PAL in a good position to expand US flights - Capa

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Flag carrier Philippine Airlines (PAL) is banking future growth on more long-haul international flights, which include a possible fourth United States destination via Chicago with the addition of new planes, regional think tank Capa-Center for Aviation said.

Capa, in a research report focused on PAL’s international business, said the carrier has been aggressively expanding long-haul operations and North America, which accounts for most of its profits partly due to limited competition, was a natural area to grow. It added PAL “is close to committing” to about six Airbus A350-900 planes, although the carrier has not made any formal announcement.

“PAL is also looking at using A350-900 HGW aircraft to potentially upgrade Toronto to non-stop and launch a fourth destination in the mainland US. Chicago is the most likely new destination for the A350-900 HGW,” Capa said in its report.

PAL president Jaime Bautista earlier said they were evaluating both the A350 and Boeing’s 787, but a decision is unlikely to emerge until the end of 2015. This comes on top of additional long-haul Boeing 777-300ERs due next year.

“PAL has also been evaluating other potential US markets in both the east and west coasts. New destinations in the western US can be launched using the existing wide body fleet, potentially as early as late 2016 as the two additional 777-300ERs are delivered,” Capa said.

It said a fleet of eight 777-300ERs and six A350s “will enable modest growth of the long haul network with a focus on North America.”

“PAL is likely to remain, for at least the medium-term, the only non-stop operator between Philippines and continental North America, which has a large loyal Filipino population,” Capa said.

Capa said PAL is on track to carry about six million international passengers in 2015, which would be about half of the 12 million passengers Bautista said the carrier will serve this year. Capa noted international traffic this year is already higher by 50 percent over 2012, indicating PAL’s continued focus in this area.

The think tank said the carrier can do a moderate expansion, noting it had been benefiting from a low oil price environment.

“It is rare to see such an established flag carrier - PAL is over 70 years old - increase the size of its international network by 70 percent in three years,” Capa said.

“Low fuel prices and improved profitability give PAL an opportunity to take a pause to let all the international capacity added in recent years be fully absorbed. Now is the time to pursue relatively modest expansion and plan for a possible future with higher oil prices,” it said.

Increased demand for air travel and lower oil prices bolstered the profits of the flag carrier’s operator, PAL Holdings Inc., in the nine months through September this year.

PAL Holdings said profit during the period hit P6 billion, higher than the P233.88 million booked in the same period last year. Total revenues, mainly from ticket sales, rose 10.8 percent to P81.98 billion.