The Impact of pandemic in the

Financial status of Philippine

Airline

Zairalyne P. Gonzales
Zarina Perlas
Rhean Recarro
May Ann Villaruel
Ivan Josh Pielago
Jhowel Drew Esplana
Romnick Ricablanca
Students
BSBA Marketing Management I

Mrs. Rowena Caling

BSBA Adviser
 Introduction
Airline Industry all over the world has been evidence showing a huge increase of positive
economic impacts to the global economy and helped millions of people Worldwide to have jobs
and source of living in the Philippines, one of the biggest sectors of the economy is the travel and
tourism industry for it is an archipelago that offers diverse ch oices of natural, and manmade
destinations, as well as unique and colorful culture and history this also essential to the economic
development of cities, countries, and regions. They directly contribute to economies by
providing services to airlines, moving passengers, and transporting cargo. The movement of
goods and people also benefits governments, consumers, and industries the booming of foreign
visits to local destinations is assisted and empowered by the travel industry. While the aviation
sector showed substantial growth, the world was struck by an unforeseen phenomenon one of the
industries that are directly hit is the travel and tourism industry when the pandemic hit. COVID-
19, or the Coronavirus disease 2019, is a respiratory illness transmitted through person-to-person
Contact and direct contact to droplets produces when an infected person sneezes or coughs.
Because of the nature of the virus, most airline companies all around the world were not allowed
to operate, leading to financial struggles and alike dilemmas.
Philippines, one of the countries greatly affected by the pandemic, is still in the process
of recovery despite having its first case on January 30, 2020(WHO, 2020). The trend line has
been rapidly rising due to the increasing number of positive cases in the country from February
onwards (DOH, 2020).
The COVID-19 outbreak is likely to cause bankruptcy for many well-known brands and
transportation in many industries as consumers stay at home and economies are shut down
(Tucker, 2020). This pandemic has affected not just the people and the country but also the
different industries on the business field. It hit the airports hard—which could stall development
in emerging markets. Every businesses are affected regardless of industry and operating
activities. Due to restrictions and imposition of new guidelines, it has severe impact with the
airline industry. Business activities cannot operate in full capacity and expected revenues are not
met this includes the Airline.
Air travel has been one of the hardest hit industries of COVID-19, with many flight
cancellations and airport closures as a consequence the pandemic has forced airlines to suspend
flights, lay off employees and seek financial help. In June, PT Garuda Indonesia’s president said
the carrier was considering options including restructuring debt and renegotiating contracts with
aircraft lessors. As most travel restrictions were continues lifted globally at the beginning of
2021. The status of air travel in the Philippines continues to suffer as air passenger traffic
continues to decline, especially for inbound arrivals.
As a result, air travel has fallen sharply, which has prompted airlines to cut capacity.
Many have been closed by governments to contain the spread of the virus. The result is a sharp
fall in revenues. Given the importance of airports to the economic development of cities,
countries, and regions, the broader impact of COVID-19 on the global economy is enormous.
 According to the International Air Transport Association (IATA), the global passenger
traffic as measured in revenue passenger kilometers declined by 65.9% compared to 2019, as
demand in international passenger dropped 75.6% while demand for domestic passenger dropped
to 48.8% below 2019 levels (Richter,2021).
Each countries government has grounded international and domestic travels and
shutdown borders to contain and manage the spread of the virus and has affected the entire
airline industry this Include the Philippines, Philippine Airlines (PAL).
Philippine Airline, also known as PAL, is the Filipino flag carrier. The company started
their operations in February 1941, which makes PAL the oldest and longest-serving airline in
