PAL to buy $2.5-B add'l Airbus jets

MANILA, Philippines - National flag carrier Philippine Airlines has agreed to buy another $2.5 billion worth of Airbus jets from European Aeronautic Defence and Space Co. NV, its president said yesterday, as part of the fast-growing carrier’s attempt to reclaim dominance of the local market.

The new deal involves the purchase of 10 wide-bodied jets with a list price of $250 million each, Ramon Ang said, adding this is on top of the airline’s $7-billion Airbus deal announced in August.

“We are starting to replace our jets with wide-bodied planes because that is what the market wants,” Ang told reporters on the sidelines of parent company PAL Holdings Inc’s stockholders’ meeting.

PAL wants to buy 35 more planes, either from Airbus or Boeing Co, Ang said, in line with its plan to add 100 new jets to its fleet in the next five to seven years as it reshapes its business to take on main rival Cebu Air Inc.

“Our refleeting program right now is close to $10 billion,” Ang said. “We exercised our option to buy 10-wide bodied jets (from Airbus) two weeks ago”, he said, referring to the new purchases.

San Miguel Corp, which bought a 49 percent stake in PAL and a sister airline in April from Filipino billionaire and brewing rival Lucio Tan in a deal worth about $500 million, controls the management of the airline.

Ang also said San Miguel was considering teaming up with Tan to build a major new airport in the country, a project he said on Friday may cost $5-6 billion.

In August, PAL entered into a $7 billion contract with Airbus for the acquisition of 54 aircraft consisting of 34 A321ceo, 10 A321neo, and 10 A330-300s that would be delivered starting next year.

The single aisle A321 aircraft are being purchased to enhance the airline’s product offerings on domestic and regional routes, as well as to support alliances with its partner airlines while the wide-bodied A330s would be operated on higher demand regional routes and longer range services to the Middle East and Australia.

Ang, who is also president and chief executive officer of diversified conglomerate San Miguel Corp., pointed out that the massive re-fleeting program would help the airline bring down maintenance and fuel costs by as much as 20 percent.

He disclosed that talks are also ongoing for the acquisition of the remaining 35 aircraft with manufacturers that he refused to identify.

Aside from Airbus, he said PAL is also taking in three more B777-300ER aircraft from Boeing Co. of which the first is scheduled to arrive not later than November while the remaining two would be delivered next year.

“We are starting to replace our jets with wide-bodied planes because that is what the market wants and we expect to save about 20 percent in our maintenance and fuel costs,” he stressed.

According to him, the airline’s old aircraft would be sold.

PAL currently maintains and operates 39 aircraft comprising of five Boeing B747-400s and three B777-300ERs as well as four Airbus A340-300s, eight A330-300s, 15 A320-200s, and four A319-100s.

SMC through San Miguel Equity Investments Inc. controls about 49 percent of Trustmark Holdings of PAL after infusing $500 million. Trustmark and affiliate Zuma Holdings own PAL Holdings and sister airline AirPhil Express.

Meanwhile, Ang said it is set to take PAL Holdings private as it is not likely to meet the free float requirement of 10 percent set by the Philippine Stock Exchange (PSE) before the end of the year.

“Because we cannot comply with the PSE, we are taking the voluntary delisting of PAL Holdings,” Ang told the company’s stockholders yesterday.