Strategic Management Paper of

PHILIPPINE AIRLINES

Presented to the Faculty of

Institute of Business & Accountancy

Baliwag Polytechnic College

In Partial Fulfillment of the Requirements

For the Degree of

Bachelor of Science in Business Administration

Major in Financial Management

By

Bentibano, Ericka

Cabingao, Chiella Joy

Chico, Leviriza

Dela Cruz, Polo Miguel

Lajom, Elmer Christian

Losada Ma. Cariza

Rabutin, Riza

Suba, Patricia

November 2022
 RECOMMENDATION FOR ORAL EXAMINATION

This strategic management paper entitled “PHILIPPINE AIRLINES

HOLDINGS INCORPORATED”, prepared and submitted by ERICKA
BENTIBANO, CHIELLA JOY C CABINGAO, LEVERIZA S.J CHICO, POLO
MIGUEL E. DELA CRUZ, ELMER CHRISTIAN G. LAJOM, MA. CARIZA D.R
LOZADA, RIZA Y. RABUTIN, AND PATRICIA SUBA, in partial fulfillment of the
requirements for the degree of BACHELOR OF SCIENCE IN BUSINESS
ADMINISTRATION MAJOR IN FINANCIAL MANAGEMENT has been examined
and recommended for Oral Examination.

BAYANI L. PASCUAL JR., LPT

Adviser

ii
 APPROVAL SHEET

This strategic management paper entitled “PHILIPPINE AIRLINES”, prepared

and submitted by Ericka Bentibano, Chiella Joy Cabingao, Leviriza Chico, Polo Miguel
Dela Cruz, Elmer Christian Lajom, Ma. Cariza Lozada, Riza Rabutin and Patricia Suba in
partial fulfilment of the requirements for the degree of BACHELOR OF SCIENCE IN
BUSINESS ADMINISTRATION MAJOR IN FINANCIAL MANAGEMENT has been
examined and recommended for Oral Examination.

BAYANI L. PASCUAL JR., LPT

Adviser

REVIEW PANEL

Approved by the Committee on Oral Examination with a grade ____________ on

NOVEMBER 2021.

[PANELIST]
Chairman

[PANELIST] [PANELIST]
Member Member

Accepted and approved in partial fulfillment of the requirements for the degree

iii
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION MAJOR IN

FINANCIAL MANAGEMENT.

MA. SOCORRO BARTOLOME, CPA, MBA

DEAN – Institute of Business and Accountancy
Date: [Date 00, 2022]

iv
 ACKNOWLEDGEMENT

This strategic management paper would not be possible without the help of these
significant individuals. We would like to express our deep gratitude to the following
people in accordance for their absolute contributions which are truly a huge help for this
strategic management paper to stretch out up to the finish:

First and foremost, we would like to thank our God Almighty for the undoubted
support that He shared with us. The strength, patience, skills and knowledge that we have
were all rooted from Him.

To our strategic management adviser and Professor, Mr. Bayani L Pascual, thank
you for the knowledge that you have shared on us as well as for your time and efforts to
understand our concern about our topics.

To our family, friends, colleague and classmates whose guidance and support are
with us in all the things we pursue.

v
 EXECUTIVE SUMMARY

Philippine Airlines established in 1941, the flag carrier and Philippines' largest
international airline and the only full-service Filipino air carrier offering Business Class,
Premium Economy and Regular Economy services. Philippine Airlines network now
stretches across the world. The flag carrier operates from four hub airports in the
Philippines to an inclusive total of 25 domestic destinations and 28 points in Asia,
Australia/Oceania, the Middle East, Europe and North America.

Philippine Airlines is working to expand its asset base, optimize its network,
create new revenue sources, and diversify its distribution methods. Simultaneously, the
airline is working to improve its information technology, risk management, and
operational
processes, as well as the professional capabilities of its personnel, in order to better serve
customers.

The Airlines External Factor Evaluation rating is 2.15 that indicates that it is
highly responsive to the different market opportunities. Strong opportunities are in
Growth in the Tourism Industry and Use Better Technology to Minimize Cost. However,
the Airlines currently faced a strong threat due to the fuel price inflation.

The Airlines Internal Factor Evaluation rating is 2.44 indicates that its weaknesses
can be addressed by their strengths. Under the TOWS Matrix, the strategies suggested is
to maintain the good image and optimize the technology investment. To innovate the
online and mobile booking system and staff training and development seminar are the
strategies that will be the most appropriate for the company to achieve its strategic
objectives to increase passenger satisfaction rating and to be cost effective in all its
operation for them to have lowest fare offered.

The researchers gathered all defining factors – the airlines' strengths, weaknesses,
threats, and opportunities – that could have an impact on their current ranking. Following
the data acquired from the Philippine Airlines report, the researchers focused on their
given recommendations for the whole study: innovating the online and mobile booking
system, and having staff training and development seminar to maintain their good image.
vi
 TABLE OF CONTENTS

Title Page……………………………………………………………………. i

Recommendation for Oral Examination…………………………………….. ii

Approval Sheet……………………………………………………………… iii

Acknowledgment…………………………………………………………..... v

Executive Summary……………….…………………….…………………... vi

Table of Contents……………………………………………………….…… vii

List of Tables………………………………………………………………… ix

List of Figures………………………………………………………………... ix

CHAPTER 1: THE INDUSTRY

Introduction………………………………………………………… 1

PESTLE Analysis………………………………………………...... 1

Major Players……………………………...…………………….…. 20

Analysis Using 5 Forces Model………………………………….…. 37

Opportunities……………………………………………………...… 40

Threats………………………………………………………………. 41

EFE Matrix…………………………………………………………. 43

Conclusion……………………………………………………….…. 45

CHAPTER II: THE COMPANY

Company Profile……………………………………………….…... 47

Nature of Business…………………………………………….…… 51

Products and Services Offered……………………………………... 51

vii
 Organizational Structure…………………………………………… 57

Analysis Using Value Chain………………………………………… 63

Strengths……………………………………………….……………. 66

Weaknesses……………………………………………….…………. 67

IFE Matrix…………………………………………………………… 67

Strategic Objectives…………………………………………………. 69

CHAPTER III: STRATEGY ANALYSIS

Present Vision and Mission………………………………………... 71

Proposed Vision and Mission…………………….………………... 71

Generic Strategy………………………………….………………… 72

BCG Matrix………………………………………………………... 74

IE Matrix……………………………………………………….…... 76

TOWS Matrix………………………………………………….…... 77

CHAPTER IV: IMPLEMENTATION

7S Framework………………………………………………………. 80

SPATRES…………………….…….………………………………. 86

CHAPTER V: FINANCIAL ANALYSIS

Financial Ratio – Present Operations.….….………………………... 88

Financial Assumptions…………………….………………………… 91

CONCLUSION

REFERENCES

APPENDICES
viii
 LIST OF TABLES
Table 1: PESTEL Analysis…………….……….……………………….…. 5

Table 2: Services of AirAsia………………………………………………. 23

Table 3: AirAsia Type of Seats Offer……………………………………... 25

Table 4: Services of Cathay Pacific Airways………………….….....….… 29

Table 5: External Force Evaluation Matrix (EFE) ……….………………. 43

Table 6: Internal Factors Evaluation Matrix (IFE) ……………….……… 67

Table 7: Philippine Airlines TOWS Matrix……………….……………... 78

Table 8: Philippine Airlines 7S Framework……………………………… 84

Table 9: Philippine Airlines SPATRES ……………...……….…………. 86

Table 10: Current Ratio …….…………………………………………… 88

Table 11: Debt to Equity Ratio ……………………………......………… 89

Table 12: Net Profit Margin ……………….......………………………… 90

Table 13: 3-Year Projected Income Statement for Philippine Airlines….. 92

Table 14: 3-Year Projected Return on Sale for Philippine Airlines...…… 93

LIST OF FIGURES
Figure 1: Effect of Energy Consumption and Reduction of Electricity and
JetA-1……………………………......……………………….....………… 12

Figure 2: Effect of Reducing Water Consumption…………………..…… 13

Figure 3: Effect of Managing Solid Waste, Hazardous Waste and Waste

Water……….……………………………………………..……………… 14

Figure 4: AirAsia Company Logo……………………………………….. 21

Figure 5: Cebu Pacific Company Logo…...……………………………... 32

ix
Figure 6: Cebu Pacific Type of Seats…………….………………………… 33

Figure 7: Cebu Pacific Type of Seats….…….……………………………... 34

Figure 8: Qatar Airways Company Logo …………….…………………… 35

Figure 9: Qatar Airways First Class …….………………………………… 35

Figure 10: Qatar Airways Business Class …….…………………………… 36

Figure 11: Qatar Airways Economy Class …….………………………….. 36

Figure 12: Five Forces Model …….…………………………… ………… 37

Figure13: Philippine Airlines Old Logo …….………………………..…… 48

Figure 14: Philippine Airlines New Logo ….…………………………...… 49

Figure 15: Organizational Structure of Philippine …….……………..…… 57

Figure 16: Organizational Structure of Philippine Airline………………… 58

Figure 17: Organizational Chart of Philippine Airlines …….…………..… 62

Figure 18: Analysis Using Value Chain …….………………………..…… 63

Figure 19: Porter’s Generic Strategy Model …….……………………...… 73

Figure 20: Philippine Airlines BCG Matrix…….……………………….... 74

Figure 21: McKinsey’s 7S Framework…….……………………………… 80

x
 CHAPTER 1

THE INDUSTRY

Introduction

Air travel nowadays is considered as one of the essential services that people use
in getting in one place to another and most of the time, land travel is simply not enough.
The transportation sector is one key component of what a thriving economy needs in
order to unleash our country’s growing demand for efficient and cost-effective means for
air transportation.

Air travel is classified into two categories. Domestic and International. Domestic
flights are a flight that flies from a point in a country and lands at a different part of the
same country. International flights are flights that start from a point in a country and
lands at a different country.

General Environment/PESTEL Analysis

PESTEL analysis is a strategic framework used by businesses to evaluate the

external environment. This framework breaks down opportunities and risks into six
different factors: political, economic, social, technological, environmental, and legal.
It is helpful in identifying the pros and cons of a business strategy.

Table 1 PESTEL Analysis

Political Economic Social Technological Environmental Legal

Notice of Gross Increasing Online Effects of Republic

Government Domestic Demand on Booking Ground Act 9497
Imposed Product the use of Service Emissions
Taxes, Fees (GDP) air in Climate

1
and Charges Growth transportati Change
Rates in air on
transportati
on
Effect of Increasing Travel Effects of Republic
Inflation Market for Guide Reducing Act 776
Rates to Air low cost Aircraft
transportati Noise in
on Human
Being
Effect of Online BancNet Effects of Republic
Loans and Booking ATM Energy Act 6235
Interest and Seat Consumpti Anti
Rates to air Reservation on and Hijacking
transportati s Reduction Law
on of
Electricity
and Jet A-1
Fuel
Ethnicity PAL Effects of Presidential
Mobile Site Reducing Decree no.
Water 1590
Consumpti
on
Calendar Effects of Republic
Pricing Managing Act 10963-
Solid Tax Reform
Waste, for
Hazardous Acceleratio
Waste and n and

2
 Waste Inclusion
Water
Article
1734
Air
Passenger
Bill of
Rights
Republic
Act 9442

Political Factors

Notice of Government Imposed Taxes, Fees, and Charges

Filipinos have traditionally chosen Philippine Airlines to go overseas or to other

countries. Due to the high number of passengers, the government must adopt passenger
safety measures. The government created the regulations to oversee the airport sector
because of the monopolistic nature of the commercial market.

Taxes, charges, and other costs imposed by the government on air travel may be
included in the ticket's value. The taxes, fees, and charges shown on this ticket are either
included in the fare or are listed separately in the "TAX/FEE/CHARGE" box(es), which
might account for a sizeable amount of the price of air travel. Additionally, the traveler
could have to cover unpaid taxes, fees, or other obligations. A franchise from the
Philippine government is required to run an aviation service, and Act 4033 was issued to
control foreign aircraft operations. Bureau of Aeronautics was moved to the newly
established Department of Commerce and Industry and given the name Civil Aeronautics
Administration as part of Executive Order No. 94, which reformed the government
(CAA). The National Airports Corporation was established by Republic Act 224 and
given responsibility for the management and operation of all national airports.

3
 The Civil Aeronautics Board and the Civil Aeronautics Administration were
restructured under Republic Act No. 776, often known as the Civil Aeronautics Act of the
Philippines. It specified the roles and responsibilities of both organizations, as well as
their resources, people, and Civil Aviation rules. The Bureau of Aeronautics was
established by the passage of Commonwealth Act No. 168 by the Philippine Legislative,
also known as the Civil Aviation Law of the Philippines. After the Philippines were freed
in March 1945, the Bureau underwent reorganization and was merged into the
Department of National Defense. Its duties included establishing Civil Aviation
Regulations.

The Department of Public Works, Transportation, and Communications was

given administrative oversight and responsibility over the Civil Aeronautics
Administration by Executive Order No. 209.The Civil Aeronautics Board and the Civil
Aeronautics Administration were restructured under Republic Act No. 776, often known
as the Civil Aeronautics Act of the Philippines. It specified the roles and responsibilities
of both organizations, as well as their resources, people, and Civil Aviation rules.

