Philippines Airlines (PAL) has completed one of the more remarkable turnarounds in Asia Pacific aviation in recent times. The carrier shut down for 18 days during the Asian Financial Crisis, but less than a decade later, has become one of the world’s Top 20 most profitable carriers with a double-digit net profit margin last year.
PAL generated a record profit of USD140.3 million in the 12 months ended 31-Mar-07 - a sixfold increase on the previous year - and its third straight annual profit. The result was supported by strong load factors of 76.8% (a 15-year high for the airline), as it added capacity carefully in its streamlined network.
The strong turnaround, under President and COO, Jaime Bautista, has positioned the carrier to invest in upgrading its domestic fleet (with 20 A320 family aircraft to be in place by 2008/09) and long-haul fleet (with six B777-300ERs to be added by 2009, and an upgrade to its B747 cabins to be completed in 2008).
Bautista noted, “these solid results, not just from last fiscal year but over the past eight years under restructuring, confirm that PAL is fully recovered and is now firmly on track towards long-term profitability”.
But PAL faces rising competitive pressure from aggressively expanding LCC, Cebu Pacific (on domestic and international routes), as well as foreign LCCs like Tiger Airways and AirAsia that operate to Manila’s second gateway at Clark, 70 km to the north of the capital. PAL recently announced a substantial investment to develop facilities at Clark in preparation for the launch of services there - just days after Cebu Pacific announced its third hub at the airport. The facilities would support PAL’s planned launch of services to China, Japan, South Korea and other foreign destinations in the next few years.
The Philippine Government is determined to develop Clark as a major international gateway, but PAL is concerned the government could open access for foreign carriers at the airport too quickly.
Last week, PAL urged the government to liberalise aviation access “wisely and responsibly” and that “liberalisation is not the goal - it is a tool”. A spokeswoman added, “we are not asking to be coddled like a baby. What we need is a fair chance to compete ... a level playing field”.
Whatever the outcome of the government’s policy on aviation access, PAL is in a better position to compete effectively than ever.