PAL posts USD 33.5-M losses in Oct-Dec 2011

Rappler.com
Philippine Airlines' financials continue to bleed

MANILA, Philippines [UPDATED] – Legacy carrier Philippine Airlines’ financials continued to bleed in the aftermath of its intense labor issues amid a competitive industry and skyrocketing jet fuel prices in October to December 2011.

It reported net loses of $33.5 million during the third quarter in its fiscal year. In the same period in 2010, the airline had a net income of $15.1 million.

Its revenues dropped to $386 million during the period, a 3.8% decline from year ago’s $397 million.

It was during this period when its workers staged strikes after they were laid off following a long-contested outsourcing plan that involved spinning off non-core units.

The strikes caused temporary halting of flights.

PAL president Jaime Bautista had already previously warned that the strike had undermined the airline’s financial performance.

“There was a time that our domestic was down 20 flights per day, but now we are back to normal” Bautista said. The airline normally stages 140 fligths a day.

Between September to November, the airline’s load factor for domestic operation was a low-70%, while its international operation was mid-70%.

“That’s why we protected the international market,” Bautista said, adding that international operations contribute about 70% of its passenger revenue and domestic operation, 30%.

“While there were improvements in yields for both passenger and cargo compared  to the same period last year, load factors lagged behind,” the airline said in a statement on Friday, February 17.

Jet fuel

The resulting lower passenger traffic was exacerbated by declining cargo revenues and climbing jet fuel prices.

PAL’s operating expenses reached $419.5 million, up by $34.8 million or 9% over the same quarter in 2010.

Jet fuel costs continued to put pressure on the airline’s bottom line as fuel prices rose to $129.75 per barrel in October to December 2011 from an average of $100.96 per barrel in the same period the previous year.

Fuel accounts for about 50% to 60% of an airline’s operating cost per passenger, and is the 2nd-highest expense next to labor.

The flag carrier warned that the rising cost of jet fuel, which continued to be its single-biggest expense item, continued to loom as a threat to its sustained profitability.

Sale?

Talk has been rife that Philippine Airline chairman Lucio Tan has been entertaining potential buyers for the local airline, including those from the diversified conglomerates San Miguel Corp. and Metro Pacific Investments Corp.

PAL is operating as a legacy carrier amid a market that is increasingly more attractive to budget carriers.

Gokongwei-led budget airline Cebu Pacific has edged out PAL in the domestic market, while new players, including AirAsia Philippines, which has the backing of a larger regional player, is joining the fray.

PAL has previously been unable to deploy some of its wide-bodied aircraft to the lucrative markets, especially in Northern America, after the regulatory bodies of US and EU, citing the government’s lack of oversight on safety issues, banned Philippine carriers from mounting additional or new flights. – Rappler.com

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