PAL to acquire 6 new Boeing jets for $1.5B

Flag carrier Philippine Airlines has signed a purchase agreement with US aircraft company Boeing for two wide-body jets and purchase rights for two additional units in line with its $1.5-billion fleet expansion program.

The $1.5 billion program is on top of PAL’s $840-million refleeting program that will be deployed mainly on the airline’s extensive domestic network and other Asian destinations.

Each jet is estimated to cost around $250 million. PAL has also signed a letter of intent with GE Commercial Aviation Services for the lease of two other B777-300ER planes.

Deliveries of the firm orders as well as the leased aircraft will start in the third quarter of 2009 and continue until 2010. The aircraft covered by the purchase rights will be delivered in 2010 and 2011.

PAL president Jaime Bautista said the acquisition of the two B777-300ER with a total cost of $500 million will allow the carrier to expand direct services between the Philippines and the United States. "Our passengers will also benefit from the higher level of comfort and amenities that this high-technology aircraft brings," he added.

In addition to flying to more areas in the US such as San Diego and Seattle, PAL is also looking at revisiting the Middle East as well as Europe. The new planes can likewise be used for flights to Australia and Japan. On Dec. 16, PAL will unveil its flights to Nagoya, its fifth destination in Japan.

About 15 percent constituting the downpayment for the two planes will be internally sourced, while the remainder will be sourced from loans.

For his part, Boeing vice president for sales Rob Laird, who signed the agreement with Bautista in Honolulu recently, said the plane is the market leader in the 300- to 400-seat segment, with better efficiency, range, and comfort. PAL has specified a bi-class configuration for its B777-300ERs, with state-of-the-art seats and in-flight entertainment system capable of providing audio-video on-demand in both business and economy classes.

The decision to move forward on the upgrading of PAL’s wide-body fleet comes on the heels of a similar modernization of its single-aisle fleet. Last Oct. 20, PAL unveiled the first of up to 20 brand-new Airbus A320 family jets that the airline is acquiring, also over the next six years. Three of those aircraft, all A319s, have already been delivered and are in service.

The more fuel-efficient B777-300ER is the world’s largest long-range twin-engine jetliner and is capable of carrying up to 368 passengers in PAL’s two-class configuration, at a range of up to 7,880 nautical miles (14,594 km). It will complement the Boeing 747-400 on the trans-Pacific routes.

Bautista said compared to the 400-seater B747 which has four engines, the B777 has only two engines, which makes the latter at least 20 percent more fuel efficient.

By 2012, PAL’s fleet will increase to 43 planes, which will include six B777, five B747-400s, four Airbus A340-300s, and eight Airbus A330-300s and 20 A320s. Right now, the ratio of owned to leased planes is 2:1.

The flag carrier flies to 24 destinations in 13 countries and territories, including three points on the US mainland – Los Angeles, San Francisco and Las Vegas, plus Honolulu and Guam in the Pacific.

The company expects two more A319s to be delivered before the end of 2006, and for next year, seven aircraft–six A320s and A319–will be delivered. PAL is also tapping five A320s for 2008 and the deliveries of five option aircraft, should PAL take them up, will start in 2009 and run until 2012.

PAL chairman Lucio Tan said these airplanes will carry tourists, businessmen and other regional passengers to a higher level of comfort on domestic and regional flights.

"Through this modern fleet, we hope to assist in fostering economic growth in the countryside. Just as well, it will help improve the air bridges between the Philippines and neighboring countries."

He added that despite current challenges, his company is bullish about the country’s growth prospects and stability. "This positive outlook, prompted us to upgrade PAL’s fleet and this is a reflection of our confidence that the global airline industry is on the road to recovery."

"We took a calculated step, despite the industry’s projected $1.7 billion loss this year. Our plan is to expand our operations, with more frequencies on the domestic front. Later on, this will be followed by new destinations once all the new airplanes arrive," Tan said.

The company’s confidence, Tan said, is anchored on the 4.8-percent projected growth in passenger traffic this year and airlines worldwide consistently posted a 10-percent increase in revenues for the last three years.

"And now that world fuel prices are stabilizing, we know we made the right decision at boldly going forward."