PAL expects profit despite high fuel cost

MANILA, Philippines—Flag carrier Philippine Airlines (PAL) still expects to post a net profit in its current fiscal year with fuel prices still at manageable levels.

PAL president and chief operating officer Jaime Bautista admitted that the price of jet fuel has surpassed the company’s estimates due to the crisis currently sweeping the Middle East, the world’s biggest oil producer.

However, he said this has not yet been enough to make PAL operate unprofitable flights.

“Our estimate was that jet fuel would average at $110 per barrel this year,” Bautista said at the sidelines of the company’s 70th anniversary celebration in Pasay City last Tuesday.

Documents from the International Air Transport Association (IATA) showed that jet fuel, which is more expensive than regular gasoline, now costs $134 a barrel, or a 53-percent increase year on year.

This means the price of jet fuel has averaged at $118 a barrel since the start of 2011.

When asked whether this would mean PAL would slip back into losses for its current fiscal year, Bautista said: “No, I don’t think so.”

PAL earlier reported a “modest” net income of $15.1 million for the October-to-December period of 2010, or the third quarter of its fiscal year. This was a turnaround from the $22.9-million comprehensive net loss during the same period in 2009.

This came as revenues totaled $397 million, up 21 percent from $327.4 million in the same period in 2009.

The flag carrier warned, however, that the rising cost of jet fuel, which continued to be its single-biggest expense item, continued to loom as a threat to its sustained profitability.

Airline officials have said that higher oil prices might wipe out gains made in the past year. In 2008, the airline industry suffered massive losses as oil prices reached record highs. The following year was another bad one for airlines, which saw revenues fall as the world economy slipped into recession.

IATA estimates showed airline profits worldwide would fall by close to half in 2011 to around $8 billion due to rising cost of fuel.