Relevance:

The Philippines is the costliest investment location for airlines in the Association
of Southeast Asian Nations (ASEAN) area as a result of these levies and the associated
regulations, which are incompatible with global norms and practices. Additionally, these
fees do not apply to Philippine international airlines on routes where they compete with
foreign airlines. The Philippines is a signatory to the International Civil Aviation
Organization, and this discrimination is against its principles. The government receives
P3.20 billion (roughly $ 70 million) from international airlines flying into the Philippines
as CCT and GPB taxes, but the continued decline of foreign and possibly Philippine
carrier flights that support Philippine trade and economic growth will be advantageous
for the other Asian economies in terms of business and employment.

4
Economic Factors

The nature of the airline might make it both expensive and risky. It is mostly due
to terrorism. Terrorists may hijack aircraft and crash them into structures like the historic
9/11. Global airline patterns have changed downward with the loss of one Malaysian
aircraft. The expense of maintaining an airplane remains high, notwithstanding the
economy's recovery. Gas will undoubtedly be subject to an excise tax, which would result
in substantially higher prices for consumers.

Gross Domestic Product (GDP) Growth Rates in air transportation

The aviation business links the entire globe in a distinctive manner, bringing
profound significance to the international economy. It contributes $3.5 trillion to
worldwide economic development (4.1% of global GDP). This subsection presents a
global overview of economic growth provided by airplanes.

GDP Growth Rate in the Philippines

Relevance:

A higher GDP growth rate indicates that the economy is expanding, which means
that the resources available to people, such as goods and services, wages, and profits, are
also expanding. The Philippines is part of a world that is becoming more globalized. In
recent years, the economy has continued to grow moderately, owing mostly to inflows of
foreign direct investment and exports. The Philippines appears to be the world's top hub
for management consultancy. This region of the world also has a thriving manufacturing
industry centered on the manufacture of electronic systems and other high-tech
components of systems for international corporations. The Philippines appears to be the
world's top hub for management consultancy. This region of the world also has a thriving
manufacturing industry centered on the manufacture of electronic systems and other
high-tech components of systems for international corporations. The Philippines has an
abundance of natural resources, including significant reserves of chromium, silver, metal,
lignite, and petroleum.

5
Effect of Inflation Rates to air transportation

Relevance:

Increasing inflation is exacerbating the pandemic's impact on the transportation

industry. Normally, commodity prices limit tourist experiences, although as illustrated in
our airline's economic study, the leisure-led resurgence remains robust as individuals
emphasize pleasures and reap the benefits of the summertime travel opportunity. The
upswing has brought with it several difficult-to-resolve difficulties, which are preventing
airlines from fully benefiting from the rebound.

For carriers, rising expenses are placing an extra strain on a sector that is already
recovering. Furthermore, labor availability issues exist, with airlines withdrawing
capacity from the market in order to more dependably execute their schedules.
Nevertheless, many travelers' impressions have been harmed, and staffing shortages
extend far beyond the airline industry to the airport, hotel, and restaurant businesses.
Quantity four of The Inflation Shift looks at how inflation is affecting the three major
cost categories for the aviation industry—labor, fuel, and maintenance—as well as what
passengers may anticipate from airlines in the coming months.

Effect of Loans and Interest Rates to air transportation

Relevance:

According to corporate sources, the flag carrier's overall liabilities are projected to
shrink to roughly $3 billion after its rehabilitation plan is authorized by US courts, which
may happen as soon as next month. A further sector's direct knowledge of the matter with
the airline's condition indicated PAL would probably receive US judicial assistance if it
obtained 67 percent of its own bondholders' and leasing companies' consent to its request
for restructuring. Companies in the aviation sector confront interest rate concerns while
growing or renewing their fleets. Low financing rates, on the one hand, make it simpler to
buy and lease planes, but places with high demand will also experience a greater GDP
growth rate. As a result, notwithstanding increased interest rates, expenditures occur in
places with greater growth rates. Additionally, investors prefer to make investments in
areas with greater potential returns.

6
Social Factors

Increasing Demand on the use of air transport

One of the world’s most important industries is air transport. Its development and
its technical and service achievements make it one of the greatest contributors to the
advancement of modern society. Demand for air services increases the influence of air
transport on the global economy, making possible the rapid movement of millions of
people and billions of dollars’ worth of goods to markets around the world. The demand
for air transport has increased steadily over the years because people nowadays prefer
traveling by airplane compared to other types of transportation because it is faster and
consumes less time.

Relevance:

It is certain that the demand for air transport will increase even more because
people nowadays prefer easier and faster trips compared to other types of transportation.
This can be a good indicator because they will choose the fastest way to travel which is
by airplane. So air transport definitely has a big advantage in terms of being fast, safe and
secure, and can save time compared to others.

Increasing Market for low cost

One of the things people are looking for, especially Filipinos is the low cost but
good service. Low-cost airlines have grown exponentially worldwide over the past few
years, owing to rise in economic activities, ease of travel, development of the travel &
tourism industry, rapid urbanization, changes in lifestyle, consumer’s preference for low-
cost service along with non-stops, and frequent service. Moreover, increase in purchasing
power of middle-class households, especially in developing regions, and high internet
penetration coupled with e-literacy notably contribute toward the growth of the global
low-cost airlines market. However, factors such as volatile crude oil prices and increase
in terrorism & crime rate, political uncertainty, & natural calamities hinder the market
growth. Furthermore, increase in cases of COVID-19 is leading to travel restrictions,
which is severely affecting the market.

7
Relevance:

Increasing market for low-cost is a good thing because of the practicality of

Filipinos, they prefer low-cost and at the same time good service. It’s a good way
because passengers will prefer it over those with high prices but the service provided is
the same. So even if the cost is low, there will still be a big profit because more people
will choose it.

Online Booking and Seat Reservations

The development in technological advancements is very helpful for every

commoner. You can now do everything online by just touching a few buttons. From
booking tickets to shopping, you will do everything swiftly. As far as airline reservation
is concerned, the benefits are a lot. Booking a flight online means you may do everything
provided have internet access. Some airlines offer bookings without cancellation fees,
while others provide online cancellations and changes for free, as long as you do it within
24 hours of departure, that’s why people prefer online. Airline reservation systems (ARS)
are systems that allow an airline to sell their inventory or seats. It contains information on
schedules and fares and contains a database of reservations tickets issued. Online
Booking and Seat Reservation can help a lot because you can save time and make your
travel easier.

Relevance:

Due to modern technology and at the same time as the pandemic, people use
online more often. So this is really a big help for them. It has a big advantage because the
online process is very easy and fast and you save a lot of time, so travellers prefer online
compared to other. Because of that, it will help a lot in the further development and use
of more modern technology in the air industry

Ethnicity

Due to the globalization of the airline industry, global airlines are focusing human
resource management on diversity strategies and employing flight attendants of various
races and ethnicity. Multinational flight attendants have brought many positive results.

8
Because it will be more comfortable and easy for the passenger if the flight attendants are
multinational. And they will feel more secure and avoid being victimized by racists.

Relevance:

Each passenger has a different ethnicity, different color, culture, tradition and
beliefs. There are also incidents in public transportation with racist people. If the airline
industry would hire flight attendants with different ethnicities, they would avoid such
incidents. Their passengers will definitely feel safe and their ethnicity is respected.
Because of that, the airline will have a good image and more passengers will choose to
board it. This can be a good indicator for an increased demand which can increase
profitability and opportunities for expansion, development, investments, and innovation.

Technological Factors

Online booking service

With the launch of its Online Booking service, Philippine Airlines (PAL) started
embracing electronic commerce by accepting credit card payments for all flights. In order
to better meet consumer expectations and provide comprehensive travel guides with all
the details about your location, a new, upgraded website was also established.

Travel Guide

They feature a travel guide with details about a certain city. It includes
fundamental information, sightseeing, amusement, lodging, dining, and maps. You can
choose the city you want to download by looking through the Destinations and Guides
area of the website. The PDF versions of the guides are freely available.

BancNet ATM

Another aviation industry first is presented to you by Philippine Airlines and

BancNet. Cardholders of BancNet ATMs can now buy domestic Philippine Airlines
tickets online without leaving their homes.

9
PAL Mobile Site

Philippine Airlines launches an interactive website for connecting to PAL while

you're on the go, the PAL Mobile Site, at www.philippineairlines.mobi. You have more
flexibility and convenience using the PAL Mobile website. You can check the most
recent arrival and departure times, view flight schedules, view the most recent Mabuhay
Miles information, and learn more about the most recent PAL news and promotions with
your web-enabled mobile phone, Blackberry, or PDA.

Calendar Pricing

By instantly displaying the lowest rate throughout a seven-day period, three days
before and three days after the desired travel date, PAL's online booking system, known
as "Calendar Pricing," enables customers to book flights whenever it is most practical and
affordable.

Environmental Factors

Effect of Ground Emissions in Climate Change

Philippine Airlines and PAL Express have begun replacing their transport shuttle
buses with more environmentally friendly vehicles, in line with the aviation industry's
push for carbon neutral growth and in support of the Department of Transportation's plan
to implement controls on greenhouse gas emissions. Now, they operate 16 COBUS units
as airport shuttle buses. These cars are equipped with EURO V compliant diesel engines
that emit minimal levels of gaseous and particle emissions. Furthermore, these cars run
on gasoline that meets EURO IV criteria and has a substantially lower sulphur level.
Staffs is also encouraged to follow anti-idling engine policies by turning off engines
when not in use to save fuel and promote cleaner air.

Relevance:

Climate change has been caused by human activities with an increase in the
emission of greenhouse gases such as carbon dioxide into the atmosphere. The main

10
effects of climate change are associated with more extreme weather conditions, changes
to global ice cover and rises in sea level that is why PAL do some action or preventive
step to stop the distractive problem to their incoming flights.

Effect of Reducing Aircraft Noise in Human Being

PAL and PALex continue to modernize its fleet that emits less noise and complies
with ICAO Chapter 4 Noise Standard. Aircraft noise is the most major cause of negative
community reaction to airport operation and growth. This is likely to continue in most
parts of the planet for the near future. Limiting or lowering the number of persons
affected by significant airplane noise is one of ICAO's top priorities and a critical
environmental aim.

The main overarching ICAO policy on aircraft noise is the Balanced Approach to
Aircraft Noise Management, adopted by the ICAO Assembly in its 33rd Session 2001
and reaffirmed in all the subsequent Assembly Sessions. (ICAO Resolution A39-1
Appendix C). ICAO has been analysing changes in global exposure to aircraft noise as
part of the ICAO Global Environmental Trends, which provides a foundation for sound
discussion and decision-making on aircraft noise policy. Furthermore, noise technology
goals have been set with the intention of presenting industry with challenging yet
achievable targets.

Relevance:

Noise pollution is a big issue in cities all around the world. Noise is described as
any undesirable sound in our environment. Environmental noise, which is a type of air
pollution, is hazardous to one's health and well-being. PAL Take an action in Noise
pollution because it can significantly impact the experience on board.
Airlines nowadays aim to deliver the best product possible, including top of the line in-
flight entertainment, catering, cabin layout changes and even
lightning within the aircraft are crafted in a way to make passengers as comfy as if they
were in their house.

11
Effect of Energy Consumption and Reduction of Electricity and Jet A-1 Fuel

Due to an increase in occupied areas, the energy usage increased by 0.6 million
kilowatt-hours (kWh) in 2019. The overall power use comprises the principal facilities of
PAL and PALex, as well as catering and ground maintenance service providers.

To boost the energy efficiency, they began switching from fluorescent bulbs to
LED lights. In 2019, the PAL Maintenance Base Complex completed the replacement of
25% of its lights with LEDs. For PALex, a total of 3,362 LED bulbs were substituted
across the main hub, with the expectation of a 40% decrease in wattage when compared
to CFL tubes.

They also implemented simple yet efficient ways to minimize the energy use even
more. This involves adjusting the room temperature in all workplaces from 22°C to 25°C
and controlling the time the lights turn on.

With an increase in internal and international flights by both PAL and PALex in
2019, the use of Jet A-1 fuel has also grown. Fuel conservation measures are in place to
reduce fuel use and carbon emissions.

Figure 1. Effect of Energy Consumption and Reduction of Electricity and Jet A-1
Fuel

12
Relevance:

Aviation's sustainability will be ensured through reducing energy use, which has
significant social, environmental, and economic benefits. It results in greater resource
efficiency, lower oxygen emissions, and lower particulate matter levels. Due to the
anticipated 5% annual growth in air travel traffic, the negative effects of aviation on the
environment would drastically worsen in the absence of any intervention. Aerodynamic
improvements, weight reduction, enhanced engine efficiency, and new combustion
technologies are a few ways that an aircraft's environmental effect might be reduced.

Effect of Reducing Water Consumption

Due to an increase in meal production, the water use increased by 9 thousand

cubic meters (m3) in 2019. The water usage covers the principal facilities of PAL and
PALex, including their separate fleets, catering and ground maintenance service
providers. They also used basic but successful ways to promote awareness about water
conservation, such as posting water conservation signage across various regions and
periodically inspecting pipelines for leakage.

Figure 2. Effect of Reducing Water Consumption

Relevance:

Given the current state of the environment, airports and everything related to their
administration require a significant quantity of water, thus they should develop
sustainable alternatives to water consumption and increase water use efficiency. As a
result, PAL and other airlines are implementing various environmental policies to
minimize their water footprint. It's important to note that most of the water used in
airports is used for non-potable reasons, such as sanitizing and manufacturing processes,
cleaning airport infrastructure and aircraft, and maintaining the air fleet.

13
Effect of Managing Solid Waste, Hazardous Waste and Waste Water

Implementing environmental protection programs in properly manage solid waste,

hazardous waste and wastewater are priority of PAL and PALex.

