PAL gears for ‘ugly’ before making money in 2020

Flag carrier Philippine Airlines (PAL) sees a return to profitability by 2020 as it explores outsourcing workers and increasing online bookings, according to company vice chair Lucio Tan Jr.

PAL, which named business process outsourcing veteran Gilbert Santa Maria as president last week, wanted to curb expenses amid what Tan described as a “very administration heavy” business.

PAL would be tapping consultants from German airline group Lufthansa to help with its turnaround.

“Give us probably six to eight months. We might find good results,” said Tan, who explained it was “not that promising” for the airline to achieve profitability by the end of 2019.

“In every rehabilitation, it gets ugly first before it gets better,” he said.

PAL’s listed operator PAL Holdings lost P4.33 billion in 2018, partly as jet fuel prices rose and competition remained aggressive. Losses last year were lower than the P7.33-billion loss it booked in 2017.

With growing revenues, Tan said cost-control measures were needed.

“There are a lot of inefficiencies there. Maybe we will start doing synergies, maybe outsourcing, maybe beef up the IT department,” Tan said.

PAL Holdings ended 2018 with over 8,000 employees. The group had outsourced some 2,500 workers in airport services and in-flight catering roles in 2010.

Tan said PAL would also lean on the expertise of its partner, Japan’s All Nippon Airways, whose parent firm, ANA Holdings, acquired a 9.5-percent stake in PAL Holdings in February.

The airline would benchmark business operations against global carriers, he said.

“Other airlines are doing half of their ticket sales from the website. Ours is still under 20 percent. So those are immediate steps. There are low-hanging fruits,” Tan said.

PAL Holdings’ last profitable year was in 2016, when it booked a P3.5-billion net income. This coincided with the launch of an aggressive strategy to achieve a five-star SkyTrax status by 2020.

Under former president Jaime Bautista, PAL won a four-star rating in 2018. Tan said achieving five-star status was still in the cards but might take more time.

“We’re still working toward that but we have to fix the problems inside first and get into profitability,” he said.