Home » Aviation » PAL expects savings of $20-30M this year

PHILIPPINE Airlines (PAL), the country’s flag carrier, will implement a fuel-efficiency program to bring in savings of $20-$30 million a year.

“Once again, a pall of dark clouds hovers over our industry. Like they were in recent months, sharp oil price spikes will be a recurring challenge in the short to medium term,” said PAL chairman Lucio Tan and president Jaime Bautista in a joint letter released at last week’s stockholders’ meeting.

PAL’s cost-savings program includes working with authorities so it can take the shortest possible route to its destinations, reducing free passenger baggage allowance, reducing baggage for cabin crew, cutting on meal servings to two instead of three, and offering fewer drinks.

Andrew Huang, SVP-Finance and chief financial officer said the carrier now has to cough up $360 million a year just to cover the additional cost brought about by the $60 difference in jet fuel from last year’s $90 a barrel to today’s $150. PAL consumes six-million barrels of jet fuel a year.

Huang said increasing fares was out of the picture because this would only dampen appetite for flying. The carrier would, however, implement surcharges.

“Malaysian airlines have increased (their) surcharge by 80%; (The) Taiwanese had (a) 25% increase across-the-board but still they have not recovered,” Huang said.

“The outlook for the next 12 months is anything but rosy,” PAL executives admitted.

“Until the recent tempest caused by the unprecedented upsurge in fuel prices, the airline industry appeared to be one of the best-performing business,” they said.

For 2007, PAL posted a $30.6-million profit, its fourth consecutive annual surplus since exiting receivership in September last year.

It expects to increase passenger volume to 8 million from 7 million last year.

PAL recently secured a total of $200 million in loans to purchase new aircraft. The first of six orders is due for delivery in September 2009.

SINGLE-HULL tankers carrying white oil will be phased out at the start of 2011. This was the agreement between the Maritime Industry Authority (Marina) and the Philippine Petroleum Sea Transport Association and the Association of Tanker Operators of the Philippines.

Marina originally wanted a 2010 schedule, a year after implementing the total phaseout of single-hull tankers carrying black oil.

Marina administrator Vicente Suazo, Jr., in an interview, said the agency has completed consultations with stakeholders.

“(But) it’s (just) funny that they (tanker operators) didn’t want the December 31, 2010 deadline, but agreed to January 1, 2011 because it sounded longer. They couldn’t do anything but follow because of the tight competition since oil companies themselves require them to be double-hulled,” Suazo said.

“Total and Pilipinas Shell, for instance, have told them to replace their fleet to double-hull in order to continue carrying their white or black oil,” he explained.

Of the 214 oil tankers in the country, 100 vessels carry white oil.

Marina is seeking the total phaseout of single-hull tankers by 2011 to comply with international standards.

Earlier, Marina said tanker operators not ready for the double-hull requirement could be delisted from the Philippine registry and their license to operate revoked.

The Marina board has already extended to yearend compliance to the double-hull requirement for black oil, provided special permits are secured.

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