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The Philippine Airlines (PAL) will report a net loss for the period July to September, mainly due to low passenger demand and a slowdown in traffic. Its fiscal year ends in March.

PAL president Jaime Bautista said, “From our original target, our passenger load is 10 percent below. So there is a reduction in capacity from July to September. Second quarter is always a losing quarter. We were affected by a slowdown in tourism, particularly from Japan and Korea, our traditional source of tourism.”

While he hopes for a better outlook in 2010, Bautista said the outlook for this fiscal year, remains extremely challenging with early indications that both cargo and passenger demand will remain depressed in the months ahead.

Because of this the flag carrier will lay off workers and reduce the number of their flights. The company also plans to outsource non-core businesses such as catering and cut the of its security personnel nationwide.

The company has also “tapped new traffic schemes” and “redeployed underperforming flight frequencies onto other routes” to cub the effects of the current global slowdown. PAL also “deferred all non-essential spending, suspended all non-essential programs, and cut fixed operating expenses.”

“The situation we are facing is very serious and your management has taken initiatives to further reduce costs and also increase revenues,” Bautista said during the PAL Holdings Inc.’s stockholders’ meeting.

Aside from trimming down its workforce by anywhere from seven to ten percent, the airline company will also reduce seat and flight capacity by seven percent. Flight capacities for US and Australia have already been cut by seven percent according to Bautista.

PAL  employees were given until October 31 to accept the retirement packages, anytime after that, management will undertake a rationalization program.

For its fiscal year ending March this year, PAL posted a net loss of $301 million from a net profit of $30.6 million in the fiscal year ending March 2008