When compared to 2018, the solid waste increased to 524 tons in 2019. The
growth in the number of flights, passengers, and meals produced at the facility is the
primary contributing element. PAL and PALex employ waste management practices such
as waste minimization and source segregation. The Catering operation, managed by PAL
offices, is closely monitoring its implementation. PAL cabin crews have also begun using
in-flight trash segregation on some airline itineraries. All garbage is separated into four
types: recyclable, compostable, food waste, and residual. Bokashi and vermicomposting
decompose food waste and biodegradable materials. Recyclable materials are collected
and sold to different recycling operations, while remaining garbage is disposed of in a
sanitary landfill.

The Toxic Substances, Hazardous and Nuclear Wastes Control Act of 1990 is met
by PAL and PALex. The hazardous waste is transported, processed, and disposed of
using a DENR approved transporter and Treatment, Storage, and Disposal Facility or the
TSDF.

Figure 3. Effect of Managing Solid Waste, Hazardous Waste and Waste Water

14
Relevance:

Waste management lessens waste negative effects on the environment, human

health, and other factors. Additionally, it can aid in the recycling or reuse of materials
like paper, cans, glass, and others. There are several types of waste management,
including the elimination of solid, liquid, gaseous, or toxic materials. PAL protect the
environment by proper dispose of waste and it will also save on costs or reduce expenses
for disposal.

Legal Factors

Republic Act 9497

An act creating the civil aviation authority of the Philippines, authorizing the
appropriation of funds therefor, and for other purposes.

Is hereby declared the policy of the State to provide safe and efficient air transport
and regulatory services in the Philippines by providing for the creation of a civil aviation
authority with jurisdiction over the restructuring of the civil aviation system, the
promotion, development and regulation of the technical, operational, safety, and aviation
security functions under the civil aviation authority.

Relevance

The CAAP is responsible for implementing policies on civil aviation in order to

ensure safe, economical, and efficient air travel. As an independent regulatory body with
quasi-judicial and quasi-legislative powers, the CAAP is mandated to set comprehensive,
clear and impartial rules and regulations for the Philippine aviation industry.

Republic Act 776

15
 The Civil Aeronautics Board (CAB) is the agency of the government mandated to
regulate the economic aspect of air transportation, and shall have the general supervision,
control and jurisdiction over air carriers, general sales agents, cargo sales agents, and air
freight forwarders as well as their property, property rights, equipment, facilities, and
franchise (R.A. No. 776, as amended by P.D. 1462). CAB is an attached agency of the
Department of Transportation (DOTr). In the exercise of its regulatory powers, it is
authorized to issue Certificates of Public Convenience and Necessity (CPCN) to domestic
carriers, Foreign Air Carrier's Permit (FACP) to foreign carriers, and Letters of Authority
to airfreight forwarders, general sales agents, cargo sales agents who are fit, willing, and
able to perform services as required by public convenience and necessity. CAB likewise
performs quasi-judicial functions.

Relevance

Generally, a permit authorizing a person to engage in domestic air commerce or

air transport can only be granted to a Filipino citizen. A Filipino citizen is defined as: an
individual who is a citizen of the Philippines; a partnership of which each member is such
an individual; or a corporation or association created or organized under the laws of the
Philippines, of which the directing head and two-thirds or more of the board of directors
and other managing officers are citizens of the Philippines, and in which 60 per cent of
the voting interest is owned or controlled by persons who are citizens of the Philippines
(section 3(r), RA 776). Note, however, that foreigners residing in the Philippines who are
members of aero clubs organized purely for recreation, sport, or the development of
flying skills, may be issued permits as a prerequisite to any aeronautical activities within
Filipino airspace. Air carriers must seek specific approval from the CAB to operate as
such. The CAB requires air carriers to have a minimum paid up capital ranging from 10
million pesos for carriers with domestic non-scheduled flights to 50 million pesos for
carriers with domestic and international scheduled flights.

Republic Act No. 6235

16
ANTI-HIJACKING LAW

3 Acts of Hijacking

a. Changing the course or destination of a Philippine aircraft while in flight

– OR to take control of the aircraft while it is "in flight"—i.e., when its doors are closed
after all passengers have boarded and ends when the doors are opened for disembarking

b. Compelling a foreign aircraft to land in the Philippines

– OR seizing control of it while it's in Philippine territory

c. Loading,

– shipping

– OR carrying

– explosive, flammable, corrosive or poisonous substances in a passenger aircraft

– within the Philippines

• Aircraft companies are authorized to open and inspect suspicious-looking packages

– in the presence of their owner (or his representative.

– If the owner or his representative refuses, he will be denied boarding/loading.

Relevance

Republic Act 6235 punishes any person who shall compel a change in the course
or destination of an aircraft of Filipino registry, or to seize or usurp the control thereof,
while it is in flight. It also punishes any person who shall compel an aircraft of foreign
registry to land in Filipino territory or shall seize or usurp the control thereof while it is
within the Filipino territory.

Presidential Decree no. 1590

17
 An act granting a new franchise to Philippine airlines, Inc. to establish, operate,
and maintain air-transport services in the Philippines and other countries

Section 7. In case of war, insurrection, domestic trouble, public calamity, or

national emergency, the Philippine Government upon order of the President shall have
the right to take over and operate the equipment of the grantee, paying just compensation
for such use or damages.

Republic Act 10963

This Act shall be known as the "Tax Reform for Acceleration and Inclusion
(TRAIN)". (c) To ensure that the government is able to provide for the needs of those
under its jurisdiction and care through the provision of better infrastructure, health,
education, jobs, and social protection for the people.

Relevance

According to the National Tax Research Center under the Department of Finance,
R.A. No. 10963 aimed to make the Philippine Tax System simpler, fairer, and more
efficient to promote investments, create jobs and reduce poverty and to raise revenues
that will fund the President’s (Duterte) Build, Build, Build Project.

Article 1734

Article 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

18
(5) Order or act of competent public authority.

Relevance

Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all circumstances of
each case

Air Passenger Bill of Rights

There are three (3) major rights of passengers covered under said issuance,
namely: (a) right to be provided with accurate information before purchase of the ticket;
(b) right to receive the full value of the service purchased; and (c) right to compensation.

The passenger is entitled to a full, fair and clear disclosure of all the terms and
conditions of the contract of carriage before he purchases his ticket. Remember that upon
purchase of your air ticket, you signify your acceptance of all the terms and conditions
stated therein

Air carriers cannot refuse to process your check-in, provided that you reach the
designated check-in area at least an hour before your estimated time of departure (ETD).
There must be a priority lane for senior citizens, people with disabilities (PWDs), and
people who need special assistance, and a special counter must be opened for a flight
nearing its check-in deadline. Passengers have the right to board the aircraft for the
purpose of the flight, except when there is legal or other valid cause such as immigration
issues, safety and security, health concerns and non-appearance at the boarding gate at
the appointed time, among others.

In case of flight cancellations at least attributable to the carrier, the passenger has the
following rights: (a) to be notified of the fact of cancellation; (b) be provided with
sufficient refreshments, hotel accommodation, transportation from airport to the hotel,
free phone calls, texts or e-mails and first-aid, if necessary; (c) be reimbursed of the value
of the fare, including taxes and surcharges; or (d) endorsed to another air carrier; or (e)

19
rebooked to the next flight available without additional charge. As to flight delays, if the
flight is delayed at least three hours after ETD, whether or not it is attributable to the
carrier, the passenger has the right to avail himself of refreshments or meals, free phone
calls, text or emails, and first aid, if necessary, rebook or refund his or her ticket, or be
endorsed to another carrier.

Relevance

The bill provides a private right of action for passengers aggrieved by airline
actions and increases civil penalties on air carriers for violations of passenger protections.

Republic Act 9442

An act amending republic act no. 7277, otherwise known as the “magna carta for
disabled persons and for other purposes”

At least twenty percent (20%) discount on fare for domestic air and sea travel for
the exclusive use or enjoyment of persons with disability.

Relevance

In addition to significant discounts on transportation fares and purchases of medicines

and other basic daily essentials, RA 9442 strictly prohibits and penalizes any act that has
an effect of vilifying persons with disabilities.

Major Players/Direct Competitors

Transportation industry is one of the most significant sector in the Philippines. Almost of
people travels and the fastest way getting on your destination domestically or
internationally is through air transportation, there is no better alternative because land
transportation doubles the time of the journey. Aviation sector is really in demand locally
and internationally because the trip does not consume a lot of time. It is one of the major
contributor on the growth of the economy because it is the key for international trade,

20
connectivity and facilitate tourism. It develops the country because it brings job
opportunities and useful when natural calamities occurred.

1. AirAsia

Philippines AirAsia, Inc. is a low-cost airline based at Ninoy Aquino International

Airport in Metro Manila in the Philippines.[6] The airline is the Philippine affiliate
of AirAsia, a low-cost airline based in Malaysia. The airline started as a joint venture
among three Filipino investors and AirAsia Investments Ltd., a subsidiary of AirAsia
Berhad.

It is a successor to Zest Airways, Inc.. In 2013, a share swap agreement with Zest
Airways added Alfredo Yao of Zest-O Corporation as an additional owner of the
company. Zest Airways was rebranded as AirAsia Zest and operated as a separate brand
from AirAsia until merged into Philippines AirAsia in January 2016.

Figure 4. AirAsia Company Logo

AirAsia Company Logo

The redesign of 2020 has introduced a completely new badge of the air carrier,
with the logotype set in lowercase letters. The custom italicized sans-serif typeface
features bold lines and stable shapes, with a few unique details, which make the logo
instantly recognizable. The massive dots above both letters “I” are slightly overlapping

21
the vertical bars, creating white “smiles”. The same approach is used with the letter “R”,
where the dot overlaps the vertical bar on the right, creating a vertical white arch.

Vision

To be the largest low cost airline in Asia and serving the 3 billion people who are
currently underserved with poor connectivity and high fares.

Mission

 To be the best company to work for whereby employees are treated as part of a
big family

 Create a globally recognized ASEAN brand

 To attain the lowest cost so that everyone can fly with AirAsia

 Maintain the highest quality product, embracing technology to reduce cost and
enhance service levels

Values

 Dare to Dream

Progress comes from innovation. Both require change to happen.

 People First

Care for our people, care for our guests.

 Make it Happen

Learn fast and deliver more with less.

 Be Guest-Obsessed

Understand deeply what our guests want. Then give them more than they expect.

 One AirAsia

We are one airline, with one vision, and one people.

22
  Safety Always

Safety is everyone's responsibility; it starts with you.

 Sustainability Spirit

Acting today for a better tomorrow.

Services

The following are the services that AirAsia offers:

Table 2. Services of AirAsia

Flight Classes Description Class Facilities Class Seats

Economy Class Economy Class is the Baggage is Passengers can

basic fare on AirAsia usually included choose their seat
Philippines, providing on AirAsia when flying with
all you need to enjoy Philippines AirAsia, to give
your flight, with extras flights, which is them the
being available to usually 1 cabin preference of if
purchase at an baggage (fees they want an aisle
additional cost. apply for hold seat with more
luggage), but leg room, or the
make sure you window seat with
check your great views and
allowance on less disruption.
your flight Seat selection is
itinerary or e- available during
ticket. In-flight the booking
entertainment, process.
food, drinks and
lounge access is

23
 all available for
an additional fee.

Premium Economy There is currently no

Class premium economy
class on AirAsia
flights, as passengers
have the choice of
flying in economy or in
business for a flight
which is truly
luxurious.

Business Class Business Class in 'Premium Up' Business class

AirAsia is called includes 40kg of passengers enjoy
‘Premium Up’ or checked luggage a spacious seat
‘Premium Flatbed’, and in the price of the with plenty of
provides a luxurious ticket. Meals are legroom and full
and enjoyable flying also included on recline into a flat-
experience. The board, with a bed for
experience is focused wide selection of passengers to
around the innovative dinners and enjoy a good
premium flatbed, which snacks for you to night’s sleep
is a fully lie-flat air enjoy in the before arriving at
seat. clouds. Amenities their destination.
such as pillow
and duvet are
available in
business class.
Passengers also
have a swift
airport

24
 experience, with
an express check-
in counter,
priority boarding
and baggage
service. There is
also access to the
AirAsia Premium
Red Lounge
included in the
ticket. Inflight
entertainment is
also included in
this ticket.

First Class This airline doesn’t

currently have the
facilities for first class.
Instead, opt for
Business class which
provides a great
premium flight
experience.

Table 3. AirAsia Type of Seats Offers

Type of Seats Description

Airbus A320 family

Hot Seats Located in the front of the plane and

emergency exit rows, Hot Seats comes

25
 with up to 29” pitch and 16-17” width.
You can even stretch out with at least
20.3” of legroom on the first and
emergency exit rows. On top of that,
you’ll also get to board first.
(Note: Priority boarding is currently put
on hold due to our staggered boarding
policy to minimize contact during the
pandemic)

Standard Seats With a pitch of 28” and width of 16-17”,

our stylish leather seats will ensure you
have a great journey with us.

Airbus A330

Premium Flatbed This 59” pitch and 19” wide seat located
in the Premium Flatbed cabin converts to
a full flatbed when desired, as well as
other features that ensure your utmost
comfort on board.

Hot Seats With at least 17.5” of legroom, you will

have more than enough space to stretch
out. On top of that, you’ll also get to
board first.
(Note: Priority boarding is currently put
on hold due to our staggered boarding
policy to minimize contact during the

26
 pandemic)

Standard Seats With a pitch of at least 30” and width of

at least 16”, our stylish leather seats will
ensure you have a great journey with us.

Twin Seats This pair of Standard Seats are the

perfect spot for lovebirds and best
friends. With no middle seat, you can
enjoy extra privacy being seated together
without any distraction from a stranger.

