Increased profitability seen for PH airlines

Domestic carriers are likely to see higher earnings in 2015 as they benefit from lower fuel prices and recent consolidation moves, consultancy firm Capa Center for Aviation said in a recent report.

Flag carrier Philippine Airlines (PAL), in particular, was cited as having its outlook “significantly improved” following an internal decision to slow down network expansion last year and defer aircraft orders, the report, which focused on PAL, said.

“The Philippine flag carrier returned in the black in 2014 with a small profit and should be able to turn a more sizeable profit in 2015 following a profitable first quarter,” Capa said.

It was referring to the company’s 2014 performance, through parent firm PAL Holdings, which showed that net income during the period hit P129.74 million.

It did not provide full-year 2013 earnings, but PAL Holdings posted an P11.85-billion net loss in the nine months ending Dec. 31, 2013. Separately, for the first quarter of 2015, PAL Holdings saw profit hit P3.78 billion, reversing a P931.13-million loss, as passenger revenues rose.

Capa noted that PAL’s international business was likely to improve as it was able to reschedule its Manila-London flights. The carrier is also seeking to regain market share in domestic flights.

Capa said the outlook for the rest of the domestic industry was just as robust, citing an ongoing consolidation plan between AirAsia Berhad and its unit Air Asia Zest as well as the 2014 acquisition of Tigerair Philippines, now known as Cebgo, by budget airline Cebu Pacific.

“Domestic yields and load factors improved significantly across all Philippine carriers in 2014, boosting profitability of the Philippine airline sector,” Capa said.

“More improvements are likely in 2015, leading to potentially even higher profits in the Philippine domestic market,” it added.

Capa noted, however, that expansion in the regional market would be “more challenging” due to capacity growth in most North Asia markets. Nevertheless, the potential for expansion was there, it added.

“Philippine carriers are well positioned to pursue some strategic growth in the increasingly competitive Philippines-North Asia market given the lower oil prices and the profits they are able to generate in domestic and other international markets,” Capa said.