PAL expects to be more cost-efficient on long-haul flights

SYDNEY (Reuters) – Philippine Airlines, Inc. (PAL), which has been reporting losses on its New York route, expects cost efficiency to improve on long-haul flights after it switches to the fuelefficient Airbus A350-900 in October, its chief executive said.

The new airplane will allow it to fly non stop on long routes, a feature business travellers favor.

The company currently uses Boeing Co.'s 777 to fly to New York, with a stop in Vancouver, Canada, CEO Jaime Bautista told Reuters at the annual meeting of the International Air Transport Association (IATA) in Sydney on Tuesday.

"That is why the profitability is not good but at least we are recovering all direct operating expenses," he said, adding the company's daily flights to London were not as profitable as he would like and the company was looking at the possibility of replacing those flights with the A350 as well.

While there is demand for longhaul flights as more Asians travel to Western countries, gas guzzling aircraft are a problem with oil at more than $70 a barrel after years of cheap fuel, and rising labor and infrastructure costs.

Airline companies including Singapore Airlines, Australia's Qantas Airways Ltd. and US-based United Continental Holdings, Inc. are adding ultra-long haul flights that can charge an airfare premium of around 20 percent versus flights that have one or more stops.

Last week, Singapore Airlines said it would launch the world's longest commercial flight in October, a near 19-hour non-stop journey from Singapore to the New York area.

On this route, the airline is likely to fly the Airbus A350-900ULR, an ultralong range version of the fuel-efficient twin-engine A350 jet.

Singapore Airlines, however, operates in a stronger business travel market than regional rivals Philippine Airlines and Vietnam Airlines JSC, which in February said long-haul flights are more an obligation than an option as the country's flag carrier.

Philippine Airlines will take delivery of 15 planes this year, including the Airbus 321neo, to fly non-stop from Manila to Brisbane, Australia and to Mumbai and New Delhi in India, Bautista said.

The company said last month it was seeking regulatory approval for an increase in fuel surcharge to counter the higher fuel costs and a weak peso, after a 36 percent jump in fuel costs wiped out annual profits.

Airline executives meeting in Sydney this week said the industry's profitability was being threatened by fuel costs that were rising faster than ticket prices, prompting some to lock in fuel hedges, lower capacity and raise fares.