PAL posts P240-M net income for December

Philippine Airlines reported a net income of P240.4 million for the month of December 1999 despite the difficult operating scenario the airline had to contend with during the last quarter of the year.

The flag carrier turned in a solid performance during the month, highlighted by improvements on both sides of the ledger.

"Both revenue-generation and expense-reduction results exceeded our budget estimates for December, which are based on financial targets set by the airline's SEC-mandated rehabilitation plan," said PAL executive vice president for the commercial group Henry So Uy.

The P240.4-million net income for December was well above PAL's internal estimate of P182 million, although the carrier is cautiously optimistic about improving on its annual financial goals.

"We have an even chance to end our fiscal year on March 31 -- PAL's first under rehabilitation -- with a better-than expected bottomline, but a lot will depend on the movement of aviation fuel prices, which account for nearly a quarter of PAL's operating expenses," added So Uy.

PAL's rehab plan projects a net loss of $16.4 million (P656 million) for the 1999-2000 fiscal year.

The December profit figure was achieved notwithstanding several exigencies that preoccupied PAL during the last few months of 1999. These included the suspension of services to Taiwan starting Oct. 1, the subsequent grant of special low fares (partly subsidized by PAL) between Manila and Hong Kong for Filipino workers, and the steep rise in aviation fuel costs.

"While these were relevant issues, they did not appreciably affect PAL's operating results for the month, which saw the flag carrier expand seating capacity on many key international routes," said So Uy.

In December, PAL boosted capacity on the trans-Pacific sector by 27 percent; Osaka, Japan, by 40 percent and Hong Kong, by 19 percent. The airline also restored a regular service to Honolulu, Hawaii.

Operating revenues topped P2.65 billion, about P60 million or 2.3 percent better than initial estimates. Passenger operations comprised P2.05 billion or 77 percent of total earnings, as PAL carried over 438,600 passengers on 1,545 roundtrip flights during the month - one of the busiest travel periods of the year owing to the Christmas rush.

On the other hand, PAL was successful in holding down costs. Total operating expenses for December amounted to P1.88 billion, about P58 million or three percent below budget targets.

Major cost components were: flying operations, P508 million; aircraft and traffic servicing, P366 million; maintenance, P188 million; and passenger service, P176 million.

Aviation fuel constituted the single biggest expense item, accounting for P448 million in December alone. PAL had to cope with the escalation in the price of fuel in the world market throughout 1999.

From about 49 cents per US gallon in April, the cost of aviation fuel jumped to 71 cents in September and then to 77 cents in December - a hike of 57 percent in just eight months.

Despite this, PAL was able to post an income from operations of P769 million for December, P117 million more or 18 percent higher than originally planned by the airline.

However, as in previous months, financial costs trimmed PAL's operational gains for December. Financing charges of P428 million and other charges of P101 million combined to produce a net income of P240.4 million.