In a briefing yesterday, PAL president and chief operating officer Avelino Zapanta said the company’s cost-cutting efforts would pay off this year, after the airline made a profit of P1.05 billion in the first four months.
"We’re trying hard to get ourselves in the black. We’re happy that we’re showing some positive results. We will continue to refine our operations by adding more frequencies and capacities in existing routes," Zapanta said.
PAL chief financial officer Andrew Huang said that with this positive development, the airline is now looking at a net income of P911 million this year. "We hope that this year will be a successful one. While we are confident that we will end the year with a profit, there are other things that we have to take into consideration. . . This is a moving target because we might still have to adjust, it. It’s too early to tell because there could be more action in the second half," he said.
Huang said the high prices of fuel might also affect management’s income forecast.
He said the company has allocated $50 million for its capital expenditures this year which shall be funded through internally-generated funds. PAL is expected to pay $230 million in debt to creditors this year.
Zapanta said it may take a while for PAL to get out of receivership and undertake an initial public offering (IPO) due to the lingering effects of the Sept. 11 terrorist attacks on its business.
He said that just like other airlines, PAL saw passenger loads collapse and freight carriage plunge, thereby affecting its bottom line.
"Sept. 11 broke what we had hoped to be a continuous string of profitable years since the start of our rehabilitation three years ago. The tragic events of Sept. 11, 2001 profoundly changed the nature landscape of air travel," Zapanta said.
He said the immediate impact of the tragedy was the cancellation of all trans Pacific flights for three days and the diversion of two US-bound flights to Canada, resulting in a net loss of P120 million.
For its fiscal year ending March 2002, PAL incurred a P1.605 billion net loss compared with a net income of P419 million the previous year, largely due to higher expenses and the settlement of a portion of its debt. The flag carrier paid a total of $245.9 million in principal and interest to its creditors in accordance with the terms of the amended rehabilitation plan.
Zapanta said PAL would also not likely meet its target to do an IPO in 2004 due to the continued sluggishness of the stock market. "With the way things are going in the equities market, I don’t think it is even good for us to look at the market in the medium-term. We haven’t even met the requirement on three years of consecutive profitability," he said.
PAL is now waiting for government to take appropriate action on its request for the deferment of the open skies policy for another 10 years.
Zapanta said local carriers are not yet ready. "Rehab is still ongoing," he added.
"We cannot put this (open skies policy) in place immediately. What we’re saying is that PAL is not totally against the government’s open skies policy. We’re saying it’s not the right time yet because the local airlines are not yet prepared to compete with the bigger global players," Zapanta said.
PAL said the government’s plan to liberalize the airline industry may not be sure-fire quick solution to Philippines’ sagging tourism industry and may even do more harm than good to the local airlines.
Zapanta suggested that government study more carefully its plan to liberalize the air travel industry because it is the future of the local airlines that are at stake here.
PAL has been vigorously opposing the full implementation of the "open skies" policy which will give foreign airlines almost unrestricted access to the country in terms of number of flights and passengers carried.
President Arroyo earlier said the government would be more successful in liberalizing the nation’s air policy if it had control of an airline flag carrier. She noted that Malaysia and Thailand, which have adopted an open skies policy, have gained a larger share of the region’s tourism market.
The President has already instructed Finance Secretary Jose Isidro Camacho to study the viability of reacquiring PAL.
At present, Tan owns 53.79 perent of PAL while the government holds only 4.26 percent. A huge block of shares, representing 35.15 percent is held by three companies, namely Top Wells Enterprises of Hong Kong, Maxell Holdings and Richmark Holdings.
PAL employees, on the other hand, own 2.61 percent of airline while the remaining 4.19 percent is in the hands of other investors.