Quiet Zone  Minimal noise with no

disturbances - no kids below 10

 Soft ambient lighting

 Your meals will be served faster

2.Cathay Pacific Airways Ltd

Cathay Pacific Airways is Hong Kong's flag carrier, offering passenger and cargo
services to around 200 cities in Asia, Europe, North America, Africa and Australia. It has
a workforce of around 23,000.

The company was established in 1946 by Roy Farrell, an American, and Sydney de
Kantzow, an Australian. Early on, it offered flights to Shanghai, Bangkok, Manila and
Singapore.

Swire Pacific, a conglomerate engaged in the property development, beverage, marine

services and trading businesses, has owned 45% of Cathay Pacific since 1948. Through

27
the years, Swire has overseen the airline's expansion. In 2006, Cathay Pacific acquired
Dragonair, a Hong Kong-based carrier that mainly flies within the Asia-Pacific region.
Around the same time, it signed a strategic partnership with national flag carrier Air
China. Air China owns 29.99% of Cathay Pacific.

Figure 5. Cathay Pacific Airways logo

Its design reflects a single stroke of a calligrapher's brush, which establishes our
Asian identity and represents a bird in flight.

Mission

To be a hub for the safe, efficient and sustainable movement of goods

to power Hong Kong and the global economy

Vision

To become the world’s most customer centric cargo terminal services provider

28
Services

The following are the flight class that Cathay Pacific Airways offers:

Table 4. Services of Cathay Pacific Airways

Flight Class Description

Economy Class Experience greater comfort than ever in

our Economy seat, ergonomically
designed with cushioning and an
adjustable headrest to provide maximum
support for your head and neck. Take
advantage of the ample legroom to really
stretch out during your journey.

Keep your personal items close at hand

with several stowage options by your
seat. A dedicated shelf keeps your
mobile device at eye level, to enable you
to watch your own content with ease*,
though you’ll no doubt want to dive into
our incredible collection of inflight
entertainment.

Premium Economy Class Your Premium Economy seat has a

generous recline, expanded legroom and
a supported head rest. Full-length calf
rests and leather-padded footrests,
already on A350 fleet and selected
B777-300ER aircrafts, will make your
journey even more comfortable. A larger

29
 meal table makes working and dining
even easier, while additional storage
space keeps personal items conveniently
close. Wi-Fi services are also being
introduced across our fleet to help you
stay connected while flying.

Settle in to your long-haul flight with a

welcome drink and personal greeting
from one of our friendly cabin crew, who
will be sure to look after you throughout
your journey.

Business Class Enjoy the privacy of our award-winning

Business seats, for work and relaxation
alike. Privacy partitions, adjustable
lighting, expansive tables, power outlets
and one-click sitting and sleeping
settings make the experience your own.
Wi-Fi services are being rolled out
across our fleet, so you’ll stay connected
in the skies.

And when it’s time to sleep, indulge in

the comfort of our fully flat bed and
luxurious 400-thread-count Bamford
bedlinen on long-haul flights.

The extra-wide cabins of our A350

30
 aircraft feature intelligent lighting and
reduced noise, allowing you to sleep
more soundly, while better levels of
cabin pressure and humidity help reduce
jet lag.

First Class Let us turn down your bed before you

turn in. Your seat transforms into one of
the widest fully flat beds in the sky,
complemented by luxurious bedding
from leading organic brand Bamford: a
thick mattress, 600-thread-count
bedlinen, a selection of soft pillows, and
a calming pillow mist.

Your suite also doubles as a private

working area, complete with
complimentary Wi-Fi and in-seat power.
For greater privacy, we’ve introduced
do-not-disturb and wake-up call services
on selected routes.

Experience our redesigned menu –

including signature favourites, wellness
options, and Hong Kong flavours – made
with the finest ingredients from
sustainable and ethical producers. Any
time you’re ready to dine, simply let us

31
 know and we’ll prepare your meal to
order.

Our award-winning onboard cellar

features top champagne cuveés,
prestigious vintages, spirits and Betsy
beer – our pale ale handcrafted for
35,000 feet.

3.Cebu Pacific

Figure 5. Cebu Pacific Company Logo

A Philippine low-cost airline based on the grounds of Mactan–Cebu International

Airport (Terminal 2), Lapu-Lapu City, Metro Cebu, Philippines. Founded in 1988, it is
Asia's oldest low-cost airline. It offers scheduled flights to both domestic and
international destinations. Its main hubs are Cebu and Manila, with focus cities
at Cagayan de Oro, Clark, Davao, Iloilo, Kalibo, and Zamboanga.

32
Mission

“It’s time everyone flies!”

Vision

“The most successful low-cost carrier in the world.”

Services:

Figure 6. Cebu Pacific Type of Seats

Cebu Pacific Standard Plus seats offer the best of both worlds when it comes to
seat selection. You can choose to sit in the front to middle rows of the plane for a more
comfortable and relaxed flight, or near the entrance and exit for a more convenient trip.

You can also select from window or aisle seats, depending on your preference.
And if you’re traveling with a group, Cebu Pacific Standard Plus makes it easy to sit
together so you can enjoy your flight. With Cebu Pacific Seat Selector, you can choose

33
 the perfect seat for your Cebu Pacific flight.

Figure 7. Cebu Pacific Type of Seats

Cebu Pacific Standard Seat features and benefits are designed to give you the best
possible experience while flying. With Cebu Pacific’s Seat Selector, you can choose your
preferred seat for a minimal fee.

Cebu Pacific’s Standard seats are located in the middle to back of the plane, so
you can choose from a window or aisle seat. If you’re traveling with a group, Cebu
Pacific’s Standard seats will allow you to sit together.

4.Qatar Airways

Qatar Airways was established by the government of Qatar on

November 22, 1993; operations started on January 20, 1994 Amman was first served in
May 1994. In April 1995, the airline's CEO was the Sheikh Hamad Bin Ali Bin Jabor Al
Thani who employed a staff of 75. By this time the fleet consisted of two Airbus
A310s that served a route network including Abu
Dhabi, Bangkok, Cairo, Dubai, Khartoum, Kuwait, London,
Madras, Manila, Muscat, Osaka,

34
 Figure 8. Qatar Airways Company Logo

Mission - To achieve the goals of its Mission Statement, Qatar Airways does the
following: Puts Safety first with the highest standards of safety and security Customer
focus-providing genuine service and hospitality.

Vision – to create a clear Customer Preference for Qatar Airways Cargo. to establish
operational excellence in delivering our promise to our clients.

Services:

First class

Qatar Airways offers first class passengers over 6.5 feet of legroom and seats that
fold into flat beds with feather duvets. First class seats are equipped with massage
functions and an entertainment system.

Figure 9. Qatar Airways First Class

35
Business Class

Qatar Airways offers business class passengers fully flat horizontal beds with
direct aisle access in a 1-2-1 configuration on board its Airbus A380, Airbus A350,
Boeing 777, and Boeing 787 aircraft. On other long and medium-haul aircraft, business
class seats are in a 2-2-2 configuration offering flatbed seats with 180 degrees recline,
with massage functions.

Figure 10. Qatar Airways Business Class

Economy Class

Qatar Airways economy class was named best in the world in the 2009 and
2010 Skytrax Awards. Qatar Airways offers economy class passengers a seat pitch of up
to 34 inches.

Figure 11. Qatar Airways Economy Class

36
Industry Analysis Using the Five Forces Model

The Porter's Five Forces is a model that identifies and analyses five competitive
forces these are the Threats of new Entrants, Bargaining Power of suppliers, Bargaining
Power of Buyers, Threats of substitute products and Industry Competitors they shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces
analysis is usually used to identify an industry's structure to determine corporate
strategy.

Figure 12. Five Forces Model

Internal Competition

Rivalry within the Industry – HIGH

The airline industry market is perfectly soaked. Both local and international
markets require more companies. These airlines are operating on the same destinations
and competing for the same customer. The competition is continuous within these airlines
in terms of prices, through offering different services, cut-fares, frequent flyer

37
membership privileges and many more areas to grab more customers than other
competitors. Low differentiation, excess capacity, customer service, switching costs for
passengers, in-flight entertainment, fast changing technology and readily available prices
via the Internet are other factors contributing to rivalry. The net result of this rivalry
among companies is an overall slow market growth rate and the overall profit possible of
this industry is low.

Only a few important businesses have an evenly distributed market share

in the aviation sector. Any new entry will encounter fierce rivalry, and current firms may
be forced out of the market owing to a lack of money. Because of credit arrangement
with suppliers or significant departure fees, each existing player remains in the game for
the long haul.

Threat to New Entrants – LOW

The gap for a newcomer is small even to seize its way in since the airline industry
is entirely saturated. The major reason for this is the cost of entry. One of the most
luxurious industries is airline industry, due to the cost of buying aircrafts, security and
safety measures, customer service and manpower. A huge investment is necessary.
Another main obstacle to access is customer’s loyalty to their existing brands. It’s
difficult to attract customer out of their existing brands. Extensive development period
and high fixed cost are also huge obstacles to access.

This implies that customers are accustomed to flying and hence alternatives
restricted.

Threats of Substitutes Products - LOW

Cars, buses, ships and trains are alternatives to air travel. The adjustment costs
among air travel and its alternative are quite low; the materiality of alternatives will alter
according to convenience and customer-type. Philippine Airlines (PAL) accompanied
several of its alternatives as they rate that it helps the growth and popularity of the airline
industry.

38
 The airline industry is highly competitive, and suppliers and customers have
significant bargaining power. However, the threat of new entrants and replacement
products is low.

Bargaining Power of Suppliers - HIGH

Boeing and Airbus are manufacturers which suppliers of airline industry are
restricted. Given that a small number of airplane suppliers worldwide, there is a small
chance for bargaining as a result of increasing power of these suppliers.

Suppliers of fuel take over its production so it can also manipulate the price. The
airline companies have no choice but to purchase fuel on whatever price that the market
gave. Airports can manipulate over airline industry since it is necessary for airplanes an
airfield to land. The employees in addition have the bargaining power basically because
they are members of labor union.

Because of the three inputs that the airlines have the fuel, aircraft, and the labour
are all impacted by the surrounding environment, suppliers have considerable power in
the airline sector.

Bargaining Power of Customers - LOW

Majority of airline customers are unable to coordinate and organize and it is the
reason why the authority of individual buyer lessens. The rivalry is fairly high in
domestic airlines so customers have an opportunity to bargain however there are less
options of bargain on international routes. Corporate discounting is a strategy where air
fare and fees are lowered. Negotiations among corporations and airlines are involved. It
is necessary for corporations to negotiate well in advance. Discounts depend on airline
offers, demand forecast, and decisions.

With the growth of marketing strategies, travelers are no longer at the control of
ticketing agents and intermediaries, as well as airlines themselves. The airline industry
has always been very competitive. Clients now have quick access to rates, allowing them
to make the most cost- effective selections.

39
Opportunities and Threats

Opportunities

Use Better Technology to Minimize Cost

Innovations are being introduced everyday as technology advances quickly. There
are now technologies for cost savings on fuels, maintenance, and modern tools to
improve efficiency and increase profitability. By making sure that technology is used to
minimize cost or reduce expenses, the aviation industry can maximize the benefits of it.
Technology or the software can be implemented to help manage human resources, book
flights, and prevent delays and other technical errors.

Growth in the Tourism Industry

Nowadays, people are exposed to media and entertainment that promotes
international travel as a way to explore other cultures and adventures. Passengers are now
exposed to more travel destinations, which are added to their “bucket list,” thanks to the
widespread use of technology and social media. Because today’s travelers prefer fast and
time-saving, they prefer to travel by airplane and this can increase airline industry sales
and profits.

Expansion
The expansion of globalization has given airlines the chance to operate in nations
other than their own. Growth of the consumer base through international market
expansion. Additionally, by offering flights to more destinations, airlines may increase
their popularity, which has a good impact on their reputation and brand image. This will
easily attract in more travelers and assist in maintaining strong relationships with
customers.

Inviting New Stakeholders

As we all know, the airline industry is a very profitable business that has been
steadily expanding for a while. Hopefully, this will continue in the years to come.
However, the management can attract and bring in new investors by using their
background. And because airlines are a very profitable business, airlines can use it to

40
entice and attract more investors. More investor means more money and capital, and the
company can use it for improvement, development, and to increase their operations.

Threats

Fuel price inflation

The present challenge to the aviation business is the price of gasoline. The rising
cost of aviation fuel causes the airline to lower domestic passenger costs. At the moment,
the fuel fee is placed on travelers as a symptomatic reprieve. The airlines to assist them in
recovering losses caused by increasing jet inflationary pressure.

Execution of the Law

As a result of the open skies policy’s adoption, regional airline companies’
financial viability might suffer. National air carriers would be free to fly over countries
without landing and to stop for maintenance or refueling while transferring either
passengers or cargo under the open skies policy. Then moving it across international
borders. Giving international airlines access rights does not guarantee that the authorities
of other international airlines, such as those that collaborate with them, would grant them
access privileges as well. Even though there were no constraints on air carrier
classification, quasi-companies were nonetheless permitted to fly internationally under
other identities and receive the same facilities.

Environmental hazards
Incidents such as seismic events, natural factors, climate variability, outbreaks,
and other diseases may make conducting business difficult for the corporation. Even if
weather may be detected and forecasted with extreme precision, heavy precipitation has a
significant influence on operating safety and efficiency. Poor visibility causes the
majority of deadly aircraft accidents.