south-east Asia. Philippine Airlines is today a private company owned by PAL holdings, one of
the largest Filipino conglomerates.
Philippine Airlines has been hugely affected by the pandemic. The global airline industry
recorded its “sharpest drop in history” last year with a total of P6.1 trillion losses in 2020 due to
the 65.9 percent decline in airline passenger traffic, according to the International Air Transport
Association (IATA).
In October 2020, PAL announced that because of the pandemic and continuous
restrictions on the borders of different countries, the company had an operating loss of 11.5
billion pesos or $237million, compared to 2.3 billion pesos the previous year. This has forced
Philippines airlines to suspend flights, lay off employees and seek financial help .Moreover, it is
also discussed that there will be retrenchment and happened during mid-March of 2021. As of
the moment, Philippines has the longest lockdown in the world.
As Philippine Airlines (PAL), the flag carrier of the Philippines, also faces difficulties
along different businesses and industries, made decisions to control the continuous loss that the
company is facing. According to experts, laying off staffs should be the last resort. People are
having a hard time in this time with increased unemployment rate as the result of restrictions and
new guidelines brought by the pandemic. With the condition that the airline industry is currently
in, PAL decided to reduce their workforce of about 2,300 employees, which is approximately
30% of their workforce. This consists of both involuntary retrenchment and voluntary
separations.
They seek bankruptcy protection in the United States—a move the flag carrier is banking
on to survive the coronavirus pandemic as it encounters a turbulence in its finances. Financial
losses began gradually mounting in 2016 and by 2019, PAL Holdings Inc., its parent company,
had accumulated P22.9 billion in losses and PAL Holdings lost a staggering P71.8 billion in
2020 alone after flights were disrupted by recurring quarantines. After emerging from
bankruptcy, Philippine Airlines is starting to suffer from its success.
 A. Why this Case Study
Philippine Airline, also known as PAL, is the Filipino flag carrier. The company started
their operations in February 1941, which makes PAL the oldest and longest-serving airline in
south-east Asia. Philippine Airlines is today a private company owned by PAL holdings, one
of the largest Filipino conglomerates. Pioneering in end-to-end airline operations that
constitute an industry of Philippine Airlines, Inc. (PAL) lives on with its original name and
the national colors, shining through for almost eight decades. Pal stemmed from the
Philippine Ariel Taxi Company established in 1931 by co-founder Andres Soriano, who shut
it down in 1939 and replaced it with it Philippine Airlines two years later. Braving the
imminence of war, PAL had its inaugural flight with only give passengers from Makati to
Baguio oj March 15,1941.
A private entity for much of its existence, PAL was brought under government
ownership in the 1970s and 1980s, reverting to private hands in the early 1990s. Today, PAL
is the only privately-owns major flag carrier in Southeast Asia. Its Chairman and CEO, Drm
Lucio C. Tan, is PLs longest-serving chief executive. Through the years, designated as the
“National Flag Carrier” by R.A. 2232, PAL has been recognized to play a central role in
boosting the growth of the Philippines economy and the emergence of a nationwide tourism
industry.
Today, PAL is the Philippines largest International Airline and the only full-service
Filipino air carrier offering Business Class, Premium Economy and Regular Economy
Services. Its growing fleet, one of the world’s, youngest, consist of modern high-technology
aircraft such as the Boeing 777 along with the Airbus A350bajdbA330 for long-haul routes
and the A320/A321 family for regional and domestic routes but this business was hugely
affected by the Pandemic which has lost over of P6.1 trillion in 2020 due to the 65.9 percent
decline in airline passenger traffic, according to the International Air Transport Association
(IATA).
This is hugely affected by the pandemic that had been incurring loss even prior crisis. Its
attributable net loss widened to 71.91 billion pesos in 2o2o from 1o.31 billion in 2o19 due to
the extraordinary impact of the global health crisis on its operation.

