By Jonathan Burgos | forbes
Philippine Airlines—controlled by billionaire Lucio Tan—expects to return to the black next year, after five years of consecutive losses, as the airline downsizes its fleet and cuts unprofitable routes.
“PAL plans to take a number of measures to optimize its network in connection with the restructuring support agreements and the plan,” the company said in bankruptcy documents recently filed in New York. “In particular, PAL will exit unprofitable markets and continue to fly only those routes that are, or can be made, profitable, while reintroducing capacity in line with evolving demand.”
Under the fleet restructuring plan, PAL will return 21 planes to lessors—reducing its fleet size by 23%—as it cancels unprofitable long-haul U.S. routes. It will consolidate U.S. flights to the West Coast gateways and cancel ultra long-haul routes, particularly in New York and Toronto.
While downsizing its U.S. operations, the airline also plans to expand capacity in short-haul Asian routes particularly in growth markets such as China. In the Philippines, PAL said it plans to consolidate its domestic flights in Manila and cancel flights from Clark, while tapping Cebu as a growth market.
“Overall, the plan will bring PAL into sustained profitability,” the company said. “By the end of 2022, PAL expects to exit its recovery phase as operating activities generate more consistent positive monthly cash flow.”
PAL expects to return to the black next year, with $145 million in net profit, which will increased to $312 million in 2023 and $379 million in 2024.
While the fleet reduction will help PAL generate savings of about $2.1 billion in payments to creditors and aircraft leasing companies, the company said financial support from lenders and shareholders is a crucial element in reviving the company. The company filed for bankruptcy protection in New York last month, paving the way for the restructuring of its debts.