Terrorists Attacks
Profitability begins to decline as well as write-downs on passenger service
expertise just after a terrorist attack appear to be temporary, although this is not a
foolproof system. The potential outcome of terrorist attacks can indeed give an indication

41
that the security systems that the business has implemented aren’t rigorous enough,
which might also lead to experiencing a negative global perception.

Expenses for aviation safety have significantly grown.

Authorities have already increased stringent safety guidelines and procedures
while airline firms must follow them due to security dangers.

42
Table 5. External Factor Evaluation (EFE)

Key External Factors Weight Rating Weighted

Score

Opportunities

o Use Better Technology to 0.15 4 0.60

Minimize Cost

o Growth in the Tourism 0.15 4 0.60

Industry

o Expansion 0.05 3 0.15

o Inviting New Stakeholders 0.05 3 0.15

Threats

o Fuel price inflation 0.20 1 0.20

o Environmental Hazards 0.15 1 0.15

o Execution of Law 0.10 1 0.10

o Expenses for aviation safety 0.10 1 0.10

have significantly grown.

o Terrorist Attacks 0.05 2 0.10

Total 1.0 2.15

43
 Note: The ratings refer to the strengths and weaknesses. Where 4 – major
strengths, 3 – minor strengths, 2 – minor weaknesses, and 1 – major weaknesses.

Analysis

The External Factor Evaluation (EFE) Matrix is a strategic management tool that is
frequently used to analyze current business situations. It is a useful tool for visualizing
and prioritizing a company’s opportunities and threats. It also enables strategists to
summarize and assess economic, social, cultural, demographic, environmental, political,
governmental, legal, technological, and competitive data. It shows if the company can
effectively take advantage of the current opportunities while also mitigating external
threats.

The EFE matrix shown above is a strategic analysis for Philippine Airlines to help assess
the opportunity and threats on its competitors. Data revealed that Use Better Technology
to Minimize Cost and Growth in the Tourism Industry are the external opportunities of
the company with rating of 4 as major strengths. Further, the Expansion and Inviting New
Stakeholders with a rating of 3 as minor strengths.

While Fuel price inflation, Environmental Hazards, Execution of Law and Expenses for
aviation safety have significantly grown has a rating of 1 as major weakness, and
Terrorists Attacks has a rating of 2 as minor weakness, are the external threats of the
company.

44
CONCLUSION

The aviation sector may optimize its benefits from possibilities by employing
improved technology to decrease costs by ensuring that it is used to minimize costs or cut
expenses. To manage human resources, schedule flights, and avert delays and other
technical issues, technology or software can be used. The tourism sector is expanding,
and individuals are exposed to media and entertainment that promotes travel abroad as a
means of experiencing other cultures and adventures. The opportunity to operate in
countries other than their own has also been made possible by the rise of globalization.
expansion of the global market and growth of the consumer base. Lastly, to include new
stakeholders Airlines may leverage their high level of profitability to persuade and draw
in new investors. More investors equate to more money and capital, which the business
may employ to expand operations, enhance, and develop.

Additionally, where there are opportunities, there is also a threat. Fuel price
inflation is likely the first threat. The airline lowers domestic passenger fares due to the
growing cost of aircraft fuel. Currently, tourists are charged a fuel price as a symptomatic
diversion. One of the threats may be the law's execution. Quasi-companies were still
allowed to fly internationally and obtain the same amenities even though there were no
restrictions on air carrier classification. Even while weather can be observed and
anticipated with incredible accuracy, Next is the environmental dangers, and excessive
precipitation has a substantial impact on operating safety and efficiency. The possibility
of a terrorist attack can in fact indicate that the security measures the company has put in
place aren't stringent enough, which might potentially result in a poor reputation abroad.
Aviation safety costs have increased dramatically. Due to security risks, authorities have
already tightened their safety regulations and procedures, and airline companies are
required to obey them.

And to analyze these opportunities and threats, we therefore concluded that the
EFE Matrix shows whether the company is capable of efficiently using current
opportunities while reducing external dangers. Similar to how it will assist the strategists
in developing new strategies and policies based on the company's current situation,
external analysis concentrates on how external elements like market trends impact a firm

45
and its performance. An internal analysis, on the other hand, focuses on a company's
internal operations, such as its corporate culture and employee onboarding, and how
those elements impact the company's performance.

46
 CHAPTER II

THE COMPANY

Beginning

In Asia and beyond, Philippine Airlines Inc. (PAL) runs local and international flights.
The company, was established in 1941, provides a variety of Airbus to satisfy the needs
of customers who wish to travel by air. PAL's corporate offices were located in Pasay.
PAL Holdings, Inc. is the name of a holding company founded in the Philippines. The air
transportation of people and goods inside the Philippines, between the Philippines and in
some other countries is, in fact, the principal business of the consolidated financial
statements. It does business through its subsidiaries, which include the national carriers,
Philippine Airlines, Inc., and Air Philippines Corporation. Philippine Airlines, Inc. offers
full-service Filipino airlines, including business class, premium economy, and standard
economy class services.

For the majority of its life, PAL was a private company. In the 1970s and 1980s, it
came under government control until returning to private ownership in the early 1990s.
Philippine Airlines, Inc. (PAL) is devoted to providing its passengers with an exceptional
travel experience. We strive to provide a product that will make us proud and our
consumers happy. We aspire to provide our clients with an experience they will cherish
by consistently improving our service delivery and regularly educating our workers. With
our consumers in mind, we are continually striving to enhance our present processes and
procedures. A fundamental and foremost aim is to provide the service that is expected of
us and that our clients deserve.

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 Figure 13. Philippine Airlines Old Logo

Philippine Airlines Old Logo

Over the history of PAL's operation, the airline's logo has undergone four changes.
The early logo had a four-pointed star whose points crossed below the "A" in the PAL
initials, a blue oval with the letters "PAL" overlaid in white, and a wing whose
orientation changed depending on where the logo was placed (the wing points to the right
if located on the left side of the plane, left if on the right side). A different version of this
logo substituted a globe for the blue oval and added the PAL initials on top. From the
1950s to the middle of the 1960s, this logo was in use.

A Renewed Brand

In 2016, PAL embarked on a mission to improve and personalize its digital

campaigns and promotions while reducing its time to market. The airline has undergone
many rebranding; it was once known as Air Philippines, subsequently Airphil Express,
and is currently called PAL Express. Air Philippines stopped operating following a string
of deficits before being bought by entrepreneurs from Philippine Airlines. Following the
acquisition, it was successfully rebranded as PAL Express, running certain itineraries
with capacity allocations from its sister firm, Philippine Airlines, although management
chose to re-brand the service as a low-cost airline known as Airphil Express. The CEO of

48
the business, however, declared in March 2013 that the name would be changed back to
PAL Express. PAL Express runs as a comprehensive airline with a low-cost business
strategy as a codeshare. The tagline "The Filipino Heart" expresses how friendly,
compassionate, and welcoming Filipinos are.

Figure 14. Philippine Airlines New Logo

Philippine Airlines New Logo

The logo for Philippine Airlines has undergone several redesigns since it was first
created. Multiple blue triangles and two red rectangles make up the current logo, which
also features a red triangle placed on top of a blue triangle. An apparent representation of
the Philippine flag is the yellow triangle with a yellow sun on it. Underneath them is the
logotype, which is positioned obliquely. A sans serif called Helvetica Bold Oblique is
strikingly close to the logotype font.

Philippine Airlines is devoted to offering a holistic, quality flight experience to

almost all of our passengers. They strive to provide a service that will produce positive
outcomes as well as make their consumers happy. They would like to give our clients an
experience they will cherish by making a continual effort to improve our service delivery
and by regularly educating our workers. With our clients in mind, we are continually
working to enhance and refine our present processes and procedures. Our dedication to
providing the service that is required of us and that our clients truly deserve is our first
and foremost priority. We are committed to building a long-term business that is focused
on wellness, security, education, abilities, and beliefs but also perceptions of our most

49
important assets, our employee’s individuals, who are backed by extensive training,
cutting-edge technology, and cutting-edge ideas such as virtual training courses.

Core values

 We grow a successful and empowered team.

 We act with passion and aim for excellence.

 We embrace and drive change.

 We put our customers first.

 We exemplify the Best of the Filipinos spirit.

Airlines Recognition

In 2016, we launched on a company-wide mission to deliver the best-in-class

experience in four important parts of our customers' trips. Skytrax, an international air
transport rating body, was awarded the PAL Group a 4-Star certification in 2018. We
have demonstrated our excellence and dedication to world-class standards throughout
Skytrax's worldwide quality indicators, which assess the quality of products and services.
Skytrax re-certified the PAL Group as a 4-Star Global Airline in 2019 based on rigorous
quality audits conducted in December 2018 and January 2019. The PAL Group received
the "World's Most Improved Airline Award" for 2019 as the provider that made the
greatest breakthrough in the quality of products and services across a poll of over 350
prominent airlines globally. Skytrax also stated that PAL is now classified as the world's
largest 30th best airline, up 19 positions from the Top 49 in 2018 and a full 60 spots from
the Top 10 in 2013.

Fast Forward

Today, PAL is currently the only comprehensive Filipino airline that offers
Business Class, Economy Class, and also ordinary economic growth amenities. It is also

50
the biggest international airline operating out of the Philippines. It is one of the youngest
fleets anywhere in the world. It is expanding and includes cutting-edge, high-tech aircraft
like the Boeing 777, as well as the Airbus A350 and A330 for long commutes and the
A320/A321 family for domestic and regional travel.

The network of PAL currently encompasses the entire globe. The flag carrier serves
a total of 32 domestic destinations as well as 41 sites in Asia, Australia, Oceania, the
Middle East, Europe, and North America from its four hub airports in the Philippines
(Manila, Cebu, Clark, and Davao). PAL offers the nation's sole direct flight connections
to the continental United States, Hawaii, Canada, New Zealand, and Western Europe.

Nature of Business

Philippine Airlines offers passenger and cargo air transport within the Philippines
and various international tourist and commercial destinations. Route network covers 35
domestic and 42 international destinations

Products and Services Offered

Philippine Airlines operates several aviation facilities in the Philippines. These

include various training facilities for pilots and cabin crew, catering services, as well as a
data center and a flight simulator.

Training facilities - Philippine Airlines maintains training facilities both for its pilots and
other crew. This is composed of the PAL Aviation School, the PAL Technical Center and
the PAL Learning Center.

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(Before Flight)

 Medical Equipment - for your special medical requirements, they offer a

wheelchair service at the airport, as well as oxygen or stretcher equipment during
your flight.

For passengers that need special medical attention, they have the Medical
Information Form (MEDIF) available for download.

(At The Airport)

 Check-in

Express check-in counters are now available for all Philippine Airlines flights
from Manila (NAIA2) and Mactan airports.

Open to passengers without check-in baggage and to senior citizens with up to two
travelling companions

 Airport Lounges

Mabuhay (Business) Class passengers and Mabuhay Miles Million Miler,

Premium Elite and Elite members may relax in a warm and bright place while partaking
of some light refreshments before boarding their flight.

 Baggage Assistance

You may approach the Baggage Assistance Counter located at the Arrival Area
for any inquiries regarding your baggage.

If no claim for PR tagged on-hand baggage is made within five (5) days after the
baggage was found, PAL will turnover unclaimed baggage to Customs for disposal.

If the baggage is not found by the fifth day after the baggage was reported
missing, then the baggage shall be considered lost and necessary claim shall be file.

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  Connecting Flights

A one stop check-in for passengers originating from any PAL station with
connecting flight to any PAL destination.

 Storage Service

PAL has space for your baggage at the airport.

(During Flight)

 (Cabin Amenities)

For your relaxation, we offer amenities for total inflight comfort. Philippine
Airlines launched a new, fresh and refined design of its Amenity Kits for Mabuhay
(Business) Class on all its long-haul flights.

 Entertainment

Flights of Fancy, Philippine Airlines’ inflight entertainment program, takes you to

a higher level of inflight entertainment programming guaranteed to heighten your
viewing, listening and reading pleasure in the air.

 Meals and Beverages

A wide range of inflight meals and beverages that we offer on Mabuhay

(Business) Class and Fiesta (Economy) Class.

 Comfort and Safety

Safety information and inflight well-being tips to help you travel the healthy and
relaxing way.

(Free Transfer Service)

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  Between Centennial Terminal 2 and new Terminal 3

Passengers transferring via Manila with confirmed connecting flight on Philippine

Airlines and PAL Express shall be provided with free airside shuttle service to and from
Centennial Terminal 2 and Terminal 3.

 Between NAIA1 and Centennial Terminal 2/new Terminal 3

Passengers transferring via Manila on Philippine Airlines, PAL Express and

International Code share flights shall be provided with free shuttle service to and from
NAIA Terminal 1, Centennial Terminal 2 and the new Terminal 3. The passenger is
requested to proceed to the Transfer Desk Service at NAIA Terminal 1.

(About Baggage)

 Free Baggage Allowance

Know the size, number of baggage and weight requirements you can check-in and
hand carried baggage you can bring into the cabin free of charge.

 Online Baggage Tracing

As part of our service, we give you online access to know the status of your
baggage. A reference number will be given to you by PAL station office once you
reported your missing or mishandled baggage. Input your reference number to access it
now.

(Cargoes)

 Express Service

Rapid Handling of Urgent Shipment - In compliance with Republic Act No. 9337, an
act amending the National Internal Revenue Code, a 12% VAT is added to the total
amount on all transactions involving purely domestic services only.

54
Our airport-to-airport express service with the following features:

 handled with highest priority

 guaranteed uplift once booking is confirmed with money back guarantee

 shipment is released within 3 hours upon arrival at destination

All cargoes within the minimum weight requirement and brought in 2 hours
before the scheduled departure time gets the RHUSH special handling.