B. What interest you about it?

Philippine Airlines or PAL for short is the first and oldest airlines in ASIA under its
original name. But then it had a down-turn which made Cebu Pacific overtake as the leading
airline company. Air Asia, on the other hand, is low-cost airline based in Malaysia and is an
emerging airline company in the Philippines.
Competition between the airline companies is also a way to make improvements the
industry in which the government has the major role to facilitate competition. Of course if there
is competition the companies would not be complacent and would constantly think of ways to
improve their services in order to continue being profitable. Airlines could invest heavily in the
quality of the service that they offer, both on the ground and in the air. They can enhance their
ticketless travel, new interactive entertainment systems, and more comfortable seating When
these airlines companies are able to make outstanding services and product enhancements, these
will attract foreign , investments , trade and , tourism.

c. Why it is important?
In the past decade, the airline industry can be said to have experienced significant changes.
Some of the various factors that have played a substantial role in effecting he widespread
changes in the industry include an increase in security insurance, escalating fuel prices, natural
disaster and deregulation of the sector. Natural disaster that have led to increased challenges , in
the case include COVID-19, volcanic eruptions making it challenging to move from one to end
another and the spread of diseases barring customers from moving from one country to the next.
The air transport sector is important in facilitating economic growth and development. In a
country made up of more than 7,000 islands , air transportation serves as the fastest mode of
connectivity within the country and the rest of the world. It is important the airline contributes to
the economy. We are the national flag carrier. We fly 15 million passengers in and out of the
Philippines every year and are responsible for one-third of tourist arrivals to the country. Every
year we carry more tourists from Korea , China , and Japan.
Part II

Abstract
This past through years, COVID19 outbreak is likely to cause bankruptcy not just for
many businesses and establishments, but also to the transportations in many industries as the
consumers stay at home due to the pandemic outbreak. This lockdowns cause a high-value
economic decrease in many businesses fields, especially in the aviation industry which could
stall development in merging market. While the tourism industry contributes to the Philippine
economy, the world was struck by COVID-19 that rapidly spread across the globe. Due to
restrictions and imposition of new guidelines, it has severe impact with the airline industry.
Business activities cannot operate in full capacity and expected revenues are not met. Businesses
that demand direct touch were shut down To control and slow the spread of the virus, each
nation's government has halted all international and internal travel as well as closed its borders.
This has had an impact on the entire aviation business, including Philippine Airlines (PAL) in the
Philippines Philippine Airlines (PAL), has taken actions to control the ongoing loss they file for
bankruptcy in the US, a step the flag carrier is relying on to survive the coronavirus pandemic as
it experiences financial instability.. Philippine Airlines is already beginning to experience losses
as a result of its achievements after escaping bankruptcy. Philippine Airlines (PAL), less than a
year after filing for Chapter 11 bankruptcy, announced a net profit of $71 million for the first
half of 2022. From the $344 million the airline lost during the same period in 2021, this was a
startling turnaround. Philippine flag carrier continues to gradually expand its route network in
line with the progressive comeback of business and leisure travel in the bankruptcy brought by
pandemic.
 A. Case Report-
Philippine Airlines is founded by a group of businessmen led by Andres Soriano, one of
the country's leading industrialists in February 1941 on December 1946 - PAL starts regular
service between Manila and San Francisco then June 1962 - PAL enters the jet age with the
introduction of DC-8 jetliners.
August 1, 1971 - Frankfurt is added to the European route as PAL continues to expand
its international services- A route to Beijing and Canton is introduced with the first of two B727-
200s, making PAL the first Asian carrier to fly into China. On the same day, PAL began carrying
Filipino contract workers to the Middle East with the introduction of services to Bahrain(1979.
September 18, 1992 - PAL is granted by a consortium of 18 local financial institutions a
record-setting US$122million financing package for the purchase of 10 new long-range aircraft.
July 6, 1993 -PAL's first female pilot, Ma. Aurora "Aimee" Carandang, flew for the first
time as a full-fledged captain on a Fokker 50 flight from Manila to Baguio.
July 6, 1993 -PAL flew its first million miler on a flight from Manila to Ho ChiMinh.
Businessman Friedrich E. W. Jahns had flown exactly 1,155,538 miles with PAL when he was
awarded an 18-karat million-miler pin.
August 26, 1993 -Jose Antonio Garcia, PAL consultant and former president and COO of
Asia Brewery, and Jose P. Magno, GSIS chairman, are elected to the PAL board of directors
while Carlos G. Dominguez retained the chairmanship and presidency of the airline during the
annual stockholders meeting. In the date of January 1995 - Lucio C. Tan become Chairman and
Chief Executive Officer. On August 2002 - PAL unveils a revamped and enhanced frequent flyer
program, Mabuhay Miles.
May 2004 - PAL launches E-ticketing where passengers could book, pay and get a seat
by phone or thru internet. They also launch E-ticketing where passengers could book, pay and
get a seat by phone or thru internet. November 2009 - PAL takes delivery of the country's first
Boeing 777. Philippine Airlines celebrates its 70th year by commemorating its storied past while
charting a course for the future(March 2011} and on January 17-19, 2015 - PAL reprises its role
as "Shepherd One" - the official carrier of the pope, leader of the universal Roman Catholic
Church during the apostolic visit of Pope Francis to the Philippines. On January 17, a PAL A320
jetflies Pope Francis to and from Tacloban in inclement weather where he commiserated with the
survivors of November 2013's super typhoon Yolanda. On January 19, a PAL Airbus A340-300
flies the pontiff back day visit. PAL president Jaime J. Bautista accompanies the pope on the 15-
hour non-stop flight.
 March 15, 2015 - On its 74th anniversary, PAL returns to New York after 18 years with a
four-times-weekly service from Manila to John F. Kennedy International Airport via Vancouver.
Airbus A340-300 aircraft are deployed on the route, the longest in PAL's network at 14,501
kilometers. Chairman Lucio C. Tan and President Jaime J. Bautista are both on the inaugural
flight, which is warmly welcomed by the Filipino community on the U.S. East Coast. New York
is PAL's fifth destination in the U.S.
April 25, 2015 - PAL launches a three times-weekly service to Quanzhou in Fujian
province, China, the ancestral homeland of most Filipino-Chinese families. Airbus A320 aircraft
are deployed on the route.
May 4, 2015 -PAL continues its financial turnaround with a total comprehensive income
of $85 million for the first quarter (January to March) of 2015. It reverses s a $20.7 million loss
incurred in the same period of 2014. The profit is attributed to the increase in passenger traffic
following the opening of several domestic and international destinations, as well as aggressive
sales campaigns that resulted in improved yields.

