The profit represented a hefty 63-percent increase over the previous fiscal year’s net income of $17.6 million. It was the airline’s most profitable year in over a decade. PAL last reported a surplus exceeding $20 million in 1993, when it booked $40.5 million.
"It was a banner year for PAL as the troubles that confronted the industry fell short of upsetting its bottom line," Tan and Bautista told stockholders during their annual meeting.
For the first time, PAL reported its financial statements in US dollars, the airline’s functional currency. The move, which complies with Philippine Financial Reporting Standards and Generally Accepted Accounting Principles, aligns PAL’s reporting process with the global nature of its business, sans the distortion caused by exchange rate movements, the airline said.
Revenues expanded by $160 million or 15 percent on account of strong performances by both passenger and cargo businesses. Virtually all key performance indices, including those measuring capacity, traffic carriage and load factor, improved from year-ago levels.
PAL was buoyed by economic recovery in its biggest markets – the Philippines, the United States and Japan - which spurred air travel in these countries, as well as by inroads in booming new markets, such as China. In November 2005, the airline launched service to Beijing, its third point on the mainland.
However, expenses also jumped by $153 million or 14 percent to a total of $1.22 billion, due largely to the unprecedented rise in the price of aviation fuel. The benchmark Mean of Platt’s Singapore (MOPS) averaged $71.50 per barrel compared to $49.82 per barrel just a year earlier, an increase of 44 percent.
"While the airline industry anticipated oil price spikes, having grown
accustomed to such, it never expected fuel prices to hit shockingly high levels during the period," Tan and Bautista noted.
Despite this, PAL managed to keep expenses in check by zealously cutting costs and improving systems. For instance, the airline’s
revenue-management, reservations and ticketing systems are now configured to drive down distribution costs. Currently, electronic ticketing is available on 70 percent of PAL flights, including all domestic routes.
"We have started to create a hassle-free ticket-buying experience, improve the appeal of the Internet as a storefront and take advantage of the convenience offered by the on-line world," they added.
Overall, PAL’s successful strategy was summed up by Tan and Bautista thus: "We continue to be consistent, disciplined and relentless in our drive for efficiencies, attacking costs and generating the level of returns necessary to strengthen our financial position."
Meanwhile, PAL stockholders elected veteran banker Antonino L. Alindogan, Jr. as independent director of the company, replacing Patrick L. Go, who had served since 2002. Alindogan was, until recently, chairman of the Development Bank of the Philippines and member of the Monetary Board.
The rest of the 15-man board of directors, led by Tan, vice chairman
Mariano Tanenglian and Bautista, were re-elected.