PAL posts increase in passengers to Mindanao, attributes this to lower fares

REPORT FROM BUSINESSWORLD DAVAO CITY — Philippine Airlines, Inc. (PAL) has posted higher passenger volume in Mindanao for the 10 months ending October, an official of the company said. Domingo Duerme, PAL vice-president for Mindanao sales, said the company posted an 80% load factor, an increase from the 78% passenger load posted in the same period last year. The higher figure was due mainly to the airline’s fare reduction, said Mr. Duerme. "We are getting a big share of the market because like other airlines, we have also reduced our rates," he said. Mr. Duerme also noted that passenger volume in Davao also increased due to the holding of conventions and other activities in the city. More flights To sustain the momentum, PAL is adding another flight for the Manila-Davao route starting Dec. 1. This, Mr. Duerme said, would raise the number of daily flights for the route to six. "We will first use the A-320 (aircraft for the latest flight). If the traffic is good, we will use a bigger one," he said. An A-320 aircraft has a sitting capacity of 150, while the bigger A-330 aircraft can accommodate 302 passengers. As this developed, an aviation analyst and consultancy firm see a profitable future for the Tan-led Philippine Airlines (PAL), citing its turnaround story and impressive financial results. The Center for Asia Pacific Aviation (CAPA) said PAL is poised to attain regional and trans-Pacific growth, investor interest and profitability after the firm posted $140 million in net profits for fiscal year 2006-2007, six times more than what it posted for the previous year. PAL’s revenues went up by 12.8% to $1.39 billion due to a solid load factor, showing that capacity matched demand. "An unflinching cost focus, network focus and superb productivity enhancements have provided Philippine Airlines the platform to profitably expand and establish a strong position in the region’s aviation industry," CAPA Executive Chairman Peter Harbison said. Last September, PAL exited receivership owing to its first-half performance earning profits amounting to over $170 million. In the independently conducted study, the Sidney-based think-tank highlighted that PAL’s new aircraft, cost management and frequency allocation should propel the firm to continue its strong performance. The arrival of new aircraft to be deployed in regional and trans-Pacific routes should strengthen its hold in the North American market and improve its core performance. Besides ensuring a better dispatch reliability and lower unit costs, a younger fleet will result in lower unit fuel consumption and maintenance bill, CAPA said. CAPA added that PAL was also able to reduce to control costs by complying with International Air Transport Association’s (IATA) e-ticketing (ET) standards, which reduces ticket processing charges by eliminating paper costs. In addition, PAL implemented a staff productivity improvement program, which increased revenue per employee by 10.5% annually since 1999, CAPA said. In terms of frequency allocation, CAPA pointed to PAL’s allocation of international route rights as its main advantage over low-cost airlines. "Although Cebu Pacific’s growing operations may challenge the profit performance of PAL’s domestic network, the upstart’s lack of wide-body aircraft and PAL’s superior allocation of international routes rights means that the flag carrier is unlikely to cede dominance in the foreign market anytime soon," CAPA said. — Carmelito Q. Francisco and Marian Grace S. Ramos/BusinessWorld