Manila, July 31, 2003 By Zinnia B. Dela Peña (Star) Flag carrier Philippine Airlines majority-owned by taipan Lucio C. Tan swung to a net income of P295 million in its fiscal year ending March this year, a significant turnaround from the previous year’s net loss of P1.6 billion.

This, as operating revenues went up by two percent from P42.44 billion to P43.22 billion despite the negative effects of the US-Iraq war and the outbreak of the Severe Acute Respiratory Syndrome (SARS).

PAL attributed the improvement to increases in passenger revenues as a result of renewed confidence of passengers in air travel after security and safety measures were heightened following the Sept. 11 terrorist attack in the US.

"This was a positive development considering that the previous year's traffic dropped dramatically after the Sept. 11, 2001 terrorist attack in the United States. The company’s performance showed consistent improvement throughout the fiscal year," PAL said in a financial report filed with the Securities and Exchange Commission.

At the onset of 2003, PAL was faced again with another traffic slump that resulted from the Iraq conflict and the sudden outbreak of theSARS epidemic in certain Asian countries.

But PAL said operating margins improved with the decline in operating expenses from P38.46 billion to P37.81 billion. Fuel costs were also reduced by three percent as a result of a decline in fuel prices coupled with the effective adoption of risk management techniques. Reductions in aircraft maintenance expenses by five percent also contributed to the improved performance of operating expenses.

The increase in total operating revenues of P772 million and the drop in total operating expenses by P647 million resulted in an operating income of P5.4 billion, 36 percent better than the previous year’s figure of P3.98 billion.

As of end-March 2003, PAL’s total assets stood at P107.77 billion, a slight decrease from the year-ago figure of P108.28 billion.

PAL said the drop represents lower negotiated aviation insurance prepayments as well as decreases in deposit requirements with fuel suppliers recognized under the other current assets balance.

Property and equipment balance also declined by P394 million as a result of higher depreciation expenses recognized in fiscal year 2003 which had the effect of reducing the net carrying values.

Total liabilities, on the other hand, declined by P1.15 billion or one percent over the March 31, 2002 balance of P106.08 billion. This was the result of payments made on various liabilities covered by the amended rehabilitation program, net of the effect of the restatement of these obligations to the current exchange rates resulting from the depreciation of the peso against the US dollar from P51.096 to P53.6.

Reported by: Sol Jose Vanzi

All rights reserved