RP firms face man-made, natural crises

MANILA – Just when they thought that they were saddled enough by the effects of the economic crisis, a number of Philippine firms had to endure the impact of natural calamities on their day-to-day operations.

Utility companies, banks, airlines, and hotels, among many others, bore the brunt of tropical storm “Ondoy” (international code name Ketsana) and typhoon “Pepeng” (international code name Parma) in the past weeks.

As these storms caused a halt on normal operations, these companies incurred losses not only in terms of profits but also on damaged infrastructure, overworked employees, and missed business opportunities.

Manila Electric Co. (Meralco), for one, lost more than P800 million in damages and power disruptions caused by “Ondoy’s” massive floods in several areas of Metro Manila and neighboring provinces.

Specifically, the company estimated a total of P830 million in foregone revenues and damages to equipment. The amount is nearly one-third of Meralco’s profits for the first half of the year at P3.2 billion.

Utility companies are easy targets of natural calamities as these bank on expensive physical infrastructure such as electricity poles. In times of intense storms such as "Ondoy" and "Pepeng," utility firms such as Meralco incur huge expenses for repair and rehabilitation efforts on their equipment.

These, in the end, are clearly seen in a utility firm’s bottomline.

Safety at the expense of profits

Even as they continue to struggle from weak international demand, the country’s major airlines had to postpone several domestic flights in the past weeks due to the 2 storms.

Flag carrier Philippine Airlines (PAL) and budget carriers Cebu Pacific and Zest Airways have canceled some of their local flights and have allowed their passengers to rebook flights without additional charges.

Bad weather is not good for the airline business. Plane crashes, for one, reflect badly on a carrier’s finances and reputation.

Second, airlines have to spend extra for accommodations, food, and other costs for their stranded passengers. They would not want to have complaining customers since it would be bad for their corporate brand.

Most importantly, an aircraft that is parked too long on the ground due to canceled flights translates to lost profit opportunities. This is especially true for budget airlines, which has a business model that aims to maximize flying hours of each aircraft.

Since carriers acquire planes worth millions of dollars each–either through direct purchases or through lease agreements–they have to make sure that their revenue stream is consistent to make up for the financing costs.

Heavy default risks

The country’s banks have also been greatly affected by the 2 storms, which took lives and destroyed properties in several areas of Luzon. As numerous residents were stripped of their jobs and livelihood, they have become incapable of settling their debt obligations.

According to Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla, around P500 billion in total retail loans in storm-hit areas are at risk of defaults.

Of this amount, Espenilla said at least 1% (P5 billion) needs to be restructured as borrowers affected by the typhoons are unlikely to repay their debts.

"We’re still surveying the damage (brought by the storms), but I think 1% is a reasonable measure," Espenilla said in an interview at ANC’s "Take One."

Given this, Espenilla said the BSP is mulling other relief measures to help banks cope with potential loan defaults, which are mostly in storm-hit areas of Metro Manila.

Fully booked

If some companies struggled to keep money and demand pouring in at times of calamities, the opposite has been the “problem” of some hotels in Metro Manila.

For instance, Ortigas-based Discovery Suites cited issues of room availability as guests keep on coming in when tropical storm “Ondoy” flooded several thoroughfares in the capital.

According to Discovery Suites head of sales and marketing Carmela Bocanegra, the sudden spike in demand for their rooms gave them no choice but to send them to other hotels.

“There was a deluge of rooms but we can only provide so much. We had to turn away people, even famous ones,” Bocanegra told abs-cbnNEWS.com in an email message.

“Ondoy” may have raked in more profits for the hotel, but it has taken a toll on some of its employees.

Since most of their replacements were trapped in their homes, Bocanegra said some of their hotel associates had to do double shifts at the onslaught of the tropical storm.

“The hotel provided shelter to employees by converting one of our function rooms as temporary shelter for employees who could not go home,” she said.

 

ABS-CBN