While it still lost money in 2018, Philippine Airlines (PAL) is optimistic that it has turned the corner of profitability. I’m not so sure.
Citing higher fuel and aircraft leases costs, PAL reported a loss of P4.33 billion ($101 million) for 2018. That is 40% less than its 2017 loss of P7.33 billion ($189 million). Revenue increased by 16% in 2018.
While revenue increased through cargo traffic and passenger load factors remained unchanged at 77.4%, expenses rose nearly 18% thanks to a 36% jump in fuel from 2017.
PAL has 87 aircraft in its fleet and has taken delivery of the following aircraft over the last year:
- 4 Airbus A350-900s
- 6 A321neos
- 5 Bombardier Q400s
The Problem For Philippine Airlines
PAL has a problem. Its fleet is largely modern and efficient. Labor costs are steady. Ancillary revenue is up. Cargo revenue is up. Passenger traffic is holding steady. And yet it could not turn a profit.
Certainly, fuel costs are up and to blame, but they are not at historic highs and that leads me to question whether PAL can expect to turn a profit in 2019 and beyond. Other carriers, of course, have been burdened by higher fuel prices but still managed to turn profit.
But Optimism For 2019…
Nevertheless, Chief Operating Officer Jaime Bautista told the Philippine Star that it expects his airline to return to profitability in 2019. He points to PAL’s strong market share on key routes and hopes that “stabilized” fuel prices will lead to profit. Well, that’s certainly fair. But on the other hand, what if fuel prices do remain steady and PAL still loses money? Then what? Will flag-carrier PAL just be earmarked as necessary loss for economic development in the Philippines?
CONCLUSION
I do look forward to flying Philippine Airlines this year…the carrier has certainly upped its game with its business class product. But I am not betting on profit.
Note, that Flight Global has a contrary report on PAL’s numbers, asserting that losses doubled last year. That information is contradicted by nearly every other publication on the matter. However, PAL has not posted the raw numbers yet. If losses did double, my analysis would not change…my skepticism would merely grow.
image: Philippine Airlines
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