Philippine conglomerate San Miguel Corp (SMC) expects to turn Philippine Airlines (PAL) around and return it to profitability within the next two years.

"The immediate task at hand, after putting in place an efficiency plan that will lower operating costs, is to differentiate and reposition PAL," SMC chairman and chief executive Eduardo Cojuangco said at the firm's annual stockholders meeting.

He added that SMC's $500 million investment in the holding companies of PAL and its low-cost partner Air Philippines (Air Phil), which effectively gives it a 49% stake in the carriers, "is seen to boost the competitiveness of both airlines".

"With the new leadership of our president and COO Ramon Ang and new management directives in place, we expect to turn around Asia's first airline and be in the black in two years' time," says Cojuangco.

Media reports in the Philippines, meanwhile, say Ang is in talks to invest in a foreign carrier and plans to position it as a low-cost brand to take on competitors such as Cebu Pacific, which has been gaining market share.

They add that PAL intends to order at least 100 new aircraft in the next five years. PAL officials could not be reached for comment.

The carrier later issued a statement on the Philippine Stock Exchange stating that "the plan to acquire an overseas airline has not been discussed at the board level at this time". It added that it is also not privy to any "personal plan of a major shareholder" before it is discussed at the board level.

Over the last few years, the flag carrier has struggled to cope with the emergence of budget carrier Cebu Pacific, which now has the largest market share in the Philippines. PAL wants to retire many of its older and uneconomical widebodies, replacing them with a new fleet to compete effectively on the long-haul markets.

Air Phil's subsidiary, AirPhil Express, has meanwhile seen a resurgence over the last two years and is fast emerging as a serious competitor to Cebu Pacific in the low-fare market segment.

SMC is mainly a food and beverage company, but has diversified into the oil refining, telecommunications and power industries.

Source: Air Transport Intelligence news