Corporate News



By Daphne J. Magturo, Reporter


Softer oil prices, higher sales keep PAL in the black in Q1




Posted on May 05, 2015


PHILIPPINE Airlines (PAL) remained in the black for a second straight quarter after reporting an $85-million net income in the three months ending March, owing to higher sales after it added new routes while its operating costs were softened by falling jet fuel prices.

A PHILIPPINE Airlines aircraft is seen taxiing at a runway of Manila’s international airport. -- AFP
The first quarter earnings results were a reversal of the $20.7-million net loss the domestic carrier booked during the same period last year, PAL said in a statement.

What used to be called the Philippines’ struggling flag carrier had returned to profitability as early as the fourth quarter of 2014, lifting full-year comprehensive income to $20.4 million to break “a three-year losing streak and setting the airline on a path to sustained growth,” according to the statement.

Revenues from January to March this year jumped by an annual 30% to $627 million.

“This was attributed mainly to an increase in passenger traffic after new international destinations were opened, as well as the expansion in domestic route network following an enhanced commercial arrangement with PAL Express,” the company said. PAL Express is the airline’s budget carrier brand.

Listed parent company PAL Holdings, Inc., whose income comes mostly from PAL, yesterday reported a net income of P3.7 billion for three months ending March, reversing the P915 million loss booked during the same period in 2014.

PAL shares gained 4.44% or 20 centavos to P4.70 each at yesterday’s trading.

Asia’s oldest airline introduced new routes, such as New York via Vancouver, Osaka, Nagoya, and Korea originating from Cebu, Korea via Kalibo, and Haneda in Japan. It also increased flight frequencies to Honolulu and Fukuoka in Japan, as well as in Dammam and Abu Dhabi in the Middle East.

“The airline also embarked in more aggressive marketing and sales campaigns resulting in improved yields per passenger revenue kilometer flown,” PAL said in the statement.

Operating expenses rose 11% to $556 million in the first quarter, due largely to growth in passenger volume as a result of operating more flights, but was tempered by lower fuel prices. Jet fuel prices fell to an average of $83.28 per barrel in the first quarter, from $130.92 per barrel in the same period last year, PAL noted.

Jet fuel is PAL’s single largest expense item accounting for 29.9% of its operating expenses, its listed parent said in its unaudited financial statement.

The airline -- control of which was regained by billionaire Lucio C. Tan through a $1-billion buyback deal with San Miguel Corp. last year -- had been buying fuel-saving planes, taking delivery of two brand new Airbus 321s in the first quarter.

It flew nearly three million passengers during the first three months of 2015, and 9.6 million for the entire 2014.

Sought for comment, Alexander Adrian O. Tiu, senior equity analyst at AB Capital Securities, Inc., said in a phone interview yesterday: “We expect this to continue. It seems like the benefits of low fuel prices and the peak season are compounding.”

“I don’t see oil prices going up as high as $100 per barrel in the next quarter. We might see PAL booking profits again in the second quarter, which is one of the peak seasons along with the fourth quarter,” he added.

Luis Gerardo A. Limlingan, managing director at Regina Capital Development Corp., said in a separate phone interview: “This is a good turnaround. Their strategy is working fine, they’re getting more aggressive, getting into more routes, and trying to improve their fleet and financials.”