Automatic confirmation for shipments weighing up to 50 kilos can also be sent through
RHUSH. All you have to do is call us 6 hours before the scheduled departure time and
tender the goods 2 hours before the flight.

 Cargo Classification

In compliance with Republic Act No. 9337, an act amending the National Internal
Revenue Code, a 12% VAT is added to the total amount on all transactions involving
purely domestic services only.

 Special Cargo

Commodities that require special or advance arrangement, packing, handling and

in certain cases, documentation. Acceptance of these type of cargo is subject to specific
regulations.

Examples of Special Cargo are the following:

 Baggage and special effects that are treated with special care and stored at a
special location.

 Perishables are shipments which are so labeled and are stored under specific
temperature.

55
  Valuable Cargo are shipments with very high commercial value.

Restricted Articles or Dangerous Goods like inflammables, explosives, radioactive

materials and corrosive substances like acids that may endanger the safe operations of the
flight.

Livestock, Live Animals and Plants are shipment that needs special attention and care.

 General Cargo. All articles or materials that are not included in the list of Special
Cargo are considered General Cargo or General Commodity.

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Organizational Structure

Board of Directors

Figure 15. Organizational Structure of Philippine Airlines

57
Executive Officers

Figure 16. Organizational Structure of Philippine Airlines

Board of Committees

Executive Committee
Lucio C. Tan – Chairman
Johnip G. Cua – Member
Lucio C. Tan III – Member
Shiela T. Pascual – Member

Audit and Risk Management Committee

Johnip G. Cua – Chairman
Lucio C. Tan III – Member
Shiela T. Pascual – Member

58
Bienvinido E. Laguesma – Member
Jerome S. Tan – Member

Nomination and Compensation Committee

Lucio C. Tan – Chairman
Johnip G. Cua – Member
Carmen K. Tan – Member
Shiela T. Pascual – Member

Corporate Governance Committee

Bienvinido E. Laguesma – Chairman
Lucio C. Tan III – Member
Shiela T. Pascual – Member
Jerome S. Tan – Member
Johnip G. Cua – Member

Philippine Airlines Management

Management Employees
Felix Cruz - Vice President, Marketing Support
Cristina Cabildo - Senior Industrial Engineer
Jeannie Banta - Accounts Payable Officer
Rosemarie Katalbas - Senior Vice President Human Resources
Frank Barcenilla - Regulatory Compliance Manager
Eugene Go - Chief Commercial Officer & Chief Marketing Officer
Gilbert Santa Maria - Partner
Eric Anderson - Vice President Strategy, Planning and Business Development

59
Sales Department
Eric Anderson - Vice President Strategy, Planning and Business Development
Morris Basila - Account Executive - Passenger Sales
Ruth Medina - Senior Sales and Business Development Executive - Philippine Airlines

Marketing Department
Eugene Go - Chief Commercial Officer & Chief Marketing Officer
Ria Domingo - Vice President of Marketing
Divina Vocal - Senior Marketing Manager
Pia Antonio - Digital Marketing Officer

HR Department
Rosemarie Katalbas - Senior Vice President Human Resources
Ma. Diosa Barredo - Human Resources Generalist
Tsin Quizon - Human Resources Business Partner
Gillian Salita - Training and Development Specialist

IT Department
Cristina Cabildo - Senior Industrial Engineer
Jerwin Mallari - Avionics and Datalink Engineer at Philippine Airlines
May Sangco - IT Systems Manager
Noel Mabborang - Technical Consultant

Senior Management

Antonio C. Moncupa Jr. – Vice Chairman, President & CEO

Rafael S. Algarra Jr. – SEVP, Head of Treasury, Markets and Off-Balance Sheet

Jacqueline S. Fernandez – SEVP & Chief Lending Officer

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Gerardo Susmerano – SEVP & Head Retail Banking

Pierre Leonard C. Monserrate – EVP & Group Head of Human Resources

Rick M. Pusag – EVP & Head, Technology and Productivity

Grace N. Ang – SVP & Chief Risk Officer

Angel Marie L. Pacis – SVP & Special Projects Officer

Salvador R. Serrano – SVP & Head, Central Branch Operations 1

Richard Chester C. Tamayo – SVP & Head, Wealth Management

Ivy V. Uy – SVP & Head, Regional Branch Banking

Minda L. Cayabyab – FVP & Financial Controller, Director of EW Rural Bank

Raul Victor M. De Guzman – FVP & Trust Officer

Anna Maria V. Gonzales – FVP & Head, Human Resources

Atty. Lourdes A. Ona – FVP & Head, Legal Services

Martin B. Ordonez – FVP & Bank Operations Head

Renato P. Peralta – FVP & Head, Credit Management

Manuel Joey A. Regala – FVP & Chief Information Security and Data Protection Officer

Alessandro L. Villaraza – FVP & Head, Bank Marketing & Corporate Communications

Alvin S. Dimla – VP & Head, Safety and Security

Arnold Stephen H. Saniano – VP & Head, Consumer Service

Paul John B. Lopez – SAVP & Head, Corporate Planning

61
Organizational Chart

Figure 17. Organizational Chart of Philippine Airlines

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Analysis Using Value Chain

Value chain analysis is a means of evaluating each of the activities in a

company’s value chain to understand where opportunities for improvement lie.
Conducting a value chain analysis prompts you to consider how each step adds or
subtracts value from your final product or service. As a result, it can help to gain a
competitive advantage

Figure 18. Analysis Using Value Chain

Primary Activities

Inbound logistics

A huge number of businesses engaged in the success of the aviation industry.

These include businesses that manufacture airplanes, provide food services, run airports,
provide local transportation services, sell fuel, lease aircraft, and belong to labor unions.
If there is a problem with the availability, supply, or storage of goods from any of the
businesses indicated above., Philippines Airlines may have a breakdown. Efficiency in all
63
companies, which includes appropriate supply and storage around each other, enables a
profitable and long-lasting airline sector. If the fuel companies are not able to get their
fuel to the aircrafts on time, then it means that the aircrafts cannot operate.

Operation

Maintenance of the aircraft and the repair of worn-out parts are included in
operations. It must be efficient in the aviation industry and must be effective and
technologically advanced. Philippine Airlines work with professional companies to
assemble its equipment and do any necessary follow-up maintenance tasks. They must be
specialized companies in order to guarantee the effectiveness and safety of the airlines.
Their global repair work must be managed, coordinated, and under control. Additionally,
to airport services the runway, and equipment, this should also apply to worker service
training. This kind of management keeps the performance of Philippine Airlines at a very
high level.

Outbound Logistics

This includes making sure customers who purchase tickets over the phone or
online get them, offering transportation for travelers to their homes after they get at the
airport, and setting up Philippine Airlines branches all over the world to make lives easier
for travelers. Warehouse is also part of this. In addition, it entails receiving clients or
goods, examining them for legitimacy, confirming their authenticity, keeping them, and
then retrieving them when needed in the future.

Marketing and Sales

Pricing and selling of goods through advertising are also included in marketing
and sales. Utilizing the Internet as the main channel for distributing airline services has
several benefits. Through direct online sales, many tickets are sold. Philippine Airlines
does a lot of online marketing to promote their services. Because they show up on the
screen as one logs on to various websites on the internet, they are quite effective. Many
potential customers may see these advertising. There is little doubt that online ticket sales
have significantly decreased airline distribution expenses.

Services

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 These are actions taken to increase the value of the product, support the customer,
repair services, manage spare parts, and upgrade the current systems to the level of
available technology. Philippine Airlines is making a substantial effort to maintain their
standards. Upgrading of systems begins with the internet upgrades to the latest
applications available. These include the ability to buy tickets online, keeping records of
online ticket sales, and maintaining effective lines of communication with customers.
Customer support helps the customers receive the right service that they are going for.

Support Activities

Firm Infrastructure

The firm infrastructure denotes a range of activities, such as quality and risk
management, planning and strategic management. Effective infrastructure management
can allow the airline to optimize the value of the whole value chain to strengthen the
competitive positioning in the market.

Human Resource Management

Philippine Airlines is aware of how important people are to their success. The
airlines cannot operate the equipment effectively without employees. To ensure the
highest possible production of goods and services, employee recruitment, compensation,
and retention are crucial factors. As a result, the airline sector makes a huge effort to
satisfy both its customers and its employees.

Technology Development

Philippine Airlines has signed a historic agreement with Amadeus to provide an

extensive transformation of the airline’s core technology systems, in line with its
ambition to upgrade and innovate products and processes. The full Amadeus Alta Suite, a
complete Passenger Service System, will be adopted by Philippine Airlines in an effort to
simplify and improve all core passenger operations for PAL, including reservation,
inventory, departure control, and flight management. Customers of Philippine Airlines
will now experience a smoother experience from booking to boarding thanks to the
transformation.

Procurement

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 The acquisition of raw materials, services, spare parts, equipment, and buildings is
dealt with by procurement. When a strategy for using them is developed, raw materials
are purchased. This guarantees that everything purchased is appropriate for the airlines
and wastage is minimal. Spare parts that are purchased by the airlines are compatible to
the type of aircrafts that they have. These are better purchased when the market prices are
fairly affordable. The goal of each procurement is to provides customers with quality
products and services at the best overall value to the airlines.

Strength and Weaknesses

Internal Strengths

Staff morale is great

Each employee has undergone training to improve their skills and develop their
attitude. Attitude is important for them to earn the respect and trust of their customers.
PAL's commitment to excellence enables them to provide quality service to their
customers.

The image is highly recognized

PAL is a renowned international airline founded in 1941. Their brand has a

number of unique elements that have helped them create a special relationship with their
customers.

Excellent Customer Satisfaction Rate

PAL is really known for its quality services. Customers keep returning to PAL
because they enjoy a comfortable and safe journey.

66
Asia's oldest carrier and still operating under its name

Despite being hit hard by the economic and financial crisis, PAL was able to
come back and redouble their efforts and they continue to serve their customers.

Internal Weaknesses

Expensive Fare

PAL charges their rate to the service they provide. Fares depend on fuel, maintenance
costs and flight schedule. The result of increased tariffs.

Space and Freight

There are restrictions on shipments as defined in their legal notices.

Limited advertising

Advertising is a way to show people how committed you are. Some people may not know
what PAL can be capable of.

Delayed Flights

This is what passengers hate the most. Sometimes there's nothing you can do about an
accidental event. PAL strives to respond to customer issues and resolve them as soon as
possible.

Table 6. Internal Factors Evaluation Matrix (IFE)

Internal Factors Weight Rating Weighted

Score
Strengths
o Staffs morale is great 0.15 3 0.45
o The image is highly 0.12 4 0.48
recognized

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 o Excellent Customer 0.10 3 0.30
Satisfaction Rate
o Asia’s oldest carrier and still 0.16 4 0.64
operating under its name
Weaknesses
o Expensive Fare 0.15 1 0.15
o Space and Freight 0.10 1 0.10
o Limited Advertising 0.10 2 0.20
o Delayed Flights 0.12 1 0.12
Total 1.0 2.44
Note: The ratings refer to the strengths and weaknesses. Where 4 – major strengths, 3 –
minor strengths, 2 – minor weaknesses, and 1 – major weaknesses.

Analysis

The Internal Factors Score Matrix represents the strengths and weaknesses facing
PAL today. These are the factors that PAL has in its internal position.

The company's products and services remain the strength of the company as they
are primarily provided and generate profits in return. Next is the employee or his
employee. Since they belong to the service industry, they play an important role in the
service delivery and business success of a business. Without people, a company cannot
achieve its goals and meet the needs of its customers. However, there were labour
disputes within the organization, so that may also be a weakness of the organization.

As for weaknesses, declining passenger numbers represent PAL's main weakness.

Because passengers are related to the revenue a company can generate. Lack of visual
acuity in PAL ranks as the second major weakness based on the matrix. This puts PAL
well above the Philippine airline industry average. It also means that you have a strong
position within the company.

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Strategic Issues Facing the Firm

 Philippine Airlines passengers are experiencing delays in their flights, not just an
hour but more than an hour. The management does not remind their passengers on
the delay in their flight and sometimes the flight is canceled without any notice.

 It is difficult to overstate just how much the COVID-19 pandemic has devastated
airlines that is why when the airlines are re-opened, the Philippine Airlines raised
the price of the ticket to make up for their losses and because of that many
passengers think that the service of Philippine Airlines is so expensive.

 Airlines are required to compensate passengers if their luggage are damaged,

delayed, or lost. Many passengers complain in Philippine Airline management
about the delay of their luggage and they say that they experienced this not only
once but many times.

Present Strategy

Philippine Airlines is dedicated to give every passenger a best travel experience.

They work hard to produce a product that would make them proud and their customers
happy. With its customers in mind, Philippine Airlines continually works to improve their
systems and procedures. Their dedication to provide the service that is required to them
and to their customer’s truly deserve is one of their top priorities.

Strategic Objectives

 To increase passenger satisfaction rating of Philippine Airlines on their flight

experience from 10% to 20% before 2022 ends.

69
 To be cost effective in all its operation for them to have lowest fare offered from
20% to 30% before 2022 ends.

• To enhance its image globally from 20% to 30% before 2022 ends.

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 CHAPTER III

STRATEGY ANALYSIS

Philippine Airlines corporate identity

A mission statement defines a company's business, goals, and approach to

achieving those goals. A vision statement describes the desired future direction of the
company. Elements of mission and vision statements are often combined to create a
statement of the company's purpose, goals, and values.

Vision

To be the airline of choice in all markets we serve.

