PAL seals Airbus refleeting deal

MANILA, Philippines–Philippine Air­lines has sealed a deal for as many as 85 wide- and nar­row-bod­ied jet­lin­ers from the world’s big­gest air­craft man­u­fac­turer Air­bus In­dus­trie in a trans­ac­tion that the flag car­rier is set to an­nounce Tuesday.
Ac­cord­ing to in­dus­try sources fa­mil­iar with the mat­ter, the first phase of the mul­ti­year ac­qui­si­tion spree would see PAL ac­quir­ing up to 54 air­craft (raised from an initial order of 35) from the Euro­pean plane maker to boost its cur­rent fleet of 39 jets.

A report by Reuters released Tuesday pegs the total value of the deal’s first batch at $7 billion at the plane manufacturer’s list prices, although discounts for large orders are customary in the industry.

The new batch of air­craft is re­ported to in­clude up to 10 A330-300 twin-aisle jets, which will be de­ployed to PAL’s re­gional and mid-range flights, in­clud­ing its ex­pected re­turn to the Mid­dle East mar­ket.

The rest of the or­der will come in the form of sin­gle-aisle A320 jets and their higher-ca­pac­ity vari­ant, the A321, which will be used for re­gional and short-haul do­mes­tic flights.

The source added that or­ders for A320 and A321 air­craft would be in the form of Air­bus’ “neo” or New Engine Op­tion planes, which could pro­vide op­er­a­tors with as much as 20-per­cent cost sav­ings in terms of fuel con­sump­tion.

PAL se­lected the Air­bus A320­neo and A321­neo, in par­tic­u­lar, be­cause of its ef­forts to re­duce op­er­at­ing costs, es­pe­cially since fuel ac­counts for as much as 45 per­cent of the flag car­rier’s ex­penses.

The PAL-Air­bus deal was sup­posed to be an­nounced as early as last month dur­ing the bi­en­nial Farn­bor­ough Air­show in the United King­dom, but was de­layed due to last minute ne­go­ti­a­tions, ac­cord­ing to peo­ple fa­mil­iar with the deal.

Ear­lier, PAL pres­i­dent and San Miguel group head Ra­mon S. Ang said the air­line would ac­quire as many as 100 air­craft over the next few years as part of its re­fleet­ing ef­forts.

The bal­ance of the 100-plane ac­qui­si­tion plan is ex­pected to go to Air­bus’ ri­val, Boe­ing, in an­tic­i­pa­tion of the coun­try be­ing re­stored to Cat­e­gory 1 sta­tus by the US Fed­eral Avi­a­tion
Ad­min­is­tra­tion.

Un­der the Philip­pines’ cur­rent Cat­e­gory 2 sta­tus, PAL is pro­hib­ited from us­ing planes other than its cur­rent and ag­ing Boe­ing 747-400s and Air­bus A340-300s for flights to the US West Coast. The flag car­rier is also pro­hib­ited from mount­ing ad­di­tional flights to US des­ti­na­tions de­spite the grow­ing de­mand from di­rect trans-Pa­cific flights be­tween the two coun­tries.

PAL op­er­ates eight air­craft man­u­fac­tured by Boe­ing, namely three B777-300ERs and five 747-400s. It has 31 Air­bus jets in its fleet, made up of four A340-300s, eight A330300s, 15 A320-200s, and four A319s.

PAL re­cently placed an or­der for three more B777-300ERs, which can match the range of the B747, but has more ef­fi­cient fuel con­sump­tion since the for­mer model only has two en­gines com­pared to the lat­ter’s four.

Last week, PAL’s par­ent firm, PAL Hold­ings, re­ported that it had posted a com­pre­hen­sive net in­come of P489.2 mil­lion, mark­ing a sig­nif­i­cant turn­around from the P475.1-mil­lion loss in the same three-month pe­riod last year. To­tal rev­enues for the first quar­ter of the cur­rent fis­cal year amounted to P20.8 bil­lion or 5.8 per­cent higher than last year’s P19.6 bil­lion.