Financial Performance
The financial performance of Philippine Airlines over the past two decades was never
spectacular. As previously discussed, heavy financial losses prompted the major shareholder of
PAL to relinquish control of the airline to the Philippine government in 1977. This development
only served to further exacerbate PAL’s financial condition. Under the Marcos administration,
PAL became one of a number of nationalized corporations controlled by individuals close to the
Marcos dictatorship. As a direct result, management policies and decisions were greatly
influenced by political considerations, without due regard for the financial wellbeing of the
company. Moreover, corruption among airline officials contributed to the already troubled
financial situation of the carrier. Between 1980 and 1986, PAL accumulated over US$275
million (P5.6 billion) in losses.
In 1987, following the change of government and improved political environment in the
Philippines, PAL reported its first earnings in six years, with a net income of P318.1 million.
Unfortunately, however, the airline’s financial performance declined again the following year,
with the company registering losses of P70.1 million in fiscal year 1988. While PAL’s financial
performance in fiscal years 1989 and 1990 seemed to indicate a turnaround, with net income of
P304.6 million and P583.6 million respectively, this trend was undermined by the negative
effects of the Gulf War in 1991, when the airline posted a staggering loss.
Table PAL Net Income (1987-1991)
Year Net Income
1987 318.1
1988 -70.1
 1989 304.6
1990 583.6
1991 -2,183.8
Note: Figures are in millions of pesos.
The heavy losses registered during fiscal year 1991 were due largely to increases in oil prices
and insurance rates linked to the Gulf Crisis. During 1991, PAL’s fuel and oil expenses for its
international operations rose 56.9% (from P2.3 billion in FY 1990 to P3.6 billion in FY 1991)
and the airline’s insurance expenses rose 86.7% (from P63.7 million to P 118.9 million). At the
same time, passenger traffic on PAL’s Middle East routes declined by 36.1% (from 1,762.1
million ASK in 1989 to 1,126.3 million ASK in 1991) as a result of decreased travel on the part
of Filipino overseas contract workers in the region.
The adverse impact of these negative factors on the airline's operations, combined with heavy
interest payments for debts that the company had accumulated in the previous five years and a
devaluation of the peso in 1991, resulted in a net loss of P2.2 billion (US$79 million) for FY
1991 (Exhibits 15 and 16).