To be the source of pride for Filipinos everywhere.

Mission

To deliver safe, reliable, efficient, and pleasant travel experience exceeding passenger
expectations.

To provide a satisfying career to our employees and adequate returns to stockholders.

To represent the best of the Philippines, the Best of Filipinos to the world.

Proposed Vision

To be the world's most preferred, admired and leading airline.

Proposed Mission

To provide superior customer service and on-time air travel at affordable prices to
markets around the world.

Analysis:

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 The recommended vision statement for Philippine Airlines, one of the top airlines
in the industry, demands for it to be the world's most preferred, admired and leading
airline. To accomplish this, PAL must continually be one of the world's most profitable
airlines and maintain a standing as a trendsetter and competitive in the market. This is
accurate for a number of legitimate reasons. The majority of this is directly related to the
strong brand management that must be led by the PAL boardroom and top management,
as well as the strong brand equity that comes from a focused, expert brand strategy
implemented across an international, varied organization.

The following mission is for people who believe in Philippine Airlines, who keep
it growing, and for those who help us accomplish our objectives. This mission was
developed for the people who would serve for this airline. That mission is to provide
superior customer service and on-time air travel at affordable prices to markets around
the world. Customers are the most important factor in this industry since, without them,
airlines would not be able to operate. Therefore, in order to provide distinctive
experiences, companies must recognize the demands and desires of the customers.

Generic Strategy

Porter identified 4 generic strategies that can be used to both classify company behavior
and drive company behavior. A generic strategy is a general way of positioning a firm
within an industry. Focusing on one generic strategy allows executives to concentrate on
the core elements of firms’ business-level strategies and avoid competing in the markets
better served by other generic strategies.

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 COMPETITIVE ADVANTAGE

What makes the company "strong"?

MARKET SCOPE

Figure 19. Porter's Generic Strategy Model

Philippine Airlines (PAL) is currently performing differentiation strategy.

Philippine Airlines is a long-standing figure in local aviation. Philippine Airlines is
Certified as a 4-Star Airline for the quality of its airport and onboard product and staff
service. It is a full cost carrier that offers lounge access, business class and code-share
flights, in-flight meals, and entertainment and Mabuhay Miles loyalty program.

PAL is the only airline in Philippines to have an International Air Transport

Association (IATA) accreditation and highest safety rating of 7/7. This accreditation is
considered as gold standard for flight safety.

Also, PAL has gained a competitive advantage by introducing a nonstop option in the
Toronto-Manila market over the nine airlines that offer a one-stop product. Toronto to
Manila is now among the 20 longest routes in the world, with a block time of 16hr30min
on the westbound leg. The shorter eastbound leg from Manila to Toronto has a block time
of 14hr40min. While, some airlines could take as long as 47 hours based on the stop over
destination and waiting duration.

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BCG MATRIX

The BCG Matrix is created by Boston Consulting Group. It is also referred to

product portfolio matrix, a business planning tool used to evaluate the strategic position
of a firm’s brand portfolio. The BCG Matrix is one of the most popular portfolio analysis
methods. It classifies a firm’s product and/or services into a two-by-two matrix. Each
quadrant is classified as low or high performance, depending on the relative market share
and market growth rate.

Figure 20. Philippine Airlines BCG Matrix

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Analysis

In the Boston Consulting Group (BCG) Matrix shows Philippine Airlines' major
divisions, which are transpacific routed destinations, flights to Asia and Australia, and
flights to domestic destinations. Passenger and cargo shipments generate revenue from
such operations. The following divisions are classified based on how they perform in
comparison to their Philippine competitors and taking into account market share and
potential market growth.

Flights to Asia and Australia, as well as flights along the transpacific route, are
classified as STAR. The following divisions generated the most revenue for PAL in the
current fiscal year, generating approximately 77.8% of total revenue (32.6% from
transpacific routes and 45.2% from flights to and from Asia and Australia). In
comparison to their competitors, PAL has the most international destinations, resulting in
a relatively high market share for the said division. Furthermore, with a growing number
of Filipinos seeking employment abroad and a thriving Philippine tourism industry, the
said division has a high potential for market growth, which can be realized through
market penetration.

The Domestic Flight Division is classified as a CASH COW. The said Division
operates in 29 cities and towns throughout the Philippines, generating about 22.2% of
PAL's total revenue for the year. In terms of the Philippine market, PAL held 45.2%
along with its competitors: Cebu Pacific, SEAIR, Zest Airways, and so on, demonstrating
their massive share in the said market. In terms of potential market growth, PAL's
domestic division, as well as its competitors, are all looking for a small window of
opportunity to expand their domestic operations.

I-E Matrix

The Internal-External (I-E) Matrix positions a company’s various divisions in a

nine-cell matrix. The I-E Matrix is a strategic management tool that is used to analyze the

75
current position of the divisions and suggest strategies for the future. The Internal-
External (IE) Matrix is based on an analysis of internal and external factors of a
company, which are combined into one suggestive model.

Philippine Airlines IE Matrix

Figure 21. Philippine Airlines IE Matrix

Analysis

Philippine Airlines received a point value of 2.15 through its EFE matrix and 2.44
on its IFE matrix in accordance with the previously completed External and Internal
Analysis. When the results are plotted, Philippine Airlines is in cell V, which mostly
stands for the "Hold and Maintain" stage. The suggested approaches to this business

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segment should focus on growth and competitive penetration while maintaining the
methodologies.

TOWS Matrix

A TOWS analysis is a variant of a SWOT analysis and is an acronym for Threats,

Opportunities, Weaknesses and Strengths. A TOWS analysis will look to match internal
factors and external factors to help identify relevant strategic options that a company
could pursue. It can help a company to see how it can take advantage of opportunities,
reduce threats, overcome weaknesses and exploit any strength.

77
Table 7. Philippine Airlines TOWS Matrix

Internal Factors
External Factors
Strengths Weaknesses
S1 Staffs Morale is Great W1 Expensive Fare
S2 The Image is Highly W2 Space and Freight
Recognized W3 Limited Advertising
S3 Excellent Customer W4 Delayed Flights
Satisfaction Rate
S4 Asia’s Oldest Carrier and
Still Operating Under Its
Name

Opportunities SO Strategies WO Strategies

O1 Use Better Technology to S2+O3+O4. Maintain the W1+O1. Optimize the

Minimize Cost good image to attract more technology investment to
O2 Growth in The Tourism customers and investors and improve the cost-efficiency
Industry develop the operation by that will bring a growth and
O3 Expansion adding an additional type of competitive advantage to the
O4 Inviting new stakeholders class offered so customers company.
have many options to choose.
Threats ST Strategies WT Strategies

T1 Fuel Price Inflation
T2 Environmental Hazards
T3 Execution of Law
T4 Expenses for Aviation
Safety Have Significantly
Grown
S4+T2. Prioritize the safeness W1+T1. Look for
of the customers/passengers alternative/cheaper materials
and environment to maintain or other suppliers to reduce
the good image that have the cost of operation and
been built for decades so the bring a comfortable
passengers trust will be intact environment and affordable
and will not look for price to the passengers.
substitute.

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Analysis

A TOWS is a commonly used strategic planning tool and can add real value to a
company, helping to take strategic planning one step further. The results of Philippine
Airlines TOWS analysis are as follows:

Under the Strengths-Opportunities factors, the strategies suggested is maintain the

good image to attract more customers and investors and develop the operation by adding
an additional type of class offered so customers have many options to choose. Adding
class of seats or services will attract new customers; different options will be a
competitive advantage because passengers will not look for another carrier because they
found what they want.

Under the Strengths-Threats factors, the strategy for Philippine Airlines is to

prioritize the safeness of the customers/passengers to maintain the good image that have
been built for decades so the passengers trust will be intact and will not look for
substitute. If the passengers trust will be taking care of, they will stay loyal and will
choose Philippine Airlines as their number one mode of air transportation domestically
and internationally.

Under the Weakness-Opportunity factors, the strategies suggested to minimize the

cost of operation is to optimize the technology investment to improve the cost-efficiency
that will bring a growth and competitive advantage to the company.

Under the Weakness-Threat factor, the strategies suggested are to look for
alternative/cheaper materials or other suppliers to reduce the cost of operation and bring a
comfortable environment and affordable price to the passengers. By changing the
materials use in the services or operation it will reduce the cost and at the same it will
increase the productivity of the company.

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 CHAPTER IV

IMPLEMENTATION

McKinsey’s 7S Framework

The McKinsey 7S Model is a framework for organizational effectiveness that

postulates that there are seven internal factors of an organization that need to be aligned
and reinforced in order for it to be successful. This will be utilized to analyze Philippine
Airlines organizational design by looking at seven key internal elements: strategy,
structure, systems, shared values, style, staff, and skills in order to identify if they are
effectively aligned to achieve its objectives.

Figure 21. McKinsey’s 7S Framework

Strategy

Philippine Airlines had managed to achieve their success through their

commitment with their total quality management dedicated to bringing a world-class
product and an excellent quality service. Philippine Airlines launched a more reliable and

80
passenger-friendly system that is designed for customers' needs. Filipinos choose PAL as
their carrier for its commitment to customer satisfaction, great service, accommodation
booking and special offers, and so much more. It is truly one of the Philippines' Prides as
it is the oldest airline industry and the flag carrier of the Philippine Islands; it offers
domestic and international flights with warm "Heart of the Filipino" service. As part of its
branding strategy, PAL wanted to ensure relevant, meaningful digital experiences from
booking to baggage claim. Philippine Airlines dominates the international flights and
they are aiming to also dominates the domestic flights through a new business plan
according to Arjay L. Balinbin, this plan calls for exiting unprofitable markets and
selectively increasing regional capacity in targeted growth markets. The airline intends to
consolidate domestic capacity from Clark International Airport to Manila International
Airport “due to market demands”. At the same time, PAL anticipates growing capacity in
short haul regional routes, especially growth markets such as China, consolidating
capacity in the West Coast gateways and cancelling certain ultra-long-haul flights, while
maintaining profitable opportunistic flying from Cebu.

Structure

Philippine Airlines has efficient and properly formed of Board of Directors with
access to relevant information and they are required successfully carry out their
responsibilities. Members of the Board will meet as needed throughout the year to adopt
and debate major operational and strategic decisions. The Board has established a number
of committees with distinct responsibilities to handle various aspects of its operations.
The Audit Committee meets with external auditors to discuss the scope and findings of
the audit and, when necessary, seeks independent legal or other expert advice from
outside sources. The Committee evaluates and recommends candidates for executive and
non-executive director positions to the Board.

System

Philippine Airlines maintains a number of industry-specific systems in addition to

the standard set of organizational systems such the employee recruitment and selection
system, performance assessments system, quality control system, complaint management
system, and others. These include, but are not limited to, the in-flight entertainment
system, the baggage handling system, and the passenger check-in system. As part of a

81
comprehensive transformation, Philippine Airlines upgraded to a more advanced
passenger service system powered by this generation technology. This is the Altea PSS
Suite by Amadeus. It is computer system used by Philippine Airlines’ IT department that
would give airline customers more ease during the reservation, ticketing, check-in, and
boarding processes.

Skills

Philippine Airlines, Inc. (PAL) provide initial and continuous trainings and to
develop each employee into a person who possesses the right Knowledge, Skills, Values
and Attitudes (KSVA) needed to deliver the performance called for by his duties and
responsibilities. We also committed to providing the total quality travel experience to all
our customers. We endeavor to create a product that would make us truly proud and our
customers satisfied. Our aim is to accord our customers an experience which they would
remember us by, through a consistent effort to enhance our service delivery and regular
trainings of our employees.

Staff

Philippine Airlines took great pride in becoming a service-oriented organization

staffed with qualified and experienced, productive, or even impressive. Individuals who
personify the Filipino's desirable characteristics: “mapagmalasakit, matulungin, masipag,
matiyaga, and masayahin”. People who seek a rewarding experience by trying to travel to
remote locations. Who seek happiness in making others feel special but instead appear to
care for others? Individuals with a winning personality, who could inspire, try to
convince, and generate. Who radiate warm feelings and optimism when going to deal
with people from all walks of life? People who can handle stress and work extremely
hard without having to lose their smiling face. Currently, Philippine Airlines offers three
service levels, depending on the aircraft: Business, Premium Economy, and Economy.
When compared to its other aircraft, which only have two classes, the Airbus A330 and
A350 provide three classes. Travelers Seeking Special Assistance Are Accommodated
Irrespective of whether a traveler has special requirements or a disability, we are
dedicated to offering them a top-notch travel experience.

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 Under PAL Express processes and regulations, as well as any legal and regulatory
requirements, we will give our passengers who require special help, notably those who
have been disabled or unattended youngsters, our greatest possible service and attention.

Style

Philippine Airlines' management style aims to use connection, motivation and

empathy. They are respected for their courage, trust and ability to make sacrifices for the
common good. The Board of Directors is primarily responsible for the governance of the
Corporation and provides an independent check on management. The strategic leadership
of Philippine Airlines is leading effectively into action and productivity while in use of
power, influence, and motivation. With the previous experience in autocratic style of
leadership, Philippine Airlines approaches this issue with concern. The company
embraces the participative leadership style which recognizes the fact that a leader is not
expected to know all things.

Shared Value

The ambition of Philippine Airlines, Inc. (PAL) is to give every passenger a top-
notch travel experience. Their commitment to providing the kind of service that clients
justifiably expect is their top priority. In order to benefit everyone, Philippine Airlines
understands the need of working together and sharing skills and knowledge wherever
they are. According to PAL, everyone should be given the chance and encouragement to
grow both personally and professionally.

