Lucio Tan’s game plan: Bye-bye New York, London, missionary routes, Clark airport as PAL focuses on China, West Coast, Manila, Cebu

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“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 demands. PAL will also selectively increase regional capacity in targeted growth markets. In doing so, PAL will strengthen its Manila hub and strategically redeploy capacity to more profitable destinations as demand returns,” said PAL CFO Nilo Thaddeus Rodriguez.

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This means increasing domestic capacity in its Manila hub “to pressure competition” while exiting Clark Airport where rival Cebu Pacific of the Gokongweis is building a base. PAL will only return Clark if a “positive business case” justifies it. PAL will also move to “protect” its Manila slots through turboprops with the rationalization of international capacity.

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PAL will pivot to the Manila-Cebu route to bring in the profits and new growth for the flag carrier.

PAL will also focus on short haul regional routes, specifically growth markets like China, by matching capacity with current demand while continuing to explore new growth opportunities and new markets. It will also use “lower risk” narrow body planes to add capacity and launch new markets.

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Across the Pacific, PAL pans to consolidate capacity in the West Coast gateways while canceling its ultra long haul flights to New York and London. It said West Coast routes can provide service to East Coast customers through its codeshare deal with American Airlines.

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PAL has to make do with a fleet which has been reduced from 98 aircraft (85 under finance leases and operating leases) before the pandemic to 70 under its restructuring plan.

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Rodriguez said PAL has already negotiated a $1.8 billion reduction in operating lease payments – $1.2 billion due to returned aircraft, $600 million due to retained aircraft at lower rates) – and $250 million due to a reduction in unsecured bank debt.

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Rodriguez said that based on its post-Chapter 11 plan, PAL would post an operating income of $220 million in 2022 and $360 million in 2023.