PAL expects profitable 2015 even as lean season sets in

Chris Schnabel
PAL expects profitable 2015 even as lean season sets in

EPA

PAL also further clarifies its position on the PH-UAE air talks

MANILA, Philippines – Buoyed by a strong showing in the first half of the year, flag carrier Philippine Airlines expects to improve on its recent return to profitability in 2015 even as the lean season sets in, said PAL president Jaime Bautista.

“We’re expecting a profitable year because we have already reported a net income of $138 million (P6.45 billion) from January to July of this year. This is much higher than the figure from the period last year so it’s already a big improvement,” Bautista said at the airline’s general stockholders meeting on Thursday, August 27.

He added that PAL is expected to sustain its profitability this year although there would be months when it is anticipating losses because of the lean season.

“August to November are months wherein airlines traditionally lose money,” Bautista said.

At the meeting, PAL formally reported to shareholders a $20.7 million (P967.7 million) comprehensive income for the year 2014.

Bautista shared that a full-year net income of about $100 million (P4.66 billion) in 2015 is feasible as despite the lean season, “December is always profitable.”

PAL also announced at the shareholders’ meeting that its North American operations would undergo a slight restructuring.

It will start flying its Boeing 777-300ER to New York in October in response to increased demand and competition on that route, instead of the Airbus 340-300 it currently uses 3 times a week via Vancouver.

There will also be changes to the schedule of some of PAL’s flights to Los Angeles, San Francisco, and Vancouver and these will be announced accordingly, Bautista said.

CHARTING A COURSE. PAL President Jaime Bautista (enter) leads the airline management's team in explaining PAL's plans for the rest of 2015. Photo by Chris Schnabel / Rappler

Minimizing losses

Bautista outlined a number of measures to minimize PAL’s expected losses during the lean season, among them, limiting its flights during that period.

“We have to see to it that we mount flights only as needed. We need to manage capacity so there are cases wherein we will need to reduce flights to certain destinations,” he said.

For instance, PAL is reducing its flights to Los Angeles in September from 11 to 9 times a week for a certain period until peak season in December, Bautista explained.

“It’s the same with other destinations, Bautista added. “For Vancouver, we’re presently reviewing the number of flights because right now, there are 11 flights a week.”

These measures will be done to save on operational cost, but Bautista reiterated, “We’ll see to it that we’ll be able to fly our passengers who have already booked with us.”

To entice more passengers, PAL will also be holding a seat sale starting Friday, August 28, to Sunday, August 30.

UNFAIR COMPETITION? The Philippines' major airlines are opposing again the request of UAE counterparts for additional flights between the two jurisdictions. Illustration by Raffy de Guzman / Rappler

Not advocating protectionism

PAL also clarified it is not asking the government to adopt a protectionist stance against the United Arab Emirates (UAE) flagged airlines such as Etihad, Emirates, and Qatar Airways, in their bid to acquire more flight entitlements on the Manila to UAE route. (READ: PAL, Cebu Pacific oppose anew UAE air talks)

“We’re not here to advocate protectionism. We’re happy to fight competitively but of course the fight had to be fair and we’re making a special exception in the case of the UAE carriers wherein we’re asking the government to hold the line and not hand out additional entitlements,” PAL said.

The controversy surrounding UAE carriers seeking additional entitlements stems from allegations that they are heavily subsidized by their national governments, resuting in unfair competition to other carriers. This has prompted an investigation by the US government.

There are 28 flights per week that Philippine carriers are allowed between Manila and the UAE, Bautista said. “PAL, alongside Cebu Pacific, are operating only 21 per week. So it’s a demonstration that the market cannot sustain additional demand.”

“If the market demand were strong, then we would fight each other for the additional 7 routes,” Bautista explained.

He said that PAL passengers are those who travel between the two countries, while the UAE carriers carry passengers beyond Dubai and Abu Dhabi.

Additional entitlements given to UAE airlines, Bautista explained, could result in the dilution of the passenger loads in PAL’s flights to London, because these airlines can carry passengers from Manila to Abu Dhabi or Dubai, and extend to Europe and even the US.

“The figures that we got is that Emirates carries less than 30% of passengers who stay in the UAE. So around 70% of  its passengers are those that fly beyond Dubai. The other carriers are carrying passengers in the same percentages,” Baustista said.

“Going by those figures, it shows that PAL and Cebu Pacific are actually carrying more passengers between the two countries so that’s why we think there is an overcapacity in that market,” he added

Bautista also clarified that PAL has not filed a formal complaint with Philippine government regulators, but has only given them its position on the matter. PAL has not yet received a formal reply. ­ – Rappler.com

 $1 = P 46.75

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