Philippine Airlines Expects $300 Million in Annual Savings From Fleet Redeployment

By Cris Larano

MANILA--Philippine Airlines Inc. expects to save around $300 million a year from its plan to use its new Boeing Co. (BA) 777 jets for long-haul routes while redeploying other aircraft to handle shorter routes, which will increase efficiency and profitability, the carrier's president said late Monday.

Speaking at a ceremony to mark the arrival of PAL's third 777 jet, President Ramon Ang said three more B777s will arrive in the coming months to serve as the workhorses of the airline's planned nonstop, long-haul service to Europe and North America.

"In the near future, PAL will fly nonstop to Toronto, Paris and New York," Mr. Ang said. "Our growth strategy for PAL is simple: Modernization of the fleet, expansion of the network and improvement of passenger service."

He said PAL will also acquire other types of aircraft to serve shorter routes, including destinations in the Middle East. He said the redeployment of the carrier's aircraft should be completed by October, and the gains in efficiency and profitability should be reflected in PAL's results by the first quarter of 2013.

PAL is also looking at pursuing alliances and joint ventures with other Asian carriers to help it increase the frequency of its flights, particularly to countries such as the U.S., Mr. Ang said.

PAL can't immediately increase its flights to the U.S. as the Philippines is considered a "Category 2" country by the U.S. Federal Aviation Administration due to its low safety standards. Airlines from Category 2 countries are prevented from expanding services to the U.S. and are subjected to stricter surveillance.

PAL must improve its competitiveness so it can take advantage of Asia's fast-growing market for air travel, Mr. Ang said.

Mr. Ang is also the president of conglomerate San Miguel Corp. (SMC.PH), which recently acquired a substantial minority stake in PAL by investing in a company owned by billionaire Lucio Tan, the controlling shareholder of PAL. Mr. Ang said he hopes PAL can tap the strength of San Miguel and Mr. Tan's group to bolster earnings.

Listed PAL Holdings Inc. (PAL.PH) controls PAL. San Miguel invested in Trustmark Holdings, a company owned by Tan that controls PAL Holdings.

Write to Cris Larano at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires