PAL turns a profit in 2021

For the first time since 2017, Lucio Tan-owned Philippines Airlines (PAL) turned a profit last year – roughly $86 million in unaudited net income – a tremendous feat considering the devastating impact of the COVID-19 pandemic the past two years.

The numbers I have, however, are unaudited and could still change. In industry parlance, unaudited financial statements are those that have not been examined or verified by a licensed independent auditor.

I asked PAL CFO Nilo Thaddeus Rodriguez for more details on the latest numbers and, replying through PAL VP for Communications, Jose E. L. Perez de Tagle, he said PAL has yet to release the final and audited figures.

But the unaudited numbers are already significant. As I said, it’s quite a feat and this is largely due to the sacrifice of each and every PAL employee and member of its team who had to make sacrifices during the most turbulent time in its history. Credit also goes to its team leader at the time – Gilbert Santa Maria who stepped down from PAL, less than a month after the country’s flag carrier successfully emerged from a Chapter 11 filing in a US Bankruptcy Court in September last year.

December profit

Rodriguez, PAL’s wingman in the company’s Chapter 11 journey, has already reported to the United States Bankruptcy Court in the Southern District of New York that in December 2021 alone, PAL made a profit of $32.97 million, reversing the previous month’s net loss of $11.7 million.

The company also told the US Chapter 11 Court that it expects to generate a net income of $145 million this year, $312 million in 2023, and $379 million in 2024.

We’ll have to wait and see what the final numbers will be, but for now, it’s looking positive.

Capt. Stanley Ng, who is now at the helm of PAL, I’m sure will continue to steer the carrier through the new normal, including possible new challenges – such as the impact of Russia’s war against Ukraine, which has already been sending oil prices to new highs.

The journey to profitability

PAL’s profitability is cyclical, affected by a host of factors.

An airplane is actually the perfect metaphor to describe an airline business – it has a lot of moving parts and every single one of its flights may face turbulence, etc.

Indeed, Rodriguez’ report to the US Chapter 11 Court noted that in the early 2010’s, PAL achieved three straight years of profitability, reporting a $20.4 million profit in 2014, $134.2 million in 2015, and $86 million in 2016.

However, things changed in 2017.

“Like many other airlines, PAL faced challenges in 2017 relating to airport infrastructure, intense competition from ultra-low-cost, low-cost, and Middle Eastern carriers, and a new round of increases in jet fuel prices that impacted airlines globally. In response, PAL made key strategic decisions that enabled it to experience meaningful growth and sustainable profitability, leading to significantly increased revenues, reduced cost, enhanced competitiveness and industry recognition over the last few years. These strategic decisions propelled PAL to record over $3 billion in revenues in 2019,” Rodriguez’ report said.

Post restructuring steps

After the Chapter 11 exit, the tedious work continues with the post-restructuring steps.

These include a stock swap with PAL’s lenders, which earlier agreed to convert  their loans into equity, giving them a stake in the airline, parent company PAL Holdings disclosed last week.

PAL’s unsecured creditors, which include local banks – such as Philippine National Bank, Asia United Bank, China Banking Corp. and Union Bank of the Philippines and other creditors, hold approximately 20.5 percent of the outstanding capital stock of PAL. They are expected to take part in the share swap.

Their debts were converted into equity in PAL, with an option to subsequently exchange or swap their new PAL shares for parent company PAL Holdings’ shares.

New loan

PAL is also in the process of negotiating an additional $100 million, three-year loan from international lenders to support its cash balance of $391 million.

The Tan-owned carrier’s journey to become a stronger airline continues. It still has a long way to go, but with all these crucial steps, it’s looking to fly friendly skies perhaps sooner than expected.

PNB Holding in the process of going public

Speaking of Tan’s business empire, PNB Holdings, a fully-owned subsidiary of Philippine National Bank, is in the process of pursuing its plan to go public and is still led by Tan’s daughter Karlu Tan-Say as president, PNB Holdings corporate secretary Carlos Fernandez said in a letter sent to me.

The holding company was tasked to maximize the values of PNB’s real estate assets. It said last year it would maximize rental demand by optimizing the revenue potential of its prime real estate assets.

Immediate focus will be on improving the efficiency of the sprawling 10-hectare PNB Financial Center in Pasay and the PNB Makati Center in Ayala’s Central Business District by revamping their gross leasable area. These assets have a combined market value of P46.7 billion.

Both assets are prime buildings and stand on coveted locations in both cities.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales Column archives at eyesgonzales.com