Philippine Airlines Reports P5.7-Billion Loss in 6 Months
MANILA – Philippine Airlines today reported a total comprehensive loss of $113.8 million for the first six months (April to September) of its current fiscal year – principally the result of the unprecedented surge in fuel prices that occurred in the second quarter (July to September) of the fiscal year.
PAL had earlier reported a total comprehensive income of $45.8 million for its first quarter (April to June) but this was overshadowed by the relentless increases in fuel prices in the following quarter, which more than erased all of the first-quarter gains.
The near-doubling of the average price of aviation fuel – from $83.73 per barrel in July-to-September 2007 to $157.03 in the same period in 2008 – impacted heavily on PAL’s expenses and, ultimately, on its bottom line.
The second quarter was also notable for the date – July 11, 2008 – when the price of crude oil reached an all-time high of $147 per barrel on the New York Mercantile Exchange, squeezing the global airline industry.
Revenues for the first half of PAL’s fiscal year (April to September 2008) increased by 16.5% to $848.7 million as the flag carrier transported 4.19 million passengers, up 11.2% over the same period the previous year. Passenger load factor was a respectable 77.2%.
However, total expenses for the first half ballooned by 37.3% from a year ago, to $971.8 million. Fuel led the way, accounting for $386.8 million of expenses during the period, making it PAL’s single biggest expense item.
In addition, PAL also recognized a non-cash fair valuation expense adjustment of $83.8 million as part of its total expenses.
In spite of the continued improvement in revenues, the increase in expenses far outpaced revenue growth, resulting in a loss of $123.1 million.
However, additional changes in the fair valuation of outstanding derivative assets, amounting to $9.3 million and reported as other comprehensive income, reduced the total comprehensive loss to $113.8 million for the first half of PAL’s fiscal year.
The fragile state of the industry has prompted the chief executive of the International Air Transport Association, the global grouping of the world’s largest carriers, to warn that airlines face massive losses and are at a critical crossroad.
“The airline sector is in trouble. Losses this year could reach $6.1 billion, more than wiping out the $5.6 billion that airlines made in 2007. Falling demand and rising costs are reshaping the industry,” said Giovanni Bisignani in a recent statement.