Philippine Airlines loses $18 million on first half

While Cebu Pacific profit soars.

November 15, 2009

Long Haul Hurts

Flag carrier Philippine Airlines loses its $35 million gains made in the first quarter of its fiscal year after registering an operating loss of $68.5 million as compared to the $30.1 million loss it suffered for the same period last year, a disclosure to the Philippine Stock Exchange said.

The airline disclosed Friday that

it managed to reduce a total comprehensive loss to $18.6 million from April to September, compared with $113 million for the same period last year, mainly attributed to one-time gains and reduced fuel prices, but some of its operating cost remained high prompting it to seek dramatic reduction of its workforce.

Meanwhile, its generated revenue dropped 17 percent to $716.4 million as compared with last year’s figure of $857.7 million mainly because of lower yields as it tried to offer international seats at a discount to fill its aircraft.

Already, the airline introduced reduction of capacity to its trans-pacific and Australian route to reflect the actual demand of the market which is still affected by the global downturn. It derived most of its revenue on international flights accounting almost 70 percent of its total revenue collection. Operating revenue for the first half of the year totaled $618.7 million, down by 25 percent from $825.3 million.

According to the International Air Transport Association (IATA), the airline industry is showing signs of recovery as there has been no further deterioration of business activity during the last eight months of the year, but still there was no positive development on legacy carriers such as Philippine Airlines where its international traffic have yet to rebound this year.

Passengers travelling in front cabins represent less than 10 per cent of the total number, but they typically contribute 30-40 per cent of an airline's revenue. Philippine Airlines premium segment or business class seat was the worst hit during the financial crisis as banks and corporations slashed jobs and business travel budgets to and from the Philippines while fewer OFW's returned home during the period.

A recovery in this segment is considered critical for Full Service Carrier (FSC)'s such as Philippine Airlines revenue generation. Increase of its passengers were mainly noted on its domestic service which while profitable generates the lowest yield and accounting no more than 30 percent of its revenue portfolio.

Philippine Airlines joined industry leader Singapore Airlines in the red with losses at $114 million. But the biggest loser in the industry is Japan Airlines which is forecasting to lose more than $1-billion in 2009.

The airline is expecting a traffic and performance rebound on its third quarter as it capitalize on the approach of the holiday season, a period where most Filipinos travel back home to visit their relatives. It however estimates that yields are unlikely to return to normal as other airlines compete to fill its seats as well.

PAL said that it will accept delivery of its first wide-body jet after 14 years in November 19, a Boeing 777-300ER which is the most fuel-efficient twin-engine airliner in the world having the most spacious passenger cabins for its class. It is scheduled to fly to Hong-Kong initially but will be flown eventually to Singapore, Vancouver, Sydney and Melbourne pending the FAA category downgrade. Its second triple seven is scheduled to arrive early next year while the four remaining type will join the fleet starting 2012.

Cebu Pacific registers $37 million profit

On the other hand, low cost carrier Cebu Pacific Airways registered a net profit of $37 million dollars in contrast to the luckluster performance of its rival Philippine Airlines, which managed to register gross revenue amounting to $345 million dollars for the first three quarters of its calendar year, according to its financial statement filed with the Securities and Exchange Commission (SEC).

The airline said that additional routes, increase in flight frequencies and capacity hike due to the delivery of additional aircraft to its growing fleet of Airbus 320's and ATR 72's boosted the airline‘s financial performance, swinging to a profit of P1.78 billion against a net loss of P1.87 billion($39 million) it registered a year ago.

Zest takes the third spot and growing fast.

Meanwhile, Zest Airways reported a growing number of passengers that it carried during the first nine months of the year as it slowly eat the domestic market pie of both Philippine Airlines and Cebu Pacific. It has yet to submit the official figures to CAB but the airline is already the third biggest carrier in the country based on number of passengers carried, surpassing the capacity of Air Philippines which hold the number three spot for quite sometime, an airline statement said.

Airline President Alfredo Yao is already pleased with the performance of his fledgling airline as it recently opened another international point to Hong-Kong from Clark in October 24 and the route so far has been operating with impressive loads that some of its flight were already fully booked. It will re-start flying to Seoul from Kalibo again on December 4 with the delivery of another brand new A320 from Toulouse, France.

“Our A320s provide our passengers with added space and comfort. It has proven to be reliable and operate at cost-efficient levels,” says airline CEO Alfredo Yao.

Zest Air’s Hong Kong and Seoul trip will make use of brand-new 162/168-seater Airbus 320 which offers the most comfortable legroom from a single-aisle plane coming from a low cost service operator with enough legroom and space to move.

The airline is already fast gaining a foothold in the aviation industry as the better transport alternative which created a buzz among business and budget conscious travelers as an airline of choice with far better service than its rivals.