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PAL Shopping Spree

Barring any last-minute hitches, it looks like Philippine Airlines is set to announce a deal to acquire six Airbus A350 aircraft to augment its long-range fleet.

Biz Buzz learned that the purchase agreement would likely be announced by PAL and the European plane maker during next week’s Singapore Air Show in the island city.

We know that the flag carrier had, for several months now, been evaluating the A350 and its rival from Boeing, the 787 “Dreamliner.” The contest was tight, with both advanced aircraft being touted by their manufacturers.

But in the end, word on the street is that it was no less than PAL owner Lucio Tan who made the final decision. Our source said the tycoon was impressed by the A350’s flight performance, especially the fact that the inside of the cabin is so quiet even when the jet is climbing at full power.

The aircraft will be used for PAL’s long-range routes, including new ones that are likely to be opened between Manila and Paris, and Manila and Frankfurt, we were told.

The A350s—which runs on only two engines—will also replace the last of PAL’s previous-generation Airbus A340s whose four engines are gas guzzlers.

We understand that PAL specifically wants the A350-900 model which is the long-range variant that competes directly with the Boeing 787 and the older Boeing 777. The A350-900 has a sticker price of $308 million per aircraft, but this is often subjected to a secret discount rate and favorable financing terms courtesy of a European export-import bank.

If history is any indication, PAL may also execute a “sale-and-leaseback” strategy for the six new Airbus aircraft, which means it may immediately sell them to a third party and lease them back making regular rental amortization (a strategy that may or may not pay off depending on one’s reading of the volatile aviation market).

PAL is also expected to benefit from the sharp drop in petroleum prices, given that fuel costs typically account for one half of an airline’s operating expenses. Expect these benefits to be reflected in PAL’s income statement for the previous fiscal year, barring any last minute surprises, of course.

All these point to an auspicious Year of the Monkey for the people at PAL, especially after a minor incident just before the Lunar New Year that saw one of its precious long-haul Boeing 777s (flying from New York to Manila) accidentally hitting a passenger boarding bridge during a stopover in Vancouver. We hear there was minor damage to the aircraft and the airbridge and the plane had to be towed to another part of the terminal where passengers were offloaded (and the rest of the flight was cancelled). Whew.  Daxim L. Lucas

Source: http://business.inquirer.net/206977/biz-buzz-pal-shopping-spree