PAL kept afloat after Lucio Tan's P15 billion infusion

Aviation Updates Philippines – In an interview with ANC on Thursday, Philippine Airlines President and Chief Operating Officer Gilbert Santa Maria revealed business magnate Lucio Tan poured in P15.2 billion, or half of the P30 billion equity, to veer the flag carrier away from bankruptcy.

“Well, without that liquidity, Philippine Airlines would probably be not here anymore,” he said. However, the airline's chief said the infusion is still awaiting approval from the Securities and Exchange Commission but added that they have already received advances.

Over the years, PAL has reported net losses in its operations. The company filed losses of P4.61 billion in 2017, P2.84 billion in 2018, and almost quadrupling to P10.2 billion for last year.

Commenting on the flag carrier's financial situation, Santa Maria said: "All airlines are at the brink of bankruptcy because of COVID-19. The 2019 report reflects the financial situation that I picked up when I joined the company last year."

"We are not in immediate danger of bankruptcy but as this crisis continues... we have lost over $300 million in revenue every single month," he added.

Although commercial flights are grounded, airlines are still forced to pay financial commitments to various suppliers for fuel, aircraft leases, operational fees, workforce salaries, among others. There is still no steady source of income for air carriers, making it vulnerable to collapse anytime.

"We'll be approaching close to a billion dollars, or P50 billion, in revenues that have disappeared because of COVID-19. The situation we face is not unique for airlines unfortunately. But now, with COVID-19, all the airlines are facing it, so we're dealing with an unprecedented situation."

According to Santa Maria, PAL shareholders and the Philippine government appear to be willing to support the airline through the crisis. This will confidently enable the PAL to continuously fulfill its mission as the national flag carrier of the country.

When asked about further retrenchments, the chief said it seems "inhuman" to layoff employees while the pandemic pursues. However, Santa Maria stressed that PAL may need to reduce personnel if the recovery outlook stays grim.

Once operations resume, PAL will begin to assess the recovery of the airline post-COVID-19. Although Santa Maria says that the airline is not in immediate danger of bankruptcy, there is still a need to reevaluate the business strategy as a safety precaution.

"For example, if we find out that there is a need to return say 10 to 20 percent of our aircraft because the demand just isn't there, we'll return the aircraft. That means we are going to reduce our cabin crew and flight crew by a similar amount because we will need fewer of them."

Once the enhanced community quarantine is lifted at the end of May, the flag carrier will begin the gradual resumption of flights — starting with only a fraction of the pre-COVID-19 numbers. For international flights, only around 5 to 10 percent are set to operate in June or July while only 20 to 30 percent is scheduled for domestic flights.

"We will slowly ramp up as the demand picks up for both domestic and international."

Photo by Flory and Karol Roa