PAL gears for growth, tough times

Philippine Airlines today said it was poised for sustained growth and profitability over the near term, but warned that external factors could pose challenges ahead.

In a joint report to stockholders gathered for their annual meeting in Manila, PAL chairman Lucio Tan and president Avelino L. Zapanta said two straight years of profits – coming after six years of massive losses – had galvanized the flag carrier and created a momentum for growth.

“Our profitability for the past two years is an achievement that we want to evolve into a tradition in Philippine Airlines, one that we hope we can sustain unbroken into the future,” they said.

The two top PAL executives reported a net income of P419 million – slightly adjusted from the unaudited P436 million declared earlier – for the 2000-2001 fiscal year that ended March 31. This was more than nine times the previous year’s profit of P45.8 million.

The surge in revenues enabled PAL to make not only its scheduled principal and interest payments of $365.3 million but also $14.2 million in debt prepayments during the last fiscal year.

“Thus, PAL remained on target in its financial commitments to creditors under the rehabilitation plan despite the adverse operating environment prevailing during the year in review,” said Tan and Zapanta.

Both also expounded on several initiatives undertaken to enhance productivity and service delivery. These include the upgrade of systems controlling the airline’s sales, accounting and revenue management functions, and the launch of real-time online booking service.

PAL is also in the process of phasing in enrichments to its inflight service, in the form of new meal-service equipment, better-quality meals and improved flight amenities, as well as to its frequent-flyer programs.

“We are making investments for the future to provide the company with the right product and our staff with the right tools to conduct business, including electronic business,” they told stockholders.

Notwithstanding these strides, Tan and Zapanta sounded a cautious note in assessing the challenges facing the flag carrier in the next few years.

They said the major challenges for PAL over the short term were the uncertainty in the global economy; the unpredictability of jet fuel prices; the continuous escalation of passenger service levels; the constant pressure on yields; and intensifying competition.

They said the behavior of these factors, which are largely beyond PAL’s influence, would impact significantly on the airline’s bottom line in the coming years.

“The future demands more from us, given the (difficult challenges) that the airline industry will face during the current fiscal year and beyond.”