Biggest PH airline deal: PAL orders 54 Airbus aircraft worth $7-B
MANILA, Philippines - Local legacy carrier Philippine Airlines (PAL) announced on Tuesday, August 28, that it had ordered 54 wide and narrow-bodied Airbus aircraft with a list price of $7 billion.
"The orders we are placing with Airbus will play a key role in revitalizing PAL and growing trade and tourism in this country," PAL chairman Lucio Tan said in a statement announcing the deal.
The 54 aircraft orders are part of the first phase of a multi-year refleeting and modernization plan, which involves the purchase of up to 100 new planes.
"Our intention is to buy up to 100 aircraft, 26 of that will be long range, wide body," PAL president Ramon Ang told reporters.
"It's a 'buy.' It's confirmed, we are not leasing aircrafts," stressed Ang.
PAL signed an order with Airbus for the following:
- 34 Airbus A321, single aisle jets
- 10 Airbus A321 neo (New Engine Option), which could provide as much as 20% cost savings in fuel
- 10 A330-300 twin-aisle jets for PAL's regional and mid-range flights, including the planned return to the Middle East
PAL, now under the control of San Miguel Corp, the country's biggest conglomerate, is implementing the refleeting plan largely to reduce fuel and operating costs. Fuel is the single biggest operating expense of PAL, accounting for 45%.
Aircraft makers Boeing and Airbus, who are battling each other for global market share, were both considered for the deal.
Reuters reported that the territorial tension between China and the Philippines was adding a "diplomatic dimension to the talks as Washington seeks to cement a growing alignment with Manila on the issue." There was reportedly significant "commercial and political pressure" on PAL to make a deal with the American aircraft manufacturer Boeing.
However Boeing has reportedly lost the race for the bulk of the 100 aircraft orders from PAL since Europe-based Airbus has more active support from European governments in influencing Asian players.
Nonetheless, PAL has placed a few orders on Boeing planes, with previous aircraft delivery even hiking the country's overall trade imports in June to a 10-month high.
The new Boeing aircraft are reportedly meant for trans-Pacific routes, which are PAL's most lucrative.
PAL is anticipating the restoration of the Category 1 status by the US Federal Aviation for the Philippines. Under the current Category 2 status, PAL could not mount new flights to the US and change out its current and aging Boeing 747-400s and A340-300s flying direct flights to the US West Coast.
PAL currently has 8 Boeing aircraft (three B777-300ERs and five 747-400s) and 31 Airbus jets (four A340-300s, eight A330300s, 15 A320-200s, and four A319s).
"We still have about 46 aircraft to go, we have the option about whichever types of aircraft to go. The capacity of the initial 54 aircraft is already more than what Philippine Airlines and Air Philippines today's capacity. So grabeng expansion ito," said Ang.
Ang said that the first slug of new planes would be delivered in January of 2013 and would likely include, "4 to 6 A330s and 6 to 8 A321s."
He added, "We hope we should be able to get these aircraft delivered within the next 3 years but we cannot tell you the exact number of the deliveries."
The plane-buying binge will come at a price but Ang said the company was very capable of shouldering it, thanks to the capital San Miguel infused in PAL after acquiring a minority but controlling stake last April.
"Earlier, a couple of months ago when we were invited by Lucio Tan, we put in US$500 million and with that the balance sheet of Philippine Airlines has been strengthened. That equity is more than enough to do this deal," Ang said.
"With the good operation results coming in in the next couple of months, maybe we don't even have to add more equity and these $500 million should be able to handle the equity requirement for the 100 aircraft," he added.
In a mix of Filipino and English, he added, "If there is a need to increase the capitalization, not that we are not doing well financially, we the shareholders will put in more money."
The Lucio Tan-chaired airline recently announced a net income of P489 million in April to June, a significant turnaround from a year ago's loss of P475 million. - Rappler.com