PAL scales back expansion plans amid pilot exodus

An ambitious $1-billion six-year expansion plan by national flag carrier Philippine Airlines (PAL) could be cut back if the airline fails to halt an exodus of pilots seeking better pay elsewhere.

"This is not a problem unique to PAL," Jaime Bautista the airline’s president and chief operating officer told AFP in an interview.

"Many airlines throughout the region are facing the same problem. The industry is expanding so fast, especially in India and China, there simply isn’t enough experienced pilots to go round.

"So the easiest and cheapest way to get your pilots is to go to the established carriers and offer packages that make it hard for many pilots to refuse.

"It is cheap because you don’t have to pay for their training because someone else has done that for you," Bautista said.

Late last year the airline unveiled a $1 billion expansion plan with the purchase of nine A320s with options for another five.

The plan was to have the new aircraft come into service between 2006 and 2008, with delivery on the options between 2009 and 2012 should the airline take them up.

"We have deferred delivery this year and will take up one next year," he said.

"It is not critical but we are planning to play it safe at least for the time being until we can stabilize the exodus. It is no point having the aircraft if you don’t have the pilots," Bautista said.

A forum of local aviation officials in Manila last week warned that with the rate local pilots and mechanics were being poached by foreign airlines local carriers could end up grounded by 2010.

Some 140 senior pilots and over 1,900 aircraft mechanics have left for higher paying jobs overseas in the last five years, the forum was told.

"Being the biggest carrier in the country of course we feel it more than the others," Bautista said.

Of the 700 pilots who carry air transport licenses (licenses that qualify them to be captains) employed in the Philippines, PAL employs 440.

From 2003 until the end of February this year, PAL had lost 78 of its senior pilots to foreign competitors.

According to Bautista, a captain with PAL can gross a salary of between $4,000 and $7,000 a month.

"By local standards at least this is a very good salary but how can you match competitors, especially those in the Middle East and India, paying double and tax free. Here, our pilots are taxed at 32 percent."

Airbus Industrie in its global markets forecast for 2004-2023 estimates that the number of passenger aircraft in service will double to 21,759 in 2023, from the 10,838 at the end of 2003.

In that period, Airbus estimates, world passenger traffic will increase by 5.3 percent per annum which will require the delivery of some 16,601 new passenger aircraft.

Founded in 1941, Philippine Airlines was halfway through a $4-billion refit, headed by new chairman Lucio Tan, when the full impact of the Asian financial crisis hit the airline industry in early 1998.

That year the carrier reported its biggest annual loss ever – P8.08 billion.

The airline’s problems were compounded by a series of labor disputes by its pilots and ground crew which saw the airline file for receivership with the Securities and Exchange Commission (SEC) in June 1998.

The SEC, with the help of the airline’s creditors, set up a rehabilitation program allowing the airline to operate while paying off its debts.

PAL was forced to cut its work force of nearly 15,000 by almost half, all engineering work was subcontracted out to Lufthansa, the fleet was reduced from 53 to 22 aircraft and routes were cut or discontinued.

PAL has already paid back more than half of its $2.2 billion in debt and in 2004-2005 it reported a net profit of P1.2 billion, reversing the loss of P643 million in the previous fiscal year.

And Bautista’s eyes are firmly on the future.

"Much of that expansion will be here in the Asia-Pacific region," Bautista said.

"India, it has been reported, will need around 4,000 pilots over the next four to five years while China will be looking for an estimated 10,000 over the next five to six years.

"There simply are not enough aviation schools around to meet the demand," he said.

A recent article in Flight International said China’s two "certified pilot training schools" can train 850 to 900 pilots a year.

Bautista said another factor putting a strain on the airlines is that under the International Civil Aviation Organization (ICAO) rules, pilots must retire at 60.

"There is some talk that the ICAO may increase this to 65 which would give airlines like us some breathing room." — AFP