Note: net profit/loss figure shown is net profit/loss attributable to parent equity holder
PAL in 2013 changed the end of its financial year from March to December. Therefore the loss for the quarter ending 31-Mar-2013 is included in
both the YE Mar-2013 (FY2012) and YE Dec-2013 figures.
Source: CAPA – Centre for Aviation and company reports

PAL Holdings turned an operating profit of PHP2.373 billion in 2014 compared to an operating
loss of PHP6.455 for 2013. The company reported an operating profit of PHP3.158 billion in
1Q2015 compared to an operating loss of PHP801 million in 1Q2014.

The service reductions have wiped out more than USD2 billion in revenue since the start of the
pandemic. Because of the sharp revenue loss, PAL has already downsized its workforce. The
airline announced in Feb-2021 that it had to cut 2,300 employees, and this was completed in
Mar-2021.
 Philippines airlines financial losses began gradually mounting in 2016 and by 2019, PAL
Holdings Inc., its parent company, had accumulated P22. 9 billion in losses because the world
passengers traffic declined 6o% of it. PAL Holdings lost a staggering P71. 8 billion in 2020
alone after flights were disrupted by recurring quarantines. However, the COVID-19 outbreak
has hit airports hard—which could stall development in emerging markets. As a result, air travel
has fallen sharply, which has prompted airlines to cut capacity. Many have been closed by
governments to contain the spread of the virus. The result is a sharp fall in revenues. The airline
also registered a positive financial performance in 2021 after year-on-year losses since 2016. It
recorded a total comprehensive income of USD 1.21 billion in 2021, which included a USD 1.44
billion net gain from debt restructuring In the first quarter of 2020, the period when the travel
restrictions and lockdowns in most countries started, international tourist arrivals declined by
22% resulting in an estimated loss of US$80bn in global tourism receipts. However, travel
services declined by 81.7 percent to US$1.8 billion in 2020, and by another 66.5 percent in 2021
to only US$600 million, Tourism receipts comprised 90.6 percent of the travel services in 2020.
Flag carrier Philippine Airlines, Inc. (PAL) registered an operating income of US$ 86.8 Million
(PHP 4.9 Billion) and comprehensive income of US$ 62.7 Million (PHP 4.2 Billion) for the third
quarter of 2022.

B. QUESTION OF STUDY
1. What is the reason of bankruptcy of Philippine Airlines?
2. How bankruptcy of Philippine airlines influenced the company’s future business plans?

3. In what ways has the pandemic affected the overall aviation industry in the Philippines, and
how have Philippine airlines adapted to mitigate the impact?
4. What factors played a significant role in Philippine airlines bankruptcy filling in 2020 amidst
the pandemic?
5, What steps did Philippine airlines take to manage the impact of the pandemic on its financial
situation?
6. How did Philippine airlines adapt its business strategy to meet the changing market conditions
caused by the pandemic?
7. What initiatives did Philippine airlines undertake to regain customer confidence following the
bankruptcy filing?
8. How did Philippine airlines manage its relations with key stakeholders during the bankruptcy
holders?
9. What role did the Philippine government play in the bankruptcy and recovery process of
Philippine airlines?
10. What lesson did Philippine airlines learn from its bankruptcy experience?
C. HYPOTHESIS
Sub Problem
Is there a significant relationship between the Impact of the pandemic in the financial
Performance of the Philippine airlines?
Null Hypothesis
There is a significant relationship between the Impact of the pandemic in the financial
Performance of the Philippine airlines

