Brexit to cost $4-M revenue loss in PAL’s London route

Louella Desiderio - The Philippine Star

MANILA, Philippines - Flag carrier Philippine Airlines (PAL) sees a $4 million reduction in revenues from its London operations this year following the United Kingdom’s decision to leave the European Union (EU).

PAL president and chief operating officer Jaime Bautista told reporters following the airline’s annual stockholders meeting yesterday the devaluation of the pound after UK voted to leave the EU would mean lower revenues from flights to London for this year.

“An eight percent devaluation of the British pound sterling would mean an eight percent reduction in our revenue in London because we are expecting to generate around $50 million...from our UK operations (this year) and with an eight percent (devaluation), it’s more or less $4 million reduction in revenue for our London operations,” he said.

The pound is under pressure amid uncertainty in the UK.

With weaker currency and purchasing power, British are expected to think twice about taking trips overseas.

On the other hand, Bautista said the Brexit may encourage more Filipinos to travel to the UK since the devaluation of the pound would mean they could spend more.

On Tuesday, PAL increased its Manila to London air service by offering daily flights from four per week previously to improve its offering and compete with other carriers.

“The reason for adding flights, actually, we are not making money in London yet. But for us to be able to compete with the other carriers, we have to improve our product. The four times a week is not really a good product,” Bautista said.

At present, PAL holds less than 30 percent of the market flying out of Manila to London.

Bautista said the airline is hopeful the daily flights would encourage passengers using other airlines to choose PAL instead.

Asked how the Brexit would affect PAL’s plan to expand operations in Europe, he said it is too early to react since flights to new destinations in the region would not be launched until 2018, when it takes delivery of the Airbus A350 acquired earlier this year for its long-haul flights.

“I think this will normalize also,” he said.

PAL is studying offering flights to four areas in Europe such as Amsterdam in the Netherlands, Hamburg in Germany, Rome in Italy and Paris in France.

Despite increasing competition and overcapacity, PAL still expects 2016 to be a profitable year given encouraging loads seen on new flights mounted this year.

Earlier this year, PAL started flying to destinations such as Jeddah in Saudi Arabia, Kuwait, Doha in Qatar, and Saipan from Manila, as well as Los Angeles in the US from Cebu.

Last June 25, PAL also started operating its Manila-Taipei-Osaka service.

PAL’s net income skyrocketed 35 times to $132.73 million in 2015 from $3.80 million in 2014.

The flag carrier’s comprehensive income posted a 560 percent jump to $134.42 million last year from $20.38 million in 2014.

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