Philippine Airlines Announces Leasing Company, Slashes London Fares

San Miguel Corporation, a 49% shareholder in Philippine Airlines, has announced that it will be investing $500 million to establish an aircraft leasing company that would support the on-going refleeting program of Philippine Airlines as it modernizes its fleet and expands to new destinations.

philippine airlines london flights
Copyright Photo: Angelo Agcamaran/PPSG
According to Ramon Ang, President of PAL, the new investment will be in addition to what was spent by San Miguel Corporation to acquire its current 49% stake in Philippine Airlines. The new leasing firm will be a wholly-owned entity of Philippine Airlines.

Philippine Airlines is currently in the process of purchasing up to 100 new aircraft as part of its refleeting program to replace older aircraft that plague the carrier with higher maintenance and operating costs. The airline already placed a multi-billion dollar order with Airbus for twenty A330 long haul aircraft and forty five single aisle A321 aircraft. In addition, it has leased six used Airbus A340 aircraft to support its expansion into Europe until it receives deliveries of brand new long haul aircraft.

It is rumoured that the new leasing firm may seek to acquire up to fourteen Boeing 777 aircraft and ten Airbus A350 aircraft. The company which is expected to be based in the Cayman Islands will have a market capitalization of $1 billion. The San Miguel Corporation has yet to come up with the additional $500 million which may come from the potential buyer of Lucio Tan's 51% stake in Philippine Airlines. "We intend to come up with another $500 million equity for the aircraft leasing company that will be 100 percent owned by PAL," said Ang.

philippine airlines flights to london

Meanwhile, Philippine Airlines held a press conference to announce its new direct flight to London scheduled to begin on November 4. This will be the first time Philippine Airlines has flown to Europe in fifteen years. "We're very happy that London is PAL's first European destination since flights to the continent were discontinued in 1998," said Ang. "The fact that we have been given permission to fly to Heathrow makes our return much more meaningful. We take this as a strong vote of confidence by UK authorities in PAL's ability to bring in the passenger traffic volume worthy of the world's top airlines." He added that Philippines Airlines is targeting Amsterdam and Rome as its next European destinations after the flights to London are launched. 

The British Minister of State for Trade and Investment, Lord Stephen Green, was also on hand for the announcement. "I'm delighted to celebrate a very concrete example of the growing ties between our two countries," said Green. "I am confident that these flights will greatly enhance the relationship between the UK and the Philippines. 

Philippine Airlines isn't wasting any time marketing its new service to London. Competition is expected to be tough particularly from Middle Eastern and South Asian carriers. "We are expecting them to react," said Ang. "In fact, one lowered the price of their tickets already. But we are definitely here to stay and we will compete with them."

philippine airlines uk flights

The launch of the new flights has sparked a fare war on the route which will be good news for travellers planning to head to London during the busy Christmas season. Introductory fares between Manila and London flying with Philippine Airlines start at just USD $1,052 round-trip including all taxes and fees. 






4 comments:

  1. Opening an offshore company may be a good thing for the investors but not necessarily good for the airline and it’s people.

    I am not saying that it is the case here but, in the past, companies have created sister (offshore) companies and used them as an easy way to conceal (hide) funds and to launder money. The benefits of an offshore company are its tax, legal and financial benefits.

    One of the main uses in aviation is the creation of what is called a “Special Purpose Vehicle” or “SPV”. I will try to explain this in plain English. For example, Philippine Airlines goes bankrupt and owes millions of dollars to oil companies, airports (landing fees), catering companies, etc… What would normally happen is that all of PAL’ assets would be seized and then sold. The money would be used to pay the creditors. The most valuable assets PAL possesses, you would think, are its aircraft but what would happen if PAL had no airplanes to begin with and just leases them?

    You may have guessed it by now, an offshore company is a way for investors to secure their investment without taking too many risks. If PAL (airlines) goes bankrupt, then its creditors will get nothing because the airline has no possessions. PAL airline employees for example, who would have 4 months salary and benefits due, will never see their money because the airline has basically nothing to sell. In the case of a bankruptcy the investors would not loose their aircraft, worth millions of dollars each (X100), because they are registered to the offshore company.

    This raises several questions about the intentions of San Miguel and other (actual or future) PAL investors. What is going to be the leasing cost of each aircraft for PAL airlines and is this consistent with the actual market value? Are they really interested to see PAL succeed or are they there to “suck out” the most of the airline and get back, as quick as possible what they invested into it? The airline itself will not be able to negotiate the prices with the leasing company because, let’s not forget, the members of the airline’s board are also the owners of the leasing firm. Very convenient.

    The BIG money will be in the Caribbean on the Cayman Islands. If the airline were to go bankrupt then the leasing company would just sell its aircraft or simply begin a new airline and start all over.

    It’s always exciting to fly to new, far-away destinations and it adds to the prestige of the airline but beware of overcapacity. I don’t wish it but it may prove to be a fatal mistake. The message here is not to open too many new destinations with flights longer than 11 hours. Do it slowly, see how it evolves and adapt accordingly. PAL should concentrate more on the Asian market, particularly China where there is great potential. It’s good to be ambitious and I am sure the new leasing company will want to lease out as many aircraft as possible. The more aircraft, the more money, but at who’s expense? Who is taking the biggest risk, the investors, the airline or it’s people?

    …Just my 2 cents

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