Flag carrier Philippine Airlines is bracing for fresh challenges in 2017, as it deals with potential lower traffic following the declaration of martial law in Mindanao apart from fierce competition and the higher cost of fuel, for which cost-savings measures are already being implemented.
PAL president Jaime Bautista said during the company’s annual meeting yesterday that revenues would take a hit after President Duterte ordered martial rule in Mindanao, in response to a Muslim extremist attack in Marawi City.
“The present situation in Mindanao will result in some cancellations and rebookings, which we are now experiencing,” Bautista said, adding these were on both domestic and international flights.
He said it was still too early to asses the full impact, given that the situation in Mindanao had yet to be fully resolved.
“We don’t know yet how much more we will expect,” said Bautista, as he noted that cancellations so far had been minimal.
The issues in Mindanao came as PAL was already expecting operating difficulties in 2017, and in the midst of the airline’s negotiations to take in a foreign strategic partner within the year.
“The outlook is that competition will remain stiff, there is still overcapacity in the market,” Bautista said.
He was mainly referring to the Middle East. PAL announced this week it would suspend flights to Abu Dhabi on July 8 this year. A day after, Cebu Pacific Air said it would also suspend flights to Doha, Qatar; Riyadh, Saudi Arabia and Kuwait over the next two months.
Moreover, higher costs were cutting into PAL’s bottomline. Bautista said the carrier had implemented a freeze-hiring policy on certain positions. He added that PAL would study its fuel hedging policy and implement fuel saving measures.
There was also the option to increase ticket prices, should the cost of fuel continue to rise.
“We may impose higher fares for us to be able to recover additional costs,” Bautista said.
PAL’s listed operator, PAL Holdings Inc., swung to a loss in the first quarter of 2017 as the airline saw the price of fuel jump by over 50 percent.
PAL Holdings Inc. posted a net loss of P1.13 billion from January to March this year, a reversal of the P2.9 billion profit announced in the same period last year.
The carrier, nevertheless, saw better sales during the period. PAL Holdings said total revenue hit P33.32 billion in the first quarter, up 14.4 percent, as it added more flights and served more passengers. However, this was not enough to offset a steep increase in terms of costs.