Philippine Airlines (PAL) is considering cutting its widebody fleet as the pandemic continues to impact business. The carrier will reduce its Airbus A350 and Boeing 777 fleet over the coming months by returning them to lessors. Let’s find out more about these fleet reductions.
According to Bloomberg, Philippine Airlines is currently planning a “comprehensive restructuring plan” that could see it enter Chapter 11 bankruptcy in the US as well. The plan will see PAL substantially scale back its long-haul fleet as demand for that segment seems unlikely to fully recover for a few years.
The fleet changes will see a minimum of two A350s and up to four 777s return to lessors in the coming months. PAL is currently in talks with multiple lessors to work out agreements for keeping on or returning their fleet.
The two A350s are reportedly already in the process of being returned to lessors and being redeployed to other carriers. This means PAL will only operate four A350-900s, down from six at the start of last year.
The larger 777 fleet could be reduced even more. PAL currently operates 10 777-300ERs, which means the airline could be left with six at the end of the restructuring. This would inevitably mean axing long-haul routes once travel resumes.
For Philippine Airlines, reducing the fleet is a part of an effort to reduce the carrier’s loss. The airline reported a 29 billion peso loss ($607 million) for January-September 2020. These figures likely continue to rise as the Philippines battles a second wave of COVID-19, further impacting schedules.
In addition to fleet changes, the carrier also announced plans to cut 2,300 jobs by mid-March this year. With no government support forthcoming, PAL will have to make changes on its own to survive this crisis.
In addition to restructuring, PAL is also considering entering Chapter 11 bankruptcy protection in the US. This would give the airline more flexibility in renegotiating contracts and dealing with lessors in the future. PAL would not be the only airline to do so, with LATAM, Avianca, Virgin Atlantic (Chapter 15), and others using similar protections.
Despite a tourism recovery on the horizon thanks to vaccines, PAL does not expect to see tourism traffic recover soon. With rollouts slow in hundreds of countries, border reopenings remain a difficult issue to tackle. Since a recovery could take up to 2023-24, PAL clearly does not want to hold on to expensive widebodies until then.
While Philippine Airlines is cutting down operations, there is still some room for growth. The carrier announced a new route to Tel Aviv from this October to cater to the growing business and leisure demand. For now, expect big changes from PAL to ensure they come out of this crisis.
What do you think about PAL’s decision to reduce its long-haul fleet? Let us know in the comments!