Philippine Airlines Posts Profits in Q2 2014

Despite tough market conditions and increased competition from low-cost and foreign legacy carriers, Philippine Airlines (PAL) has managed to post a profit in second quarter of 2014 as new routes and increased demand for travel helped to boost the carrier's income. With the aggressive cost-cutting measures that Ramon Ang, President of Philippine Airlines, has undertaken since taking over management, many believe that PAL is on track to end 2014 with a profit.

Image Source: The New Wage

REVENUES INCREASE FROM RISING PASSENGER DEMAND

Philippine Airlines recorded a net income of Php 1.49 billion enabling them to reverse a Php 1.08 billion net loss the previous year. April to June revenues rose 47.4% to Php 27.3 billion in comparison to Php 18.52 billion in the same period last year.

Overall passenger revenues rose 51% to Php 23.1 billion from Php 15.3 billion the previous year, which was attributed to the carrier's international expansion to Europe, parts of Asia, and the Middle East. "The increase was attributable mainly to the favorable passenger revenue performance during the quarter," Philippine Airlines said in a statement. "This was brought about mainly by the introduction of new routes such as London, Abu Dhabi, Dammam, Riyadh, Canton, and Haneda, Japan.” In addition, the airline's cargo business has also improved rising to P 1.8 billion from the P 1.4 billion last year.  Other businesses affiliated with the carrier recorded Php 2.3 million from Php 1.8 billion a year earlier.

However, the carrier's expenses also increased by 31% to Php 25.52 billion from Php 11.41 billion in the same period last year. These expenses include flight operations, aircraft, and traffic servicing, passenger service, sales and reservations, and general and administrative services. Due to the international expansion, operating expenses rose to Php 16.33 billion from Php 11.41 billion. This is primarily due to the increase of fuel consumption, charges on aircraft leases, and dues from cockpit crew. On the other hand, the modern aircraft introduced by the carrier enabled maintenance costs to decline by 21.1% to Php 1.94 billion from Php 2.64 billion the previous year. In 2012, PAL began a $9.5 billion intensive fleet renewal program, with a plan to accept delivery of up to 100 brand new aircraft. 

PENDING OWNERSHIP CHANGE

As Philippine Airlines slowly returns to a profit, talks continue of a pending ownership change with Lucio Tan aiming to buy back complete control of Philippine Airlines from Ramon Ang and San Miguel Corporation. According to Reuters, San Miguel Corporation is open to reach an agreement, which is expected by the end of this month.  In a recent disclosure filed at the Philippine Stock Exchange, San Miguel reported that, "An appropriate disclosure shall be made in the event a definite agreement is concluded by the parties." Neither side has released a statement on any new offers since Tan presented his initial offer, which was rejected by Ang.

-Travelling_bk

17 comments:

  1. in my view, PAL should pursue its modernization which is the direction being pursued by Ramon Ang. The country is now investment grade and the global business community is taking note of the Philippines. Tourist growth is picking up and Asia is projected to grow steadily until 2030. The future of PAL is very promising and it is no surprise that PAL is now making money. Lucio Tan should just sell his 51% to SMC so that the plans of SMC for PAL will come to fruition.

    ReplyDelete
    Replies
    1. If that is the case and PAL will continue to pursue Ramon Ang's ambition for PAL to be an LCC, PAL will not attract tourists like me. I live in Canada with all of my family, so going back to the Philippines is more of a leisure travel than an obligation to do so. The last time I went to the Philippines, I flew on PAL's 777 jet and I can say that this jet is competitive with the equipments being used by other international airlines on a long haul route. But I heard that PAL is planning to switch this Jet with an A340 that does not even have personal IFE. Sad cause if that is the case, I would rather fly with Cathay or Korean Air or even Delta.

      Delete
    2. You are right. PAL should modernize the proper way. They failed to do that in the past 10 years. They are almost getting it right in the the past 2 years but still something seems to be wrong somewhere.

