Optimism comes despite annual losses hitting P73B

By Arjay L. Balinbin, Senior Reporter

PAL Holdings, Inc., the listed operator of flag carrier Philippine Airlines, expects positive monthly operating cash flows this year after its net loss after tax widened to P73.08 billion in 2020 from P9.70 billion previously due to the “extraordinary impact” of the global health crisis on the company’s operations.

PAL Holdings’ net loss attributable to equity holders of the parent company reached P71.91 billion in 2020 from P10.31 billion in 2019, the listed company said in its annual report released on Thursday.

The company remains optimistic that it will be able to continue operations in the next 12 months.

It expects to generate “positive monthly operating cash flows” this year “as a result of the gradual recovery in the travel industry and the effect of the cost containment measures implemented in 2020 and early 2021.”

PAL Holdings’ total revenues for 2020 dropped 64.2% to P55.26 billion from P154.54 billion a year earlier.

The company noted that it was able to cut expenses by 46% last year compared with the figure in 2019, but this was offset by the decrease in revenues.

“The Philippine government halted all commercial flights in April, May and part of March 2020 as part of a nationwide community quarantine, while local and worldwide travel restrictions held airlines down to a limited number of flights for the rest of 2020,” it explained.

Passenger revenue declined 68.8% last year to P41.86 billion from P134.29 billion in 2019, while cargo revenue saw a slight improvement of 0.32% to P9.41 billion from P9.38 billion a year earlier.

Ancillary revenue dropped 62.8% to P3.98 billion from P10.70 billion in 2019.

“For 2021, PAL has increased its regular flights on most of its pre-pandemic routes, in addition to new all-cargo services and special repatriation flights on multiple routes to North America, the Middle East, Asia and throughout the Philippines,” PAL Holdings noted.

PAL Holdings’ attributable net loss for the first quarter of 2021 narrowed slightly to P8.60 billion from a loss of P9.38 billion in the same period a year ago, but total revenues dropped 74.1% to P8.30 billion from P32.07 billion.

Passenger revenue decreased P80.3% to P5.32 billion in the first quarter from P27.01 billion in the same quarter last year, while cargo revenue grew 31.2% to P2.48 billion from P1.89 billion previously.

Ancillary revenue dropped 84.3% to P494.94 million from P3.16 billion.

PAL Holdings expects to pay its obligations based on restructured debts, with the assumption that negotiations with its lessors and creditors will be successful and the rehabilitation plan will be approved by the court.

The company noted it has “not made principal and/or interest payments due in respect to its long-term obligations since April 2020, resulting in breach of certain loan covenants and default provisions in the lease and loan agreements.”

It said it expects a funding of up to $505 million from a “major stockholder,” and this may involve sourcing of the fund by the major stockholder from the government and private financial institutions, estimated to be around $250 million.

“This is on top of the funds initially committed and provided by the major stockholder amounting to $358.2 million in various dates from fourth quarter of 2019 to first quarter of 2021,” it added.

The company likewise expects an exit facility amounting to $125 million.

It is currently in the “final stages” of its comprehensive restructuring plan.

“We are confident that the restructuring will enable PAL to strengthen its capital structure, meet stakeholder obligations and position the company for long-term success,” PAL Holdings said.