Old challenges greet new PAL managers

Taipan Lucio Tan’s Philippine Airlines (PAL) is navigating another era of transition amid its biggest management shakeup since San Miguel Corp. exited the flag carrier five years ago.

And alongside these ongoing changes, the airline faces a familiar host of challenges.

Rivals, including budget airlines Cebu Pacific and Philippines Air Asia, are strengthening their market positions and expanding their fleets.

PAL is also hoping to post a profit in 2019 after recording two successive years of losses as an aggressive expansion push coincided with a jump in jet fuel prices last year.

Sources told the Inquirer that cutting costs and returning to profit would be a key focus of Vivienne Tan, the daughter of Lucio Tan who was named PAL officer-in-charge after the surprise retirement of Jaime Bautista, the airline’s longtime president. PAL’s board formalized the transition on Monday.

A broad review on strategy would include a number of business decisions that were made in recent years.

Sources said among these was PAL’s pursuit of a Skytrax five-star rating, which was first announced in 2016 to help secure and validate PAL’s ambitions to become a recognized world-class airline.

PAL swiftly reached four-star status in 2018 after buying new planes, including next-generation Airbus A350-900s, expanding its global routes and upgrading existing aircraft and customer service.

The new status became a source of pride for Asia’s oldest airline and introduced PAL into the small constellation of four-star carriers. But with earnings in focus, a decision would have to be made given the huge investments to attain the five-star goal, sources said.

Another segment that drew scrutiny was PAL’s P600-million foray into the passenger maritime business. Through Mabuhay Maritime Express, PAL launched a premium ferry service between Kalibo and Boracay Island on October 2018.

Bautista said last May 30 they were looking for new routes after downscaling the Kalibo-Boracay service since the business was “not making money at this time.”

Sources said those initiatives enjoyed the blessings of the elder Tan but these would need to be “rationalized” with PAL’s immediate goal to stop losses.

Bautista’s management team also led successful negotiation for the entry of Japan’s ANA Holdings, which now owns 9.5 percent of operator PAL Holdings, last February. CAPA Center for Aviation chief analyst Brendan Sobie said there were other major areas where PAL can improve the bottom line.

“PAL has slipped into the red in the past two years, due mainly to losses in the long haul segment,” Sobie said in a June 22 report. He suggested the airline scrap money-losing operations in Europe, reduce capacity to the United States, cut its long-haul fleet and postpone future orders.

Bautista had earlier acknowledged the need to cut unprofitable routes. He said PAL would pursue more chartered flights, a $100-million business for the airline, to maximize the use of its aircraft.