New Decisions Await New PAL Leadership

Jaime Bautista is stepping down as Philippine Airlines (PAL) President and Chief Operating Officer to 'spend time with his family', PAL confirms.  Vivienne Tan, PAL's Executive Vice President and daughter of PAL's Chairman and CEO Dr Lucio Tan, was initially named officer-in-charge.   However, Skift is reporting that PAL's board of directors is looking for a 'professional manager' to permanently take over the helms.

PAL A350
Image source: World Airline News/Wikimedia

Although Bautista leaves behind a legacy that includes a four-star Skytrax rating, numerous Most Improved Airline awards, and introducing nonstop flights between Manila and the eastern parts of North America, his successor will face and oversee key decisions that involve the latter.

The Centre for Aviation (CAPA) has published a recommendation that PAL shrink its long-haul network, including axing its European foothold altogether amidst poor profitability figures. The flag carrier posted a net loss of ₱2.8 billion (US$54.3 million).  Currently, London is PAL's only destination on the continent.  However, despite several adjustments to the service such as a new schedule and the acquisition of more fuel-efficient aircraft, the flag carrier has been unable to sustain a profit from the route.  CAPA is reporting that Bautista admitted trouble with the route that the flag carrier is considering other alternatives such as the possibility of transferring its European flights to Paris instead and seek partner carriers to fill the gap that would be left.  

Furthermore, CAPA has recommended PAL to maintain a reduced year-round schedule for North America.  At the moment, PAL maintains up to 52 weekly flights between Manila and the North American mainland with reductions during the off-peak season.  CAPA also reported that PAL is dropping its previous ambitions to further expand into North America citing that they would be “new routes we [PAL] wouldn’t make money on”.  

Moreover, the upcoming leader will need to make decisions on the future of PAL's long-haul fleet as the flag carrier currently operates six Airbus A350-900s and 10 Boeing 777-300ERs (77Ws).   Most of these are leased and the leases on the two oldest 77Ws are due to expire in 2022.  The new leader , along with the board, can either choose to replace them with the Boeing 777-X or Airbus A350-900 or A350-1000 or not renew them at all.  There were recent reports that PAL was considering two 777-Xs to replace the oldest 77Ws.  CAPA is recommending that the lease on the two oldest 77Ws not be renewed and replaced immediately, and that PAL wait until 2024 when more leases on 77Ws are due to expire before deciding to get new aircraft.  According to CAPA, the deferral of new deliveries and ensuing outright non-renewal of the oldest two 77Ws would allow PAL to enact CAPA's other recommendation of shrinking its long-haul network without worrying about aircraft underutilisation, which would all then lead to better profits.

CAPA's reports and assessments suggest a clear departure from recent years when Bautista was signalling an aggressive strategy for the airline, especially as he hoped to put PAL on the road to a becoming a five-star carrier by 2020.  It will be up to Bautista's successor whether to continue aiming for this.  However, amidst the leadership changes and regardless of the decisions that the new leadership will take, PAL's board has assured its stakeholders that it is 'business as usual' for the flag carrier.

5 comments:

  1. CAPA seems to be ridiculous for criticizing PAL for having trouble in Europe. Why don't they think these?
    1. Remember that PAL overcame the European Union ban which prevented PAL for entering European Union countries and providing European destinations. I think PAL's lack of European destinations due to EU ban makes airlines such as Singapore Airlines, Thai Airways, Cathay Pacific, and several mainland Chinese airlines (just included airlines in neighboring countries with several European destinations) strong in Europe as those airlines doesn't overcame EU ban and are being accumulated by several passengers while PAL cannot provide European destinations due to EU ban. The load factor of PAL in London is too low because many passengers get habits in travelling to Europe with those airlines. It makes PAL having trouble in Europe while those airlines provide several destinations in Europe especially Singapore Airlines and Thai Airways which provides European destinations even in Scandinavian cities such as Copenhagen, Stockholm, and Oslo (Thai only). If PAL doesn't being in EU blacklist, PAL has several European destinations and can provide several passengers in Europe.
    2. It is because the Ninoy Aquino International Airport which is small, outdated facilities, and congested. Many foreign passengers (somewhere from Australia, New Zealand, Guam, Indonesia, and East Timor) prevents NAIA to connect flights to Europe. Instead, they choose other cities such as Singapore, Bangkok, Hong Kong, Dubai, Doha, etc. to connect flights to Europe. Let's wait for new and expanded airports such as Bulacan International Airport and Clark International Airport to be done and see if there would be improvement for PAL's London flights as well as opening new European destinations.

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  2. It is amzing that the recommendation for profiability did not include joining an alliance or improving air terminal facilities for transit passengers.

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