Philippine Airlines has announced on Wednesday that it is reducing its fleet size from 54 aircraft to only 14. It also cancelled pending orders placed with both Boeing and Airbus following a crippling 20-day pilot strike. The airline terminated leases on four Airbus A340-200 wide-bodies and four A 300-B4 narrow-bodies, which will go back to Airbus's portfolio of used aircraft.

Philippine Airline facing its worst financial crisis in its 57 years, said it planned to sell or return the bulk of its fleet to raise desperately needed cash. The airline expects to generate around $ 1.5 billion from the disposal of 40 aircraft from itsexisting fleet of 54. The airline has been in the red after its privatisation in 1992.

Aviation sources say Air India also needs drastic steps to come out of the red. "Only the discontinuance of PLA will result in the airline making a cash profit of Rs 150 crore," sources in civil aviation ministry say. "Time has come for the employees to make some sacrifices or the airline will be never come out of the red," they add.

In fact, sources say, all these matters would be discussed in the forthcoming board meeting of the airline scheduled in the second week of July when it is meeting to adopt the accounts for the fiscal 1998. The new aviation minister, Ananth Kumar has already asked the airline's management not to ask funds from the government and prepare an independent blue print on how to make profits.

"The airline should reduce its staff by half and retire expensive loans. Thanks to the sanctions imposed by the US government and Moody's downgrade, its cost of borrowings will also go up," officials said.Air India, with a fleet of 24 aircraft, has a bloated staff of over 18,000 people.

"Even the proposed expansion should be put into cold storage as the airline will not be able to raise subsidised loans from the US Exim Bank," they add. The airline was planning to induct about 5-6 medium capacity long range (MCLR) aircraft at a cost of about $ 1 billion. With the US sanctions now in force, the airline will have no other option but to freeze the expansion till further notice.