PAL, Cebu Pacific seen to sustain revenue growth


By Arjay L. Balinbin, Senior Reporter

LOCAL AIRLINES will likely sustain the momentum in their revenues for the rest of the year amid easing of restrictions to further reopen the economy, analysts said.

“I think they will sustain the momentum, especially that the economy is increasingly being opened up and coronavirus cases are being managed until now despite after elections,”  Astro C. del Castillo, managing director at First Grade Finance, Inc., said in a phone interview on Saturday.

“Many countries are also opening, so the demand for flights by Filipinos and foreigners are there, so I think, moving forward, the skies will be a bit clearer. But I’m sure there will still be remnants of dark clouds hanging in the air,” he added.

Flag carrier Philippine Airlines (PAL) and budget carrier Cebu Pacific have both reported higher revenues for the first three months of the year, with the former returning to profitability.

PAL, operated by PAL Holdings, Inc., generated P24 billion in revenues from a 201% growth in passenger revenues and a 72% growth in cargo revenues for the first quarter of 2022, as compared to the same period a year earlier, the flag carrier said in an e-mailed statement last week.

The airline reported a net comprehensive income of P1.2 billion for the first quarter, “a significant development that marks PAL’s return to profitability.”

“The last time that PAL registered positive first quarter results was in 2016,” it added.

Meanwhile, Cebu Pacific, operated by Cebu Air, Inc., saw its revenues for the period jump by 148% to P6.71 billion from P2.71 billion generated in the same period in 2021.

Its first-quarter performance was driven by passenger operations, which grew by 256% to P3.16 billion from P887 million in the same period last year.

However, its net loss for the period widened to P7.61 billion from a loss of P7.30 billion in the same period a year earlier. This was mainly due to forex translation of dollar-denominated loans and unrealized mark-to-market losses from the derivative value of its convertible bonds, the budget carrier said.

“Sales and income of airlines and related businesses/industries improved amid further reopening of the economy towards greater normalcy such as the lowest Alert Level 1 for Metro Manila and other areas since March 2022,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mailed reply to questions on Friday.

He noted that the resumption of foreign tourism for some fully vaccinated foreigners since February, as well as further recovery in domestic tourism and the resumption of face-to-face schooling have supported the recovery of many adversely affected businesses.

“Higher global oil/fuel prices could lead to higher costs and narrower margins (partly due to competition) for airlines, unless these are hedged on their oil/supplies.”

“Other risk factors include more contagious coronavirus variants that could still lead to some potential spike in new coronavirus cases in some countries that could again lead to potential risks of lockdowns/restrictions, which could again adversely affect businesses/industries/economies, as well as cause some disruptions in the local/global supply chains,” Mr. Ricafort added.

Transport expert Rene S. Santiago said it is still difficult to predict the pandemic measures of the next administration, as former Senator Ferdinand “Bongbong” R. Marcos, Jr., who emerged as the clear winner in the presidential race, has yet to present his plans.

Revenue growth for local airlines can be sustained “subject to no surge in coronavirus cases and no imposition of lockdown,” he noted.

Mr. Del Castillo said: “Reading between the lines, I think the next administration admitted that revenues are very much needed this coming year and the next few years. Given that, I’m sure they will be more liberal and open, supporting industries, especially our airlines wherein the movement of goods and services as well as passengers would be free-flowing to boost the economy.”

Cebu Pacific said that for the rest of 2022, it “sees a better business outlook driven by domestic recovery and reopenings of international destinations.”

“However, it remains cautious of the risks presented by increasing jet fuel prices and interest rates and depreciation of the Philippine peso versus US dollar.”

Cebu Pacific will “continue to invest in the modernization of its fleet and will remain committed to providing affordable and accessible air transport services for all,” it added.

PAL said it expects to return to pre-pandemic levels in its domestic network within the second or third quarter of 2022, while “continually adding flights on key international routes to the US, Canada, and parts of the Middle East and Asia.”

PAL shares closed 1.84% higher at P6.10 apiece on Friday, while Cebu Air shares closed 2.27% higher at 45 apiece.