      Delete
    3. Ramon Ang is not thinking the way you think. The thinking is towards the likes of: having a skeletal working force, a non-renewable contract hires for a maximum of 5 months, really cheap fare to fill the seats because a decent fare also demands decent service which they don't want to offer, and sell the flag carrier. The overall desired outcome sought is profit, not customer service. Just money and plenty of money. Ramon Ang doesn't care whether the seat pitch is comfortable or not, whether you get hungry in-flight or whether there is toilet paper in the toilet.

      Delete
  2. Mkae no mistake, PAL is a low cost carrier

    ReplyDelete
    Replies
    1. The character of the business follows the mindset of the business owner. In the case of PAL, Lucio Tan is the dominant business owner who at his age of 80+ already lacks the vigor to compete in the very challenging environment of Globalization. Even the children of Lucio Tan or the heirs do not have the elan and are absolutely clueless on what to do with PAL. That is the reason why you are correct and why PAL transformed to an LCC. If Lucio Tan still has some sense of patriotism, just Let it Go. Lucio Tan should just stick to what he does best and that is managing low class businesses.

      Delete
    2. I disagree, LT's daughters - Vivienne, Sharon, Cheryl, the pilot - can run the airline with class and they can do much better job than Ramon Ang and his SMC people.

      The daughters can be guided by Jimmy Bautista and Henry So.

      Delete
    3. Weren't these children and executives the same ones running PAL before Ramon Ang?

      If these people knew what to do with PAL in the 10 years they managed PAL, their airline wouldn't be in its present sorry situation. If they knew something then they would have done it already before and we should be seeing the changes by now. Another set of experimentation for PAL? Heaven forbid!

      Delete
    4. I would have to disagree with all of you. This truly is not a matter of Tan versus Ang. They have both proven their incompetence. Can't we all just finally agree that Philippine Airlines needs an experienced international airline executive to run the ship? It's been the blind leading the blind for years and none of them truly know what they are doing. Perhaps they can do basic business management like generate profits and cut costs, but they won't help PAL to realize the potential of what it could be, nor will they help it to grow their business and market share. Bring in an expat!

      Delete
  3. What about the number of passengers that they carried?? Siguro hindi na nila pinost kasi nakakahiya kasi talong talo na sila sa CEB, kung paramihan ang pinaguusapan.

    ReplyDelete
    Replies
    1. why would you say it's embarrassing if ceb had more passengers that pal?

      the news clip is not even about the number of passengers, but the fact that pal made a profit.

      Delete
    2. And why would you say it is not?

      Delete
  4. Ramon Ang offered retirement package to all those who logged 20 years and above. 1.5% + 250k + 1 year medical.

    Totally getting rid of airline experienced staff. Total LCC is the strategy. I hope they offer an airfare of 1,000 pesos for every one hour flying time regardless of destination - domestic or international at an all economy class seating arrangement. Since they do not really have a product to sell, they should just go for the cheapest product.

    1,000 pesos for every hour of flying time...I hope they do this. I really don't care whether they make profit or not, I just want that pricing scheme.

    ReplyDelete
    Replies
    1. Was the retirement voluntary or compulsory. Because I think Ang could be right. Without offense to anyone affected, maybe it is high time for some old hands to turn over the baton to the new generation. It is like retiring the 747 and re-fleeting using the new generation air crafts. Come to think of it, PAL has a lot of those experienced staff and yet look, experience did not win the game for PAL. Ironic isn't it?

      Delete
  5. 1,000 pesos for every one hour flying time is good for me too. That's being innovative on their part.

    And probably, they can contract out all staff - ticketing, reservations, accounting, planning, recruitment etc. They will earn more profit in the succeeding quarters. They should do what SM does - less than 6 months contract then another batch is hired.


    ReplyDelete
    Replies
    1. From SEC documents, PAL has 4,000 land-based employees. Maybe they should consider trimming down that fat. Because of the changing times, outsourcing certain business processes like mentioned above is quite the trend because these processes are just generic - the same for most companies and easy to replicate.

      Delete
  6. i would rather go for ANG who is a visionary I was a former PAL employee for 13 yrs during Lucio Tan administration nothing happened he sold PAL piece by piece and made money around it. PAL never posted a profit under him treated his employee like trash..

    ReplyDelete

Powered by Blogger.