PAL seen taking more conservative stance

Philippine Airlines CONTRIBUTED PHOTO

MANILA, Philippines-Philippine Airlines is considering deferring some orders from French plane maker Airbus SAS, signaling that the airline management is taking a more conservative expansion approach after taipan Lucio Tan last month retook the helm of the flag carrier from conglomerate San Miguel Corp.

PAL’s current management is led by its former president and now general manager Jaime Bautista, who told reporters in a chance interview Tuesday that while a different direction would be set, it was still anchored on returning to profitability while ensuring passenger safety and service.

The new business plan, which is yet to be finalized, is deemed important in making PAL more “attractive” before taking on a potential new strategic investor, Bautista said.

New overseas flights, meanwhile, would focus on the United States, which is now possible after the Philippines’s Category 1 rating was restored earlier this year, and less on Europe, where it would be “very difficult to become profitable,” Bautista said.

PAL recently announced a plan to fly from Manila to New York, via Vancouver, by March next year, marking its return to the US East Coast after 18 years. In Europe, PAL currently flies directly to London from Manila.

Tan’s managers have barely warmed their seats—this is Bautista’s first media interview since a deal to reacquire SMC’s 49-percent stake for more than $1 billion was signed on Sept. 15.

In the interview, Bautista said PAL had “too many planes.”

“Right now, we have to accept the fact that many planes were ordered by PAL,” Bautista said, referring to a $9.5-billion refleeting program that involved the acquisition of 64 mid-range and long-range planes from Airbus.

Bautista, however said, PAL was not ditching plans to become an aggressive player as envisioned under SMC.

“What we want is a well-managed expansion,” Bautista said. “We really have to check if the market requires all these planes.”

The refleeting was a key component in SMC’s plan to bring PAL back to profitability when the conglomerate entered in 2012, with the carrier expected to save millions of dollars on fuel and maintenance-related costs, SMC president Ramon S. Ang said in a previous interview.

Losses mounted over the last few years mainly due to volatile fuel prices and fierce competition posed by budget carriers like the Gokongwei Group’s Cebu Pacific Air. The latter now corners more than half of all domestic flights.

Bautista said PAL would receive the 30th Airbus aircraft from the latest order in November, with about 20 more planes scheduled for delivery through 2016.

Asked about deferring orders, Bautista noted “we will have to discuss with Airbus.”

“We can defer but there are costs if you defer,” he added.

PAL Holdings, the listed operator of PAL, had 85 planes of as June 2014, with mid-range Airbus A319s, A320s and A321s accounting for half, information on its latest quarterly report showed.

It also operates a fleet of Airbus A340s, A330s and six Boeing 777-300ERs, which are being deployed for US flights.