PAL posts $10M Q1 loss on high fuel prices, unrest

Philippine Airlines (PAL) reported today (17 August 2011) a total comprehensive loss of USD 10.6 million for the first quarter (April to June) of its current fiscal year 2011-12 compared to a USD 31.6 million comprehensive income for the same period in 2010.

The flag carrier attributes the slide to modest revenue growth eroded by significant increases in fuel prices and other factors like political turmoil in the Middle East and North Africa and natural calamities like the Japan earthquake and tsunami.

In a report submitted to the Securities and Exchange Commission, PAL said operating revenues improved by USD 25.6 million or 6% to USD 454.1 million for the period April to June 2011. While the airline reported a 9% improvement in passenger yields in its first quarter operations, sluggish demand resulted in a 7% decline in passenger traffic, it said.

Operating expenses, on the other hand, escalated to USD 464.7 million, up by USD 71.3 million or 18% compared to the same period year. Jet fuel costs alone, which is the airline’s biggest expense item amounted to USD 210.8 million up by USD 56.2 million or 36% from the year ago level of USD 154.6 million. Aviation fuel prices increased from an average of USD 100.47 per barrel for the period April to June 2010 to USD 138.11 per barrel for the same period in 2011.

The International Air Transport Association (IATA), of which PAL is a member, expects a net industry margin of only 0.7% this year. It said rising jet fuel prices is putting much pressure on the bottomline of its member airlines. According to IATA, the ability of airlines to recoup this cost is critical to staying in the black this year and slower economic growth is making these challenges all the more difficult.