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PAL to Cut Costs Following US$301.4 Million Loss

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Following a US$301.4 million loss for its fiscal year ended March 31, 2009, Philippine Airlines has confirmed it will take decisive steps like rationalizing its workforce, realigning operations to match demand and other cost-cutting measures to survive the crisis currently plaguing airlines worldwide.

The airline management will offer early retirement packages for its employees as one way of enhancing productivity and reducing costs.

“Extraordinary times call for extraordinary measures,” PAL president and chief operating officer, Jaime J. Bautista said, noting that PAL – as a global business – shares the same predicament as other airlines severely hit by the slowdown in passenger traffic.

“We are currently reviewing our entire organizational set-up. We want to make PAL lean and mean so it will be agile and flexible enough to adapt to the new economic climate. Clearly, the crisis has changed the face of the airline industry which is among the sectors hardest hit by the recession,” Bautista added.

PAL shareholders have approved a quasi-reorganization plan, reducing the par value of PAL shares to P0.20 from P0.80 per share. The airline will also increase its authorized capital stock from P16 billion to P20 billion divided into 100 billion shares at P0.20 per share.

PAL’s annual report showed an increase in revenues to US$1.634 billion, from US$1.504 billion the previous year, after carrying 17% more passengers due to acquisition of additional aircraft and growth in the domestic market.

However, the cost of operating more flights, which involved higher maintenance expense and compounded by record-high fuel prices, raised expenses to US$1.9 billion, from US$1.539 billion the previous year. Fuel comprised 44% of PAL's operating expenses.

In the latter part of the year, PAL’s passenger load factor fell to an average of 76.2%, three points lower than the previous year.

PAL also reported paying US$165.4 million in principal and interest to its creditors, bringing to US$2.4 billion the total paid from March 1999 to March 2009. Total assets decreased by US$60.6 million to US$1.971 billion, while total liabilities rose by US$239.5 million over the previous year.

“We must stress, however, that our cost-cutting measures will in no way infringe on our safety compliance and standards. We are eyeing new destinations either through charters or regular scheduled operations. We also expect to take delivery of our brand new and fuel-efficient Boeing 777-300ERs and we are in the final stages of refurbishing our current fleet of wide-bodied aircraft to feature a bi-class configuration, new seats and state-of-the-art entertainment systems. All these are being done to better serve our customers,” Bautista said.

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