PAL further tweaks aircraft order from Airbus

Lawrence Agcaoili (The Philippine Star) - August 18, 2014 - 12:00am

MANILA, Philippines - National flag carrier Philippine Airlines Inc. (PAL), jointly owned by taipan Lucio Tan and diversified conglomerate San Miguel Corp. (SMC), has further tweaked its order of Airbus aircraft under its massive fleet renewal program.

Based on a report submitted to the Philippine Stock Exchange (PSE), PAL has decided not to exercise an option to acquire eight of the 20 A321 NEO (new engine option) that it has agreed to purchase last year.

In April 2012, SMC’s wholly-owned subsidiary San Miguel Equity Investments Inc. (SMEII) acquired a 49-percent equity interest in Trustmark Holdings Corp. for $500 million. Trustmark owns 97.71 percent of PAL Holdings which in turn owns 84.67 percent of PAL through PR Holdings Inc.

PAL embarked on a fleet renewal program aimed at acquiring 100 brand new aircraft. It entered into two purchase agreements with aircraft maker Airbus.

PAL entered into its first Purchase Agreement with Airbus for firm order of 44 A320 aircraft with options for 20 A321 NEO aircraft for delivery in fiscal years 2014 to 2020.

It also signed a second purchase agreement for a firm order of 10 A330-300 and options for another 10 for delivery in fiscal years 2014 to 2016.

However, PAL and Airbus agreed to an amendment last March wherein the number of order of A330-300 aircraft would be reduced to 15 instead of 20.

PAL dropped an option to acquire eight A321 NEO aircraft in the first purchase agreement but agreed to acquire eight A321 NEO. The airline has until 2017 to exercise its right to purchase four A321 NEO aircraft.

As of end-June, PAL has received a total of 17 aircraft from Airbus including 10 A330 and seven A321.

The fleet of the PAL Group including PAL Express stood at 85 as of end-June. The fleet is composed of six Boeing 777-300ER,  four Boeing 747-400, 10 A340-300, 18, A330-300, seven A321-231, 28 A320-200, three A319, five Bombardier DHC 8-400, and four Bombardier DHC 8-300.

PAL is set to retire 20 aging aircraft including four Boeing 747-400 aircraft as part of efforts to transform the company into “Asia’s airline of choice” and one of Asia’s youngest fleet at 3.5 years.

PAL is set to launch direct flights to New York, Florida, Chicago and other major cities after expanding its flights to Los Angeles, San Francisco, Hawaii, and Guam as the country’s aviation safety rating was upgraded back to Category 1 last April.

It is also set to launch more direct flights to Europe including Paris, Rome, Amsterdam, among others after successfully mounting direct flights to London last November after the airline was allowed by the European Union to enter European airspace.

PAL revenues jumped 47.4 percent to P27.3 billion from April to June this year compared to P18.52 billion in the same period last year as passenger revenues surged 51 percent while cargo revenues grew 33 percent.

The airline’s expenses increased 31 percent to P25.52 billion from P19.47 billion largely on account of higher expenses related to flying operations, aircraft and traffic servicing, passenger service, reservation and sales, general and administrative expenses.

Talks are ongoing for a move to buyback SMC’s 49-percent stake in PAL by the Tan Group.

After taking back full control of PAL possibly within the month, the Tan Group is likely to take in Abu Dhabi-based Etihad Airways as partner for a 40-percent stake in the national flag carrier.


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