In a disclosure to the Securities and Exchange Commission, PAL corporate secretary Eduardo Ceniza said the lease renewal will be under the same terms and conditions as the current agreement but with a modification on the payment of lease consideration.
Under the current lease, PAL is guaranteed an income representing 10 percent of the net revenues from the operation of the aircraft. Based on the renewal terms, this will be changed to 50 percent of the net profit from the operation of the leased aircraft with a no-loss guarantee by APC, thereby assuring no financial risks for PAL and its creditors.
Ceniza said that aside from providing additional capacity, the lease renewal will cover for fleet deficits during PAL’s aircraft downtimes and substitute for organic aircraft when maintenance windows render critical the on-time performance and schedule reliability.
PAL said the aircraft will also be used for the protection of the on-time performance on the B747 — 400 (B744) Hong Kong flights whenever the B744 US flights have to make technical stops in Honolulu, Hawaii enroute to Manila when wind conditions are adverse. The B744 are normally scheduled on Hong Kong flights in between US flights.
Last April, PAL beefed up its air fleet with the addition of three B737-300s in preparation for increased flights frequencies in the East Asian region, particularly the Taiwan market.
Ceniza said the three B-737s will be leased for five years, although two will be immediately sub-leased to APC with the least payment guarantee in the form of a standby letter of credit in favor of PAL.
Both PAL and APC are majority owned by beer and tobacco magnate Lucio Tan.
Ceniza said PAL needs an additional B-737, its 10th, to enable it to meet the capacity requirements due to the increases in the Taipei frequencies to nine times weekly, from the initial schedule of three times a week.
He added PAL also plans to mount a thrice-a-week long-term charter for the Manila-Kaoshiung-Cebu route which is estimated to give PAL additional utilization of 1,254 hours per annum and an estimated $12,000 per round trip in margin before fleet costs.
The PAL official said the company intends to maintain a high on-time performance by avoiding numerous flights delays and cancellations due to mechanical breakdowns and grounding of aircraft associated with tight aircraft rotation as what had been experienced last year.