PAL out to replace aging fleet

Philippine Airlines may save as much as $160 million a year once it starts replacing its aging fleet of Boeing 747 planes now serving lucrative United States routes, company president Ramon S. Ang said.

The flag carrier is looking to acquire newer, more fuel-efficient planes to stem its financial losses.

The announcement came a day after the United States Federal Aviation Authority said it would bring the Philippines back to the so-called Category 1 aviation status, which would open up the United States to local carriers.

Rival carrier Cebu Pacific said it was studying European destinations like London, Paris and Amsterdam, apart from US destinations such as Hawaii, Guam and Saipan, CEO Lance Gokongwei said on Thursday.

In the case of Philippine Airlines, which already flies to the United States, the immediate benefit of a Category 1 rating is that it can now avail of newer Boeing 777 planes as the US “blacklist” has been finally lifted after six years.

Its previous Category 2 rating prevented the national carrier from acquiring newer aircraft, as well as expanding routes beyond existing destinations.

“This means at least $100 million a year on savings on fuel, and another $60 million on maintenance,” Ang said in press conference, where it was announced that a European Union ban was lifted for Cebu Pacific, the country’s biggest budget carrier and a rival of Philippine Airlines.

Philippine Airlines uses passengers Boeing 747-400 aircraft to ferry passengers to Los Angeles and San Francisco.

Once Boeing’s best-selling model, the 747-400 model was replaced in 2009 by the more efficient Boeing 777s, which has enough range to reach the US east coast from Manila.

Philippine Airlines obtained its first Boeing 777-300ER in 2009, a year after the US FAA downgraded the Philippines to Category 2. The flag carrier currently has a fleet of six Boeing 777-300s, which Ang said would be deployed to the United States “within a month’s time.”

Philippine Airlines’ parent, PAL Holdings, booked a net loss of P2.2 billion during the six months of its fiscal year ending in September 2013. It said sales dipped by 5.9 percent to P36.6 billion due to a decline in passenger revenues and yields.

Jose Mari Lacson, head of research at Campos Lanuza & Co., agreed that switching to newer planes would help Philippine Airlines cut costs. Fuel expenses are the single largest component of an airline’s operating costs, accounting for about 40 percent.

“But it’s not 100 percent [of the problem],” Lacson said in an interview. “It’s still about bringing in the passengers by providing better services and keeping ticket prices stable.”