August 28, 2009
Legacy carrier Philippine Airlines intends to slash more than a third of its 8,000-strong workforce, reduce its international flight frequencies, and outsource parts of the airline business to cope with a sharp decline in travel demand coupled with higher than expected operating cost despite registering modest net profit of $35 million for the first quarter of 2009, regarded as peak period for the airline, its president said on Thursday.Jaime Bautista said its profit is expected to dissipate in the next 3 quarters as its yield continue to decline amidst dwindling traffic despite reporting lower fuel bills as recorded during the same period last year. PAL incurred a $301.4 million net loss for its 2008-2009 fiscal year ended March and Bautista said the carrier "will be happy" if it breaks even in the current fiscal year.
"But based on the results of operations for the first three months, traffic remains weak," he said. The airline reported lower yields particularly to its bread and butter destinations in the United States, Canada, and Australia.
To trim costs, Bautista said the airline is planning to transfer several operations to third parties and sell the remaining Boeing 737 they owned to raise some $8 million to $10 million.
"We are considering outsourcing the non-core business of PAL ... like catering, reservation, just like what other airlines are doing," he said saying further that they are one of few Asian carriers that still do their own catering and ground handling. The airline will likewise hold plane purchases except for Boeing 777-300ERs due for delivery this year.
"We are considering outsourcing the non-core business of PAL ... like catering, reservation, just like what other airlines are doing," he said saying further that they are one of few Asian carriers that still do their own catering and ground handling. The airline will likewise hold plane purchases except for Boeing 777-300ERs due for delivery this year.
PAL has reduced its total international flight frequencies by 7 percent and plans to cut further flight frequencies to the United States, Canada and Australia to match demand on said route.
Flights to Los Angeles are now down to seven per week from nine, San Francisco down to seven from eight per week, while Vancouver flights will have five per week from daily starting next month. Flights to Japan, Australia and Hong Kong will also be trimmed to reduce the cost of operations.
”We were really affected with the long haul, instead of the medium haul flights,” he stressed, adding that "the airline would rather add more domestic flights in several destinations because of higher traffic volume.” Bautista added.
Meanwhile, as the number of international passengers slipped by 8%, the airline's domestic passengers rose by 17% in the first quarter prompting the airline to upgrade service to some key destinations vacated by its subsidiary low cost airline Air Philippines, which decided to suspend flight operations effective September 1 as part of the organizations operational realignment plan. Air Philippines is managed by Philippine Airlines, and both airlines are owned by Lucio Tan, the second wealthiest man in the Philippines based on the Forbes magazine list.
For this reason, all flights of Air Philippines will be serviced either by PAL and PalExpress starting with daily flights from Manila to Iloilo and for Cebu-Davao and Davao-Cebu destinations that will also be added to PAL's domestic schedule using the wide-bodied Airbus A330 on a triangular route while Surigao will be serviced with Airbus 319 later. PALExpress will handle daily flight to the Cebu-Iloilo-Cebu sectors using the 76-seater Q400 turboprop aircraft and which will grow to twice daily before yearend, while twice-a-day service to Naga will be re-introduced on the Q400. Daily flights to Surigao will be temporarily service by PAL Express in the meantime.
Flights to Los Angeles are now down to seven per week from nine, San Francisco down to seven from eight per week, while Vancouver flights will have five per week from daily starting next month. Flights to Japan, Australia and Hong Kong will also be trimmed to reduce the cost of operations.
”We were really affected with the long haul, instead of the medium haul flights,” he stressed, adding that "the airline would rather add more domestic flights in several destinations because of higher traffic volume.” Bautista added.
Meanwhile, as the number of international passengers slipped by 8%, the airline's domestic passengers rose by 17% in the first quarter prompting the airline to upgrade service to some key destinations vacated by its subsidiary low cost airline Air Philippines, which decided to suspend flight operations effective September 1 as part of the organizations operational realignment plan. Air Philippines is managed by Philippine Airlines, and both airlines are owned by Lucio Tan, the second wealthiest man in the Philippines based on the Forbes magazine list.
For this reason, all flights of Air Philippines will be serviced either by PAL and PalExpress starting with daily flights from Manila to Iloilo and for Cebu-Davao and Davao-Cebu destinations that will also be added to PAL's domestic schedule using the wide-bodied Airbus A330 on a triangular route while Surigao will be serviced with Airbus 319 later. PALExpress will handle daily flight to the Cebu-Iloilo-Cebu sectors using the 76-seater Q400 turboprop aircraft and which will grow to twice daily before yearend, while twice-a-day service to Naga will be re-introduced on the Q400. Daily flights to Surigao will be temporarily service by PAL Express in the meantime.
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