PAL sees sustained profitability with $7-B fleet modernization

MANILA, Philippines - Flag carrier Philippine Airlines (PAL) is confident that it would be able to sustain the strong earnings booked in the first quarter of its fiscal year with the ongoing major fleet modernization program where it intends to acquire 100 new aircraft.

PAL president and chief operating officer Ramon Ang told reporters that the company posted strong earnings for the months of June and July on the back of higher load factor for both passenger and cargo volumes as well as lower operating costs.

“We are confident that the company’s first quarter earnings can be sustained,” Ang stressed.

PAL yesterday inked a contract with Airbus for the purchase of 54 aircraft comprised of single aisle A321s and widebody A330-300s wherein the first batch would be delivered early next year.

The A321s would be used to enhance the airline’s product offerings on domestic and regional routes while the A330s would serve regional routes and longer range services to the Middle East and Australia.

The deal worth $7 billion is the biggest aircraft deal in the Philippines. The acquisition would be funded through a syndicated loan headed by the European Eximbank.

Ang said the contract also allows PAL to acquire another 10 A321 new engine option and a couple of A330s in the future worth $4.5 billion.

According to him, the $500 million fresh equity infused by diversified conglomerate San Miguel Corp. through San Miguel Equity Investments Inc. It controls about 49 percent of Trustmark Holdings. Trustmark and affiliate Zuma Holdings own PAL Holdings and sister airline AirPhil Express.

“That equity is more than enough at the moment. We don’t need to get more equity but if ever we need more funding, our existing shareholders are willing to infuse more equity,” he explained.

He added that the modernization program also covers the requirement of AirPhil Express so the airline does not intend to sell its old aircraft at the moment.

Furthermore, the PAL official said the company is still in talks with other aircraft manufacturers including Boeing for the acquisition of 46 more aircraft.

The introduction of the B777-300ER aircraft type is PAL’s current initiative for modernizing its wide body fleet. Four (4) Boeing 777-300ER aircrafts are scheduled for delivery in 2013 and 2014.

Ang and PAL chairman Lucio Tan said the airline’s refleeting program is in line with management’s efforts to strengthen the flag carrier and help boost the Philippine economy.

 “The orders we are placing with Airbus will play a key role in revitalizing PAL and growing trade and tourism in the country,” Ang and Tan said in a statement.

PAL Holdings Inc. was back on the black in the first quarter of its fiscal year ending June as it booked a net income of P489.2 million, a complete reversal of the P475.1 million net loss recorded in the same period last year.

On the other hand, revenues rose 5.8 percent to P20.783 billion in the first quarter of its 2012 fiscal year from P19.641 billion for the first quarter of its 2011 fiscal year on the back of higher passenger traffic.

“With the proper use of equipment, we are confident that the company will deliver a very good financial performance this year,” he stressed.

On the back of strong earnings, Ang pointed out that the airline is aggressively pursuing its modernization program wherein it intends to acquire 100 new aircraft to beef up its existing fleet of 39 planes.

They added that the additional aircraft would allow the airline to offer more passengers the best the industry has to offer across Asia-Pacific and at the same time help PAL lower its operating costs with the new generation aircraft and the reduced impact on the environment.