Albay, Jeremy James G.

BSA-3A
Assignment 1: Review on areas related to strategic business analysis

Philippine Airlines
Company Profile

Pioneering in end-to-end airline operations that constitute an industry of its own,

Philippine Airlines, Inc. (PAL) lives on with its original name and the national colors, shining
through for almost eight decades. PAL stemmed from the Philippine Aerial Taxi Company
established in 1931 by co-founder Andres Soriano, who shut it down in 1939 and replaced it with
Philippine Air Lines two years later. Braving the imminence of war, PAL had its inaugural flight
with only five passengers from Makati to Baguio on March 15, 1941.
A private entity for much of its existence, PAL was brought under government ownership
in the 1970s and 1980s, reverting to private hands in the early 1990s. Today, PAL is the only
privately-owned major flag carrier in Southeast Asia. Its Chairman and CEO, Dr. Lucio C. Tan,
is PAL’s longest-serving chief executive.
Through the years, designated as the “national flag carrier” by R.A. 2232, PAL has been
recognized to play a central role in boosting the growth of the Philippine economy and the
emergence of a nationwide tourism industry.
Today, PAL is the Philippines’ largest international airline and the only full-service
Filipino air carrier offering Business Class, Premium Economy and Regular Economy services.
Its growing fleet, one of the world’s youngest, consists of modern high-technology aircraft such
as the Boeing 777 along with the Airbus A350 and A330 for long-haul routes and the
A320/A321 family for regional and domestic routes.
PAL’s network now stretches across the world. The flag carrier operates from four hub
airports (Manila, Cebu, Clark and Davao) 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. PAL operates the country’s only direct air links to mainland U.S.A., Hawaii, Canada,
New Zealand and Western Europe, Japan and Australia.
 Issues/Challenges

Since we are in a pandemic state, PAL faced its biggest challenge yet in their long-
standing business. Only this month, September 3, 2021, news outlets broadcasted that PAL files
bankruptcy as travel fallout rises. PAL isn’t exempted in the devastated global travel, they filed
for Chapter 11 bankruptcy in New York which basically aims to cut $2 billion in borrowings
through a restructuring plan. The pandemic truly forced airlines like PAL to suspend flights, lay
off employees and seek financial help.
Apparently, this issue predates pandemic as PAL Holding Inc., the holding company of
Philippine Airlines reported losses since first quarter of 2017. The company suffered a record of
71.8 billion pesos loss in 2020, compared with a 10.3 billion peso shortfall the year before.
Shares of PAL Holdings have declined 7.6% this year, extending a 17% fall in 2020.
Despite of this big problem they’re facing, PAL pledged to continue operating normally
during the period of restructuring while continuing to interact with its trade creditors and
suppliers, employees, and customers.

PESTEL Analysis

POLITICAL FACTOR – Pandemic crisis forced global travel to either shutdown or be limited as
the government restricted flights domestically or internationally.

ECONOMIC FACTOR – The economy not only in the Philippines but also around the globe
suffered because of Covid-19 and because of that, lots of small businesses are wiped out
meanwhile corporations and business institutions took toll too and their overall value
plummeted, evident in their low stock price value in the market.

SOCIAL FACTOR – Again because of pandemic, a lot of people despite of their need to travel
outside the country are forced to be held lockdown in their own home, affecting the demand for
flights. Number of employees are affected too if some of them are stricken by the virus.

TECHNOLOGICAL FACTOR – Travelling requires physical contact, so despite of technology-

based solutions for work problems like online communication, it is not applicable to the industry
of PAL thus potential passengers can’t do anything but wait till flights are opened and made
available.
ENVIRONMENTAL FACTOR – There’s no significant issue with regards to environment at the
moment, weather issues isn’t that significant too.

LEGAL FACTOR – Strict protocols for hygiene and sanitation, wearing of face masks, face
shield and all necessary things needed before passengers are allowed to take flight is
implemented and demands more work not only for the employees but for passengers as well.

SWOT Analysis

STRENGTHS
- PAL remains the leading airlines in the Philippines
- Investors are still believing that PAL can survive despite of filing bankruptcy and
continues its normal operations
- The fact that PAL is unfazed by the near bankruptcy shows their strength as a company
WEAKNESSES
- Losses predating pandemic state means that PAL has problems in managing their debts.
- Poor financial planning and control
OPPORTUNITIES
- Creditors of PAL are open for negotiation and is open for the restructuring of debts
- Travel restrictions are beginning to ease thus they can get back on track as soon as it
happens
- Lessors of PAL agreed to reschedule leases for aircrafts
THREATS
- No one knows how long before things go to normal after the Covid-19 crisis
- The court handling their case of bankruptcy might not grant the restructuring thus
assuring their liquidation
- Philippine Government is on/off with regards to their rulings for travelling
- Airlines is essentially a place where a lot of people of different kind can have contact to
each other which is a negative during a pandemic despite of sanitary protocols, for short
the risk is still there
 Recommendation

If I were given a chance to give solutions to PAL’s current issues, I would back their
decisions firstly of requesting for a restructuring of debts as it is a win-win scenario for both
creditors and the company. Creditors would technically lose money if they would let PAL go
bankrupt instead of allowing the said restructuring plan so they would accept it even if it cost
them haircuts of investment (writing off of outstanding interest payments or portion of the
balance will not be repaid). Next, if finally allowed, then PAL would take it as a lesson to pay
more attention to the financial management of the company. Pandemic times requires changes to
approach in financing and that is what PAL should do to prevent this issue to occur again in the
future. PAL should strategize well, implement a better financial planning and allocation of
resources. Tone down in leasing aircrafts as it is not that needed for now as demand for flights
are still lower to pre-pandemic times. Overall, PAL should improve their handling of debts and
financial issues. Restructuring of debts is the first step for the right direction.