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By: Marvin Germo | June 26, 2019

Airlines Competition

The competition among airline companies here in the Philippines is not new. Steep competition has been long existing between local airline companies and other Asian and Gulf carriers. For PAL to become efficient, there is an urged to cut down their widebody fleet. This will allow the company to minimize the routes from its long haul flights that are profiting lower than its normal operation. In a simple sense, PAL should consider replacing its long-range jetliners with new airplanes that could fit long haul flights. So, what does this mean for the company?

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Stock Smarts Manila —  June 15, 16, 22, 23, & 29, 2019
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Dropping European Flights

Replacing long-range jetliners means dropping its flights particularly in Europe and North America. The market for Philippine and Europe is too aggressive and competitive, considering that there are numerous Gulf and Asian carriers waiting in the line. If PAL would choose to reduce the flights that giving them low profits, they must be able to cut down its European flights entirely. The Australian-based Center for Asia Pacific Aviation (CAPA) has said it already—PAL is best off retreating from Europe operations completely. Having said that, the flag carrier can increase its capacity in other regions of the world to make up for the cut down if ever they choose to follow this urge.

PAL’s Aircraft Acquisition

Currently, PAL has 16 long haul aircraft in its possession. This includes 6 Airbus A350-900s and 10 Boeing 777-300ERs. They are basically used to fly to New York, London, Los Angeles, Toronto, San Francisco, and Vancouver. Apart from this, PAL is considering to acquire more Airbuses and 777xs as a replacement to the older model 777-300ERs, which is not a better idea as per the statements of CAPA. Rather, the company should use the upcoming lease returns as a chance to reduce its long-haul capacity and improve its profitability. If this will not be considered, PAL will then have difficulties to cut back in London or North America without launching its Paris route first.

PAL’s Losses For The Past Years

So if you’re wondering where this is all coming from, you should know by now that PAL has been incurring losses since 2017. It has not been making yields from its Manila-London routes although there have been changes to aircraft, schedules, and frequency since 2013. These losses are seen to be the result of long-haul flights, including that of London. During the first quarter of this year, the carrier reported an attributable net loss of P838.17 million, which is already 24.3% better compared to its losses in the same period last year.

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