PAL to cut costs amid global crisis

THE Philippines’ flag carrier said it would cut its workforce and flight capacity abroad to cope with the global economic slowdown.

Jaime Bautista, president and chief operating officer of Philippine Airlines (PAL), told The Manila Times that the carrier will take “decisive” steps like “rationalizing its workforce, realigning operations to match demand and other cost-cutting measures to survive the crisis currently plaguing airlines worldwide.”

“We are currently reviewing our entire organizational set-up,” Bautista said, adding that the crisis has changed the face of the industry which is among the sectors hardest hit by the global crisis.

“We don’t know yet how many will be affected. For now, we don’t have a target. I talked to the union about the plan yesterday. In a few weeks, we will know how many will be affected,” he added.

At end-March, PAL had a workforce of 8,052. Of the total, 472 were pilots and 1,593, cabin crew.

The company recognizes two Philippine labor unions, one for the rank and file ground employees, and another for the cabin crew. In addition, it also recognizes foreign labor unions in the United States, Singapore and Japan. There has been no strike or threatened industrial action for the last 10 years, PAL said.

Bautista said the airline’s cost-cutting measures will in no way infringe on its safety compliance and standards.

He said management will offer early retirement packages for its employees as a way of enhancing productivity and reducing costs.

PAL will reduce flight capacity to the US, Canada, Australia, Japan and Hong Kong, he said, adding that 7 percent of the airline’s total capacity would be reduced effective this month until March 2010.

Despite the reduction in its international flights, PAL would increase domestic flights, Bautista said.

“We are eyeing new destinations either through charters or regular scheduled operations. We also expect to take delivery of our brand new and fuel-efficient Boeing 777-300ERs,” he said.

At end-March, PAL’s route network covered 29 points in the Philippines and 31 international destinations.

The company reported a net income of $35.5 million from April to June, down by $9.6 million over the same period last year.

Revenues dropped by 12 percent to $394 million compared with $446.9 million for the same period in 2008.

PAL blamed the lower revenues on the 25-percent decrease in passenger revenues of $95 million, as passenger traffic and yields continued to decline.

When the global crisis led to a travel slump in the latter part of the year, PAL’s passenger load factor fell to an average of 76.2 percent, three points lower than the previous year.

For its fiscal year ending March this year, PAL posted a net loss of $301 million from a net profit of $30.6 million in the fiscal year ending March 2008.

The company’s total expenses for the first quarter amounted to $358.5 million, 11 percent better than the previous year’s $401.8 million. Fuel comprised 44 percent of its operating expenses.

PAL also reported having paid $165.4 million in principal and interest to its creditors, bringing to $2.4 billion the total paid from March 1999 to March 2009.

Its assets decreased by $60.6 million to $1.971 billion, while liabilities rose by $239.5 million over the previous year.

PAL also approved a quasi-reorganization plan, reducing the par value of shares to P0.20 from P0.80 per share. It will also increase its authorized capital stock from P16 billion to P20 billion divided into 100 billion shares at P0.20 per share. –Darwin G. Amojelar, Senior Reporter, Manila Times