PAL seen missing goal of making profit in 2018

Flag carrier Philippine Airlines tempered expectations that it would return to profitability in 2018, citing the rising cost of jet fuel.

PAL president Jaime Bautista told reporters in a recent interview that the airline could miss its goal to post a profit, which was hinged on the early implementation of the fuel surcharge.

“We were hoping the [surcharge] could be approved in early 2018,” Bautista explained. “We just started collecting on Sept. 16.”

PAL perviously announced that it posted a comprehensive net loss of $129 million last year, reversing an $86-million profit in 2016.

The Civil Aeronautics Board earlier allowed commercial carriers to impose a fuel surcharge, which airlines add on to the ticket price. This would allow them to partially recover the cost of jet fuel, which was up about 25 percent year-on-year when the policy was finally implemented last month.

The current surcharge tier approved by the CAB meant that airlines could add an additional P74 to P291 for a one-way domestic trip, depending on the distance flown. For international flights, the range was an extra P381 to P3,632. This will be reviewed and possibly adjusted every two months. The CAB said the surcharge would be removed if the price of jet fuel fell below P21 a liter.

Both PAL and budget airline Cebu Pacific Air availed themselves of the fuel surcharge mechanism last month. Air Asia Philippines on Oct. 2 said it would not avail itself of the fuel surcharge, a move that could lure additional customers turned off by higher prices.

The rising cost of jet fuel has been a drag on the global airline industry’s profitability. At home, regulators are also worried that the airlines may cut back on less profitable routes to preserve their bottomline.

PAL officials earlier this year said they were targeting to carry around 17 million passengers in 2018, up from 14.5 million in 2017. It remains to be seen if higher ticket prices will dampen demand for air travel.

The fuel surcharge was scrapped in early 2015, when the average price of jet fuel fell to $52 a barrel, down 22 percent from the previous year and lower by 60 percent from the recent high of $129.6 a barrel in 2012. According to S&P Global Platts, the price of jet fuel as of Oct. 19 this year hit $95.26 a barrel, up 36 percent.