abs-cbnNEWS.com's readers.

"It was one of the plans discussed before (internally), but it didn't push through. We ended up offering early retirement packages instead," he said.

Last August, abs-cbnNEWS.com received a letter from one of its readers about PAL's cost-cutting measures. The reader, who claims to belong to PAL's Network Management and Telecommunication Services (NMTS) department, said that they were being forced to take a forced leave without pay until December.

Aside from reducing its workforce, Bautista confirmed that PAL will outsource its non-core services to prevent the company from incurring further losses.

In a notice sent to the PAL union early this month, he said services to be initially outsourced on November include catering, passenger handling, ramp handling, and cargo-handling operations.

New planes

As it continues to struggle from losses and higher expenses, PAL is expected to take delivery of 6 new planes in the next 4 years. The airline is set to add a Boeing 777-300 extended range plane to its existing fleet in November.

The new B777-300 aircraft is one of the 2 planes on a lease agreement, with the other one set to be delivered in January next year. The other 4 planes, meanwhile, are direct purchases and are set to be delivered between 2012 and 2013.

Each of the 4 twin-engine planes has a list price of $257 million to $286.5 million, depending on interior configurations. Costs for the 2 aircraft under lease agreements were not disclosed.

According to Bautista, PAL's cost-cutting measures should not in any way "infringe on the quality of PAL service to its customers and passengers," thus the airline's purchase of new aircraft.

"We are also in the final stages of refurbishing our current fleet of wide-bodied aircraft to feature a bi-class configuration, new seats, and state-of-the-art entertainment systems. All these are being done to better serve our customers," Bautista said.