PAL seeks additional loan for working capital needs

Monday, 08 November 2010 00:00
The Manila Times
BY DARWIN G AMOJELAR SENIOR REPORTER

PHILIPPINE Airlines (PAL) said it will borrow billions in pesos from several banks to finance its working capital for the next fiscal year ending March 2012. Jose Gabriel Olives, PAL chief finance officer told reporters that if business continues the way it is right now, “we may still have to raise some additional working capital maybe another P2.5 billion or $50 million next year.”

Olives said the borrowing for next year is on top of the P2.5 billion that the company will raise this year to finance the severance package of the 2,600 PAL employees that would be retrenched under a spin-off of the flag-carrier’s three non-core businesses.

PAL plans to borrow from state-run Development Bank of the Philippines and Land Bank of the Philippines to fund the P2.5 billion severance package.

The affected units are in-flight catering services, airport services (including ground handling, cargo terminal/cargo handling, and ramp handling) and call center reservations.

For next year’s borrowing, Olives said,” We have not finalized anything. We are in discussion with several local banks.”

The executive said the airline’s normal capital expenditure amounts to $50 million a year to finance maintenance and replacement.

But with the delivery of two Boeing 777-300 ERs in 2012 and another two in 2013, Olives said PAL has to start putting up pre-delivery payment starting 2012.

“Normally the down payment will range anywhere from 15 percent to 20 percent. The lease price of the planes should be around $200 million, he said.

Olives also said the company will continue the implementation of the increase in its authorized capital stock from P16 billion to P20 billion, divided into 100 billion shares in preparation for the entry of new investors.

“We will still proceed to that . . . we didn’t implement it because there were no investors,” he said.

Talks with possible investors, however, were put on hold because of the airline’s labor disputes.

PAL aims to be profitable in its next fiscal year after incurring a $14.4-million loss for its fiscal year ending March 2010.

In the first quarter ending June, the flag-carrier recorded a profit of $31.6 million, or 11 percent lower than the previous year.

Revenues went up by 30 percent to $426.7 million from the previous year’s $327.7 million.

PAL sought rehabilitation in 1998 after racking up $2.12 billion in debts. It brought down its liabilities to about $1 billion since entering corporate receivership and emerged from rehabilitation after recording a profit in 2007.