PAL to purchase 9 new Airbus A320s

Flag carrier Philippine Airlines (PAL) will purchase nine new Airbus 320s over the next three years as part of a refleeting program aimed at further cementing its dominant foothold in the industry.

PAL president Jaime Bautista said funding for the acquisition of the new aircraft will come from new loans from various export credit agencies. He, however, declined to reveal the amount to be borrowed from these entities.

PAL currently has an operating fleet of 31 aircraft consisting of B747-400s, A340-300s, A330-300s, A320-200s, B737-400s and B737-300s with average aircraft age of 9.01 years.

Bautista said the new aircraft will serve regional and domestic routes.

He said the company has been up-to-date in the payment of its obligations to creditors. From $2 billion in 1999, PAL’s debt is now down to just $1 billion.

Last year, PAL made payments for principal and interest to its creditors in accordance with the terms embodied in the amended and restated rehabilitation plan. From March 1999 to March 2005, PAL paid a total of $1.43 billion to its creditors.

Bautista said the airlines might report lower earnings in the second quarter of its fiscal year ending March 2006 as this is considered a traditionally lean season.

He also expressed concern over surging oil prices in the world markets and the avian flu that might reach the country through migratory birds, saying this could adversely affect PAL’s operations. "The bird flu could reduce our ability to post a higher income," Bautista said.

Bird flu remains a national concern for the government because of the country’s proximity to Indonesia and Thailand where a number of bird flu cases was recorded.

PAL will start flying direct to Bejing on Nov. 11 as part of its plan to boost revenues and take advantage of the growing tourism in China.

In China, PAL already flies to Xiamen and Shanghai. China has consistently been one of PAL’s brightest growth areas in terms of sales.

PAL is also planning to increase flights to San Francisco and Los Angeles. It is also studying the possibility of flying to Seattle.

The company was earlier considering resuming flights to India and European countries to take advantage of the booming information technology industry in India. Indian call centers currently employ 160,000 professionals, who answer calls from the United States-based customers referred to as an information technology-enabled services and business processing outsourcing (BPO) which accounts for a quarter of all software and service exports from India.

On the homefront, Bautista said PAL is looking at additional frequency domestic destinations in Cebu, Davao and other major cities with significant market demand.

From its hub in Manila, PAL serves 43 destinations – 18 domestic and 25 international points.

Amid the escalating prices of crude oil, Bautista said he is hoping that PAL could retain the same profit level as last year. The national flag carrier posted a net income of P1.2 billion for the fiscal year 2004 to 2005 compared with a restated net loss of P643 million the previous level. For the first quarter of its fiscal year ending March 2006, PAL reported a net income of $27.5 million (roughly P1.5 billion), already exceeding its net income during the last fiscal year.