PAL Holdings ends 1st year under SMC with P4-B losses
One year after conglomerate San Miguel Corp acquired controlling stake in Philippine Airlines, the legacy carrier posts lower losses

LESS LOSSES. Philippine Airlines trims losses under San Miguel management. Photo by AFP

MANILA, Philippines – The parent firm of legacy carrier Philippine Airlines (PAL) has trimmed its annual losses to P4.133 billion for fiscal year ending March 31, 2013, marking the carrier’s first full year under the management of conglomerate San Miguel Corp.

In its annual report submitted to the Philippine Stock Exchange on Monday, July 15, PAL Holdings Inc attributed to lower operating costs the P246 million difference or 6% decline from the P4.379 billion net loss incurred in fiscal year ending March 31, 2012.

San Miguel acquired minority but controlling 49% stake in PAL Holdings in April 2012. The group of tycoon Lucio Tan holds the remaining 51%, which is up for sale.

Under San Miguel, PAL embarked on a major re-fleeting program aimed at acquiring 100 aircraft, meant to reduce fuel costs, which is the single biggest item in the airline’s operating cost structure.

Below are more details of the PAL’s financial performance during the fiscal year:

  • Revenues slipped by P30.4 million to P74.022 billion from P74.053 billion due to stronger peso. 
  • Passenger revenues reached P62.2 billion as it flew 7.62 million international and domestic passengers 
  • Cargo revenues reached to P5.35 billion
  • Other revenues from the lease income recognized from aircraft operating lease arrangements with an entity under common control and ancillary revenues jumped 15.9% to P6.468 billion
  • Flying operations expenses dropped 3.5% to P45.01 billion from P46.65 billion due to the 5.4% decline in fuel expenses as average jet fuel prices went down to $131.73 per barrel from $132.97 per barrel 
  • Maintenance costs rose 11.6% due to higher aircraft, engine, and component repair costs, as well as increased costs incurred for various consultancy, legal and management services increased general and administrative expenses.
  • Total assets jumped 39% to P99.86 billion from P71.78 billion due to the additional aircraft 
  • Total liabilities increased 22% to P86.1 billion from P70.78 billion

Foreign exchange

PAL Holdings said it suffered when the peso strengthened to P41.6379 per $1 this 2013 from P43.1203 in 2012.

Had the exchange rate remained at the 2012 level, passenger revenues would have increased by P1.35 billion while cargo revenues would have gone up by P137.1 million.

In all, the airline booked a comprehensive loss of P496 million due to the effect of foreign exchange translation.

On the other hand, the strong peso helped cut the airline’s expenses by 2.1% to P77.76 billion from P79.39 billion.

“This had the effect of reducing flying operations, aircraft and traffic servicing, passenger service and reservation and sales costs offset in part by the increase in maintenance and general and administrative expenses,” PAL Holdings added.

EU lifts ban

Trading in PAL Holdings resumed in the wake of the European Union’s decision to allow PAL to fly again to the 28-nation bloc.

The EU lifted the ban on PAL, citing the Philippines’ efforts in addressing serious air safety concerns. –

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