D. VALIDATION OF HYPOTHESIS
Little more than a year after entering chapter 11 bankruptcy, Philippine airlines (PAL)
reported a net profit of $71 million for the first half of 2022. This was a stunning turnaround
from the $344 million the airline lost in the same period in 2021. PAL successfully completed its
financial restructuring within four months, in contrast to other airlines that remain in the chapter
11 process more than a year after filing in 2020. The Philippine flag carrier recover because of
the strong support of its creditors and shareholders, the cooperation of its industry partners and
the collective efforts of PAL employees around the world who sustained flights on multiple
international and domestic routes throughout the restructuring period, this case study want to
know how the pandemic effect Philippine airlines financially.
E. Important Finding
The Philippine Airlines (PAL) Group implement a misguided new strategy that involves
its budget airline subsidiary pulling off several domestic trunk routes. Air Phil Express, which is
planning to be soon re-branded as PAL Express, has redeployed capacity from trunk to leisure
and secondary routes, which it has taken over from PAL following a surprising decision by the
Group that the two brands should remove nearly all overlap in their route networks.
The move, implemented on 28-Oct-2012, goes against the grain of typical two-brand
strategy at Asian airline groups, which have discovered that they can successfully use their LCCs
to operate alongside their full service brand. As Philippine Airlines and Air Phil Express (soon
PAL Express) brands cater to different sectors of the market, the two should be able to co-exist
on trunk routes with minimal cannibalization. Most crucially, PAL Group needs the second
budget brand on domestic trunk routes to compete with rival LCCs. The Philippines has a
crowded and intensely competitive LCC sector and it will be the Philippines’ four other LCCs
that stand to gain the most as the PAL Group removes its budget brand from several of the
country’s largest domestic markets. While the global health crisis worsened PAL’s financial
woes, forcing the flag carrier to suspend debt payments as early as April last year, signs of
trouble were long-brewing for the airline.
After Tan regained full control of PAL in 2014, ending a two-year alliance with
conglomerate San Miguel Corp., it pursued a new strategy to expand its international network,
modernize its fleet and achieve a coveted five-star status by 2020.
When it retired old planes and introduced next-generation Airbus A350-900s, the airline
opened nonstop flights from Manila to New York and appeared unstoppable in its mission to
connect the Philippines to more global gateways. Losses since 2016 But financial losses began
gradually mounting in 2016 and by 2019, PAL Holdings Inc., its parent company, had
accumulated P22.9 billion in losses.
PAL Holdings lost a staggering P71.8 billion in 2020 alone after flights were disrupted by
recurring quarantines.

E.1. Results
 Philippine Airlines (PAL) has boosted its domestic and international capacity
significantly in the months since the government reopened borders, which helped the airline
return to profitability in its most recent quarters. Philippine Airlines (PAL), less than a year after
filing for Chapter 11 bankruptcy, announced a net profit of $71 million for the first half of 2022.
From the $344 million the airline lost during the same period in 2021, this was a startling
turnaround.
Also helping the airline’s financial performance is its recent restructuring. PAL was hit
hard by the onset of the pandemic, and like many other Southeast Asian airlines, it had to
undertake restructuring under the protection of bankruptcy court. But PAL’s pre-packaged
restructuring was quicker and less painful than most, enabling it to emerge with a healthier cost
structure and balance sheet. Although market conditions are still far from normalized, the
airline’s results and revised strategy are promising signs for its post-pandemic outlook.

E2. Conclusion
This Case study investigated the impact of Covid 19 pandemic in Philippine airline
company. This concludes that Philippine flag carrier continues to gradually expand its route
network in line with the progressive comeback of business and leisure travel in the bankruptcy
brought by pandemic. also this show that there is a significant relationship between the Impact of
the pandemic in the financial Performance of the Philippine airlines
In addition to an extensive domestic network anchored on its gateway hubs in Manila,
Cebu and Davao, PAL is the only airline operating nonstop flights linking the Philippines to the
U.S. and Canada, along with the largest network of flights from Manila to multiple cities in the
Middle East, Japan and Australia.