Philippine Airlines Scales Back Airbus Order

In the midst of reporting its first profit in years, Philippine Airlines has revealed that it will not purchase as many aircraft as originally ordered with Airbus under its massive fleet renewal program. According to a filing submitted to the Philippine Stock Exchange, the airline announced that it will not exercise an option to acquire eight of the twenty A321neo aircraft that it ordered in 2012. 

Copyright Photo: Angelo Agcamaran/PPSG

As part of a massive fleet overhaul, Philippine Airlines announced in 2012 that it was planning to acquire up to 100 new aircraft. Consequently, it signed two purchase agreements with aircraft manufacturer Airbus. In the first purchase agreement, Philippine Airlines ordered 44 A320 aircraft with options for up to 20 A321neo aircraft to be delivered between 2014 to 2020. As part of the second agreement, Philippine Airlines placed a firm order for 10 A330-300 aircraft and options for an additional 10 for delivery between 2014 and 2016. 

However, PAL first decided to scale back its order last March when it advised Airbus that it would only take 15 of the original 20 A330 aircraft on order. Most recently, Philippine Airlines decided to drop an option to acquire 8 A321neo aircraft of the previously ordered 20 A321 aircraft. However, the airline agreed to purchase eight of the aircraft with an option until 2017 to exercise its right to purchase the remaining four A321neo from the original order. 

Of the up to 84 aircraft that Philippine Airlines agreed to purchase from Airbus, the carrier is now set to accept delivery of 67 with the possibility of adding 4 A321 aircraft by 2017. As of the end of June 2014, Philippine Airlines had accepted delivery of 17 aircraft including 10 A330 and 7 A321 aircraft. That leaves 1 A321 due to arrive and 5 additional A330. 

The Philippine Airlines fleet is presently composed of 85 aircraft including PAL Express aircraft. It is composed of six Boeing 777-300ER aircraft, four Boeing 747-400, ten A340-300, eighteen A330-300, seven A321-200, twenty-eight A320-200, three A319, five Bombardier Dash 8-Q400, and four Bombardier Dash 8-Q300. However, twenty of those aircraft are set to retire including the four Boeing 747-400 that have been the carrier's flagship for several years. 

The fleet modernisation is part of an attempt by San Miguel Corporation to transform Philippine Airlines into "Asia's airline of choice" with one of the youngest fleets in the region at just 3.5 years. However, sceptics are questioning the bare cabin configuration of the new aircraft that do not feature any in-flight entertainment, while other carriers in the region continue to upgrade their cabins and on-board amenities. While the move may be successful in generating profits in the short-term, it remains to be seen whether it will be successful creating passenger loyalty and satisfaction in the long-term. 

Meanwhile, Philippine Airlines is still planning to launch new services to the United States and Europe pending the outcome of the present ownership dispute between Lucio Tan and San Miguel Corporation. Prior to the dispute, Philippine Airlines had planned to launch new flights to New York, Chicago, Florida, and San Diego, after expanding existing services to Guam, Honolulu, Los Angeles, and San Francisco. In addition, the carrier would like to launch more direct flights to Europe serving the cities of Amsterdam, Paris, and Rome after launching London in November 2013.