PAL expects losses in FY 2010

Written by Lenie Lectura

Wednesday, 17 March 2010

FLAG carrier Philippine Airlines (PAL) expects another round of net loss for its fiscal year ending March 2010 brought about by the global economic slowdown that continues to depress passenger traffic.

But for the next fiscal year, PAL is looking at improved revenues and passenger traffic, particularly in its overseas routes. The company expects the airliner may break even by end-March next year if the aviation industry’s standard is upgraded to Category 1 from Category 2.

“If the government will be successful in upgrading the category we will almost break even as we will be able to fly to the US using the Boeing 777,” said PAL president Jaime Bautista told reporters on Monday.

The January 2008 decision by the US Federal Aviation Administration (FAA) to downgrade the standard of Philippine aviation prevents PAL from increasing its flights to the US or from switching the type of aircraft being used in the route. The next inspection by the FAA may take place within the year or in 2011.

If the restriction will finally be lifted, PAL said it will expand its presence in the US market by opening new services to San Diego, New York and Chicago. PAL may also mount additional flights to San Francisco if demand is strong.

“Even if the upgrade happens toward the last half of the year we will be happy. We’re hoping that we will recover next year. We are seeing good signs,” added Bautista.

As a result of the category downgrade, PAL has asked aircraft manufacturer Boeing to delay the delivery of four B777 aircraft. “We have made arrangements with the aircraft manufacturer. Originally, we [were supposed to] take delivery of two more [aircraft] this year and [another] two in 2011 but because of the decline in traffic and the Category 2 downgrade, we were able to negotiate with Boeing to defer delivery to 2012 and 2013,” said the PAL executive.

PAL, in its fiscal year ending March 2009, recorded a net loss of $301 million from a net profit of $30.6 million in the fiscal year ending March 2008.

With only two more weeks before the end of PAL’s fiscal year, Bautista said PAL will likely be in the red again. “Last year, we lost so much. We are one of the airlines which were affected by the crisis so we are expecting another loss, definitely smaller than last year,” said Bautista.

From April 2009 to March 2010, Bautista said PAL will report over 9 million passengers, revenues of about $1.5 billion and a slightly lower net loss compared with the year-ago figure.

In the same period, PAL sees a 5-percent decline in the number of recorded passengers who traveled outside the country and a 10-percent increase in domestic passenger traffic.

“PAL, this year, we will be carrying more than 9 million passengers. We will be happy if there will be a 5-percent drop in international passenger traffic, although in domestic we’re expecting a modest growth as [what] we experienced this fiscal year. We have a growth in domestic passenger traffic of more than 10 percent and a minor decline of 5 percent for overseas,” said Bautista.

PAL also wants to resume flights to India. “We wanted to fly from Manila to Bangkok and [then] to India—either Mumbai or Delhi. But we were not permitted to pick up from Bangkok by the Thai government,” said Bautista.

At present, the flag carrier is appealing to the Philippine government to help negotiate landing rights for PAL so it could service the Manila-Bangkok-Bombay route, said Bautista.

“The problem is the landing rights. We are talking to the government to negotiate for landing rights,” said Bautista.

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