No one wants to buy PAL?

The Philippine Star
Demand and Supply
By Boo Chanco
November 4, 2011

It now seems that Lucio Tan will not be able to sell PAL to anyone any time soon. Not to a Filipino group anyway. Manny Pangilinan just said it would be awkward for him to buy PAL now that the Gokongweis of Cebu Pacific are his partners at PLDT. I had lunch with San Miguel’s Ramon S. Ang last week and he said, he can produce better results and faster in San Miguel’s other businesses with the billion dollars needed to rehabilitate PAL. (San Miguel is still waiting for government final approval for their unsolicited bid to build MRT-7 to Bulacan and a reaction from DOTC to their offer to rehabilitate PNR, extend it to Laoag and to Sorsogon at no cost to government.)

RSA told me he understands the problems of PAL, being a pilot himself who is familiar with aircraft operations. PAL’s aircrafts are either on lease or even those that the airline owns are beyond their service years or will soon be. An investor, he explained, can’t make money flying aircrafts that consume 30 percent more fuel than the latest models PAL’s competitors use. In so many words, RSA is virtually saying there is nothing to buy in PAL for an investor like him.

But RSA was once interested in acquiring PAL. He sent his investment bankers to do due diligence on the airline. That’s why he knows what financial resources are needed to make PAL really fly. Some of RSA’s aides told me he once told them PAL was a done deal but he changed his mind once the numbers came in. RSA said it would be better to start a new airline using the low cost carrier model than to try to rehab PAL, a legacy carrier.

RSA also told me that Philippine skies have now become extremely competitive. Even Cebu Pacific has started giving up margins and that has now affected their bottom line because of the cut throat pricing of AirPhil Express and Zest Air. Then there is Air Asia Philippines that is authorized to fly the Philippine domestic routes. Maybe, he surmised, it is not the time to start a new airline, much less buy a dinosaur airline like PAL.

Lucio Tan is apparently stuck in PAL in the foreseeable future. For as long as he is alive, he may feel the need to continually put money to finance its losing operations due to sheer ego considerations. His heirs may not be as disposed to throwing good money after bad.

International aviation is in a difficult situation too… witness the Qantas strike that was settled only after a court order was issued. And yes, Singapore Airlines just inaugurated another budget carrier a low cost long haul airline called Scoot. That’s in addition to Tiger Airways that Singapore Air already partly owns. Scoot will fly to China and Australia, countries PAL already flies to.