PAL sees costs rising by $110 million this year

MANILA, Philippines — Taipan Lucio Tan’s Philippine Airlines expects higher costs of at least $110 million this year due to increasing prices of fuel.

On the sidelines of the rollout of the carrier’s new Airbus aircraft, PAL president Jaime Bautista said the airline is losing $3 million a year for every one peso depreciation,

“We’re doing a bit of hedging, but it’s not enough to cover additional cost..We’re trying to raise (fares) a little bit…but we can’t just raise it... We’re taking a hit (because of oil prices),” Bautista told reporters.

“The market is growing, but of course competition is very stiff so we can’t just raise airfares,” he said.

PAL estimated oil prices to reach $60 per barrel, but global crude prices have already soared to as high as $75 per barrel.

“In our budget, it’s just $60 (per barrel). We’re consuming 11 million barrels a year…That’s $110 million increase in cost for 2018,” Bautista said.

Last month, PAL said it expected to post a modest profit of more than $10 million this year.

The volatile fuel prices are also affecting talks with possible strategic investors.

“We continue to talk, but what is happening now is that investors can’t decide yet because the situation is very volatile at this point because of oil prices,” Bautista said.

The aging airport infrastructure is also a problem, he said.

The Lucio Tan Group is part of a consortium of seven conglomerates that is seeking to redevelop the Ninoy Aquino International Airport into a world-class terminal.

Other members of the consortium are the Aboitiz Equity Ventures, Ayala Corp., Alliance Global Inc., Filinvest Land Inc., JG Summit Holdings Inc. and Metro Pacific Investments Corp.

The transportation department has already recommended granting the consortium the original proponent status (OPS) for its unsolicited proposal.

Amid the challenging environment, PAL expressed hopes its new Airbus A350 and A321neo would help it attain its goal of becoming a five-star airline.

The A350-900 is touted as a game changer in the industry with its ability to fly longer on less cost.