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NEWS UPDATES 1 October 2009

Philippine national carrier to reduce staff, capacity

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Philippine Airlines (PAL) on Wednesday said it would let go more of its staff and capacity as it sees no recovery until next year, the Manila Times reported.

On the sidelines of the stockholders’ meeting of PAL Holdings Inc., Jaime Bautista, PAL president, told reporters that its first quarter operations from April to June this year “are not encouraging.”

The Lucio Tan-owned airline reported a net income of $35.5 million for the three-month period, down by $9.6 million over the same period last year.

Revenues dropped by 12 percent to $394 million compared with $446.9 million last year.

“The situation we are facing is very serious and your management has taken initiatives to further reduce costs and also increase revenues. We could only hope that there would be some improvement in the outlook for 2010,” Bautista said.

He said the company would reduce its workforce by 7 percent to 10 percent, while trimming about 7 percent of the airline’s seat and flight capacities.

He said its US and Australian flight capacities have been reduced by 5 percent to 7 percent.

At end-March, PAL had a workforce of 8,052. Of the total, 472 were pilots and 1,593 were cabin crew.

The PAL employees have until October 31 to accept the company’s retirement packages, Bautista said, after which the management will undertake a rationalisation programme.

“We are planning to outsource our non-core business like catering and ground breaking services,” he said.

Tan also controls MacroAsia Corp, which has as one of its businesses the handling of catering services for airlines.

Bautista said PAL would further cut the number of its security guards nationwide.

“Moving forward, we are now in the second quarter of what appears to be an extremely difficult fiscal year. This current fiscal year still shows no signs of recovery,” he said.

The PAL executive said the outlook for this fiscal year remains “extremely” challenging with early indications that both cargo and passenger demand will remain “depressed” in the months ahead.

He expects the carrier to post a net loss in the second quarter of its fiscal year due to weak international passenger demand.

He projected flat growth in the number of passengers this year to nine million from 8.5 million passengers last year.

For the full year, Bautista expects a “better” performance compared with last year, but “it’s still a net loss.”

For its fiscal year ending March this year, PAL posted a net loss of $301 million from a net profit of $30.6 million in the fiscal year ending March 2008.

The company’s total expenses for the first quarter amounted to $358.5 million, 11 percent lower than the previous year’s $401.8 million. Fuel comprised 44 percent of its operating expenses.

Bautista also said the company has implemented a variety of measures to deal with the current liquidity crisis. ”These include launching revenue enhancement programs, tapping new traffic streams, reducing flight frequencies on under-performing routes and redeploying freed capacity onto other routes to take advantage of new opportunities deferring all non-essential capital spending, suspending all non-essential programme and cutting fixed operating expenses,” he said.


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