83
Table 8. Philippine Airlines 7S Framework

Present Strategy Aligned Proposed Strategy Aligned

(Yes or (Yes or
No) No)
Strategy Commitment with Yes Sustain a higher level Yes
their total quality of service
management excellence and
dedicated to bringing current strategies
a world-class product towards competitive
and an excellent advantage on its
quality service. competitors.

Improve on time
performance to meet
the passenger’s
satisfaction.
Structure Efficient and Yes Maintain the board's Yes
properly organized directing role as it
management determines the
organization's overall
strategic direction
and objectives. To
achieve the
company's goals and
vision, which value
qualities such as
dedication,
perseverance,
teamwork and
honesty.
System Altea PSS Suite by Yes Technology Yes
Amadeus Innovations and New
Cargo Options to
deliver smarter and
simpler products that
customers will love.

Use advance
technologies and
increase its fleet as
demand recovers
after returning planes
during its business
restructuring.

84
Skills Professional Yes Retain the current Yes
Employee Training specialized program
and Development or employee's skills
through trainings and
development.

Improve the current

systems and policies
with the customers in
mind.

Employment Yes Continue recruiting Yes

Staff demographics, skill staff that seem to
levels in relation to have extensive
corporate objectives, experience working
and deficiencies in in the same
necessary talents and professions.
competencies.
Utilize an effective
human resource
management program
to increase worker’s
enthusiasm as well as
effectiveness.
Style Leadership Yes Retain as current Yes
management style leadership
management style,
wherein the Board of
Directors is primarily
in charge for the
governance and
leadership of the
company and
provides an
independent check on
the management.
Shared Act with passion Yes Philippine Airlines Yes
Values recognizes the
significance of
cooperating with one
another and sharing
information and skills
wherever they are for
the good of all.
Everyone should be
given the opportunity

85
 and encouragement
to develop both
personally and
professionally,
according PAL.

Analysis

Based on PAL Holdings, Inc. 7s Framework, the airline organizational structure is

effectively aligned to achieve the company’s goals and objectives. However, Philippine
Airlines needs to improve their strategy on flight time performance to sustain their
competitive advantage in addition the current systems and policies they use to train their
professional employee needs to improve with the customers in mind to achieve customer
satisfaction.

SPATRES

Strategies, Programs, Activities and Tasks, and Resource Requirements

(SPATRES) are determined based on strategies derived from the TOWS matrix. It will
answer the questions: What programs, activities and tasks will these programs require?
What resources will be need? How much resources are needed for the implementation of
these strategies?

Table 9. Philippine Airlines SPATRES

Responsible Resource
Strategies Program/s Activities/Task Person/Departmen Requiremen
t t (Budget)
Innovate the Reducing the  Developing Marketing and 2 Million
online and error Website Operating
mobile occurrences  Online Department
booking in booking services January 2023
system system. reservation
calls via SMS
Staff Career  Improving Administration 1.5 Million
86
Training and Developmen competencies Staff
Developmen t Program in customer January 2023
t Seminar service
 Becoming a
benchmark in
terms of
providing
customer
service.

Analysis:

Philippine Airlines will develop a website and an online services reservation call
to reduce the error occurrences to the booking system. By innovating the online and
booking system, it will enable customers to book online faster and easier. With modern
technology and the advent of the pandemic, customers prefer to book flights through
online. This innovation will help a lot to facilitate the booking, and provide smooth and
good services to the customers of Philippine Airlines.

In order to maintain their good image, Philippine Airlines will start a Staff
Training and Development Seminar. Where they will develop a program called the
Career Development Program. This will help to further improve their competencies in
customer service. Also, it can boost employee's competence, potential and readiness for
technology innovation. This will greatly help in achieving the goal of Philippine Airlines
to become a benchmark in terms of providing customer service.

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 CHAPTER V

FINANCIAL ANALYSIS

Financial Ratios – Present Operations

Current Ratio

The current ratio a liquidity ratio that measures a company’s ability to pay short-
term obligations or those due within one year. It tells investors and analysts how a
company can maximize the current assets on its balance sheet to satisfy its current debt
and other payables. We can get the current ratio by dividing current assets to current
liability.

Table 10.

Current Ratio

2021 2020

Current Asset 59,322,799,000 32,310,296,000

Current Liability 70,465,490,000 196,332,409,000

Current Ratio 0.84 0.16

Analysis

As presented in table above, PAL Holdings Inc. has a 0.16 current ratio in 2020
and a 0.84 current ratio in 2021 to measure if the company can cover its current
liabilities. It can be concluded that the bank is currently in a situation where it will not be
able to meet its short-term obligations for over a year.

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Debt to Equity Ratio

The debt- to- equity ratio is computed by dividing a company’s total liabilities by
its shareholder equity to evaluate its financial leverage. The D/E ratio is an important
metric used in corporate finance. It’s a measure of how much a corporation relies on debt
to fund its operations rather than totally owned funds. In the event of a business
downturn, it indicates the ability of shareholder equity to cover all outstanding debts.

Table 11.

Debt to Equity Ratio

2021 2020

Total Liabilities 192,156,928,000 296,005,919,000

Total Shareholder's Equity 1,689,626,000 -68,106,555,000

Debt to Equity Ratio 113.73 -4.35

Analysis

Table shown above, PAL Holdings Inc. has Debt to Equity Ratio of 112.73 in
2021 whereas, a ratio of -4.35 in 2020. A lower debt to equity ratio usually implies a
more financially stable business.

89
Net Profit Margin

Net Profit Margin, also known as net income margin or net margin, it the ratio of
profit in a company or business unit earns to the total amount of revenue (net sales) the
company or business unit generates. Net profit margin is expressed as a percentage. Net
profit margin equals a company’s net income either listed as such in its financial
statement or can be calculated as revenue minus the cost of goods sold, operating and
other expenses, interest, and taxes divided by revenue. The result is multiplied by 100 to
convert the net margin ratio into a percentage.

Table 12.

Net Profit Margin

2021 2020

Net Income 60,611,475,000 -73,083,760,000

Revenue 58,700,711,000 55,263,966,000

Net Profit Margin 103.26 -132.24

Net Profit Margin

Analysis

Presented in the table above the Net Profit Margin of PAL Holdings Inc. data
revealed it goes up to 103.26% in 2021 compared to previous ratio of -132.24% in 2020.
The increase is due to minimized costs from the effect to Covid-19 Pandemic.

90
Financial Assumptions

Financial assumptions and projections are critical components of all business

plans. They include income and expense assumptions, as well as the inventory and
accounts receivable in balance sheet. Assumptions for balance sheet presentations should
be conservative and based on reasonable expectations of assets acquisitions in the coming
five (5) years. These will help to construct the assumptions in the cash flow statement.

The following are the financial assumptions for PAL Holdings, Inc.

1. There will be an investment of Php 2,000,000 for the website development and
mobile booking system project. This will form part of CAPEX.
2. Revenues will increase by 30% yearly due to the gradual recovery in the travel
industry as well as the new implemented improvements and strategies.
3. Expenses related to flying operations will increase by 5% annually.
4. Maintenance costs will increase by 1%.
5. Expenses related to aircrafts and traffic servicing and passenger service will
increase by 2% annually.
6. Reservation and sales expenses will increase by3%. These will include
maintenance and support costs related to the implemented mobile booking system.
7. General and administrative expenses will increase by 3% which cover the training
and development seminar of the customer service employees.
8. Financing charges will decrease by 7% due to decreasing obligations. Other
income (charges) will decrease by 20%.
9. Income taxes computed at 25%. A 10-Million tax asset will be credited in year
2022.
Projected Income Statement

A projected income statement is a forecast of how profitable a company will be in

the future. The future time period could be a month, quarter, year or several years.
Projected statements should include in the business plan and strategic plan for the
company.

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Table 13. 3-Year Projected Income Statement for Philippine Airlines
PAL HOLDINGS, INC. AND SUBSIDIARIES
3-YEAR PROJECTED STATEMENT OF INCOME
Year Ended December 31,2022, 2023 and 2024
(In Thousands)

FS 2021 2022 2023 2024

REVENUE
Passenger 37,255,668 20.00% 44,706,802 ###### 53,648,162 ###### 64,377,794 ######
Cargo 15,021,441 5.00% 15,772,513 5.00% 16,561,139 5.00% 17,389,196 5.00%
Ancillary 6,397,614 3.00% 6,589,542 3.00% 6,787,229 3.00% 6,990,846 3.00%
Others 25,988 2.00% 26,508 2.00% 27,038 2.00% 27,579 2.00%
58,700,711 67,095,365 77,023,567 88,785,414
EXPENSES
Flying operations 33,284,132 5.00% 34,948,339 5.00% 36,695,756 5.00% 38,530,543 5.00%
Maintenance 10,055,531 1.00% 10,156,086 1.00% 10,257,647 1.00% 10,360,224 1.00%
Aircrafts and traffic servicing 6,114,971 2.00% 6,237,270 2.00% 6,362,016 2.00% 6,489,256 2.00%
Passenger service 3,997,620 2.00% 4,077,572 2.00% 4,159,124 2.00% 4,242,306 2.00%
Reservation and sales 3,161,387 3.00% 3,256,229 3.00% 3,353,915 3.00% 3,454,533 3.00%
General and administrative 6,184,175 3.00% 6,369,700 3.00% 6,560,791 3.00% 6,757,615 3.00%
62,797,816 65,045,197 67,389,249 69,834,477
OTHER INCOME (CHARGES) - Net
Financing charges (6,574,970) -7.00% (6,114,722) ##### (5,686,692) ##### (5,288,623) -7.00%
Other income (charges) - net 64,385,168 -20.00% 51,508,134 ###### 41,206,508 ###### 32,965,206 ######
57,810,198 45,393,412 35,519,816 27,676,583
INCOME (LOSS) BEFORE INCOME TAX 53,713,093 47,443,581 45,154,134 46,627,520
INCOME TAX BENEFIT (EXPENSE) 6,898,382 (1,860,895) (11,288,534) (11,656,880)

NET INCOME (LOSS) 60,611,475 45,582,685 33,865,601 34,970,640

NOTE

Reservation and sales expenses will increase by 3% covering the maintenance and support costs of the website development and mobile booking system
An increase of 3% to General and administrative expenses include the trainings and development seminars for employees
Financing charges will decrease by 7% yearly

Analysis

The projected income statement shows an increasing net income for the next three
(3) years. Which indicates that the implemented strategy is effective to perform the
business operation well in the long run. All computations are based on Philippine Airlines
Financial Statement 2020 and from Financial Assumptions.

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Return on Sales

Return on sales, often called the operating profit margin, is a financial ratio that
calculates how efficiently a company is at generating profits from its revenue. In other
words, it measures a company’s performance by analyzing what percentage of total
company revenues are actually converted into company profits. The return on sales
formula is calculated by dividing the operating profit by the net sales for the period. The
result is multiplied by 100 to convert the net margin ratio into a percentage. Income tax
expense and interest expense are not included in the equation because they are not
considered operating expenses.

Table 14. 3-Year Return on Sales Ratio for Philippine Airlines

Years Ended December 31

2022 2023 2024
Income Before Interest and Tax
(EBIT) 2,050,168,000 9,634,318,000 18,950,937,000
Net Sales 67,095,365,000 77,023,567,000 88,785,414,000
Return on Sales 3% 13% 21%

Analysis

The table above shows the projected return on sales for PAL Holding Inc. The
2022 ratio is 3%. In 2023 the ratio is 13%, PAL Holdings, Inc. return on sales ratio has
increased due to the effect of implemented strategies. And in 2024 the ratio is 21%. It can
be presumed that when PAL Holdings Inc. return on sales is significantly increasing, the
company becomes more profitable and manages their expenses well.

93
 CONCLUSION

Conclusion Based on the study conducted by the researchers, the following

conclusions have been made:

1. PAL had a score of 2.44 on the IFE Matrix, which evaluates its strengths and
weaknesses and their relative relevance to the business. This indicates that PAL is
performing significantly better than average for the Philippine Airline Sector. It strongly
suggests that the business has a solid internal position.

2. PAL had a score of 2.15 on the EFE Matrix, which visualizes and prioritizes a
company's opportunities and threats. This means that PAL has an above-average ability to
respond to external factors that may have an impact on the company's operations.

3. The Domestic Destination unit of PAL appeared to be a cash cow business unit
in the BCG Matrix, which determines what priorities should be given in a business unit's
product portfolio. This indicates that this unit has a low market growth but a large market
share. As a result, this unit can be used to support other business units, so the company
should devise defense and maintenance strategies for it. It must be managed for continued
profit in order to generate the strong cash flows required by the company for its Stars,
which in PAL's case are the Transpacific Routes.

4. In the IE Matrix, this examines a company’s operating environment and

strategic positioning. This suggests that PAL should hang onto and preserve its position
within the sector. The business should pursue strategies aimed at boosting product
development and market penetration.

5. The researchers came up with the conclusion that PAL may create its strategies
by contrasting 3 alternative activities, namely market development, product development,
and market penetration, based on the results reflected on the various matrices described.
The organization should therefore adopt market penetration methods, as they produced
the greatest score of the three plans that were provided. Since PAL received the second-
highest score and a score that is significantly higher than the norm, it may also use
product development methods.

94
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https://unfortunatelysingle.tumblr.com/philippineairlines

https://amadeus.com/en/insights/press-release/philippine-airlines-chooses-amadeus-
technology-to-power-5-star-ambitions

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 APPENDICES

Appendix A: Philippine Airlines Financial Statements 2020

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Appendix B: Computation on 3-Year Projected Income Statement