Air Philippines unveils expansion plan

(philstar.com) Updated September 30, 2010 12:34 PM

MANILA, Philippines (Xinhua) – Lucio Tan-led Air Philippines plans to open more new air routes by expanding its aircraft fleet to compete in the country's competitive aviation industry, the company said today.

Air Philippines CEO Cesar Chiong said the company plans to increase its Airbus A320 aircraft from just three to 18 by 2012 and add more domestic and regional routes.

The airline will fly to its first regional destination, Singapore, later this month, using its brand new 180-seater A320, which was delivered earlier this week.

"We're looking at destinations like the Republic of Korea, Bangkok and maybe Hong Kong," Chiong said.

Domestic routes like Vigan and Marinduque are also in the company's radar screen.

By the end of the year, Chiong said, the company expects to have six new A320s. Another six will arrive next year while the rest will come in 2012. Air Philippines' first two A320s given to it by sister company Philippine Airlines (PAL).

Aside from the three Airbus jets, Air Philippines also has eight turbo propeller planes used to fly on domestic routes.

A total of $250 million will be spent for the lease of the new aircraft.

Chiong said the company preferred to acquire A320 jets, which are the same planes used by its sister PAL, to keep expenses down since a fleet with just one type of airline is easier and cheaper to maintain.

Air Philippines is already the country's third largest airline, behind Gokongwei-led Cebu Pacific and Tan’s Philippine Airlines, at the end of the first half of the year after carrying 676,686 passengers.

Lucio Tan Jr now owns 80% of MRC Allied

By Zinnia B. Dela Peña (The Philippine Star) Updated September 23, 2010 12:00 AM

MANILA, Philippines - Tycoon Lucio Tan’s son and namesake now owns 80 percent of MRC Allied Inc. after buying out the listed firm’s debt from several financial institutions.

On the sidelines of the company’s annual stockholders meeting yesterday, MRC president and corporate information officer Benjamin Bitanga said the group of Lucio “Bong” Tan Jr. bought out P600 million in debt of the property holding firm in exchange for around 80 percent of MRC.

MRC issued to Menlo Capital Corp., a company 51 percent owned by Tan, a total of 3.625 billion common shares coming from the increase in its authorized capital stock to P3 billion. The new capitalization consists of 15 billion common shares with a par value of 20 centavos.

Bitanga said the new management’s thrust is to acquire operating companies or entities that will give MRC immediate profitability. “Our goal is to post profits by the first quarter of 2011,” he said.

PAL open to partnership for flag carrier

By Mary Ann LL. Reyes (The Philippine Star) Updated July 23, 2010 12:00 AM

MANILA, Philippines - Lucio Tan-led PAL Holdings is open to partnerships insofar as owning flag carrier Philippine Airlines is concerned, top company officials said yesterday.

PAL chief finance officer Susan Lee said the holding company has been entertaining inquiries, mostly from international airline companies, on the possibility of putting in fresh capital into PAL.

Earlier, PAL president Jaime Bautista revealed that some international airlines have expressed interest in partnering with PAL Holdings, which owns 83 percent of PAL, and have made inquiries regarding this matter.

Bautista said that the equity needed from a possible investor should be at least 25 percent, but should not exceed 40 percent, of PAL’s total assets which stood at $1.1 billion.

He added that if there is a good offer to buy the entire business of PAL, the company’s owners, led by Tan, are willing to give the company up. Tan is reportedly not interested in shelling out more funds for PAL considering his already substantial investment in the airline.

Bautista, however, emphasized that PAL is not a bankrupt company. “It only needs to have additional equity,” he stressed.

But Lee pointed out that nothing definite has been agreed upon and discussions are still mostly in the exploratory stages.

PAL is in talks with several fund managers and Asian carriers for possible investments but according to Bautista, instead of the shareholders selling their stocks, they will be considering issuing new shares.

Bautista, however, explained that at this point, it is not clear whether the shares will be that of PAL or of publicly-listed PAL Holdings.

Although issuing new shares could dilute the Lucio Tan group’s stake in PAL, Bautista said Tan is more concerned with the fresh funds being put into the airline than the ownership aspect.

About a decade ago, Hong Kong-based Cathay Pacific Airways Ltd. had contemplated on investing in PAL but this plan failed to materialize. Now, Bautista revealed that Cathay is now among the carriers that PAL is in discussions with.

PAL Holdings’ share prices has been climbing, from P3 per share at the start of the month to P4.60 last Friday, as rumors circulated that new investors were about to come in.

Despite its financial difficulties, Bautista said PAL settled $40 million in maturing debts last month, on top of the $10 million it has been paying monthly. PAL was able to bring down its liabilities to about $1 billion since entering corporate receivership.

The company emerged from receivership after recording a profit in 2007 but the airline’s finances spiraled in the succeeding three years as it incurred over $350 million, or at least P15 billion, in losses during its last two fiscal years. Its equity also dropped precipitously to a little over $1.1 million as of February this year.

With this, the company decided to let go of at least 3,000 employees with the spin-off of its three core businesses. The affected workers belong to the in-flight catering services, airport services (including ground handling, cargo terminal/cargo handling and ramp handling) and call center reservations.

Although the industry is improving, Bautista said PAL has to continue implementing more measures to generate more revenues and reduce costs.

Aside from its debts, the airline is also dealing with the problems brought about by the downgrading by the US Federal Aviation Authority (FAA) of the Philippines, from Category 1 to Category 2, and the consequent blacklisting by the European Union. The downgrade has prevented PAL from mounting additional flights to the US.

Earlier, PAL’s chief executive explained that the move to outsource non-core units is essential to attract investors that will put in fresh capital for the financially strapped carrier.

PAL explained that it was constrained to pursue the restructuring plan due to several factors beyond its control that include, among others the unabated liberalization of the commercial aviation industry to the detriment of local players like PAL, the worldwide economic recession that led to a crippling slowdown in passenger traffic, as well as the record-high oil prices in 2008-2009 and the continuing increase in the price of aviation fuel, which account for nearly half of PAL’s operating expenses.

In April, Bautista said that apart from a series of cost-cutting initiatives, PAL approached several investors but none were interested given the fact that in 2009 alone, more than 20 airlines went bankrupt. “We approached government for help but it, too, was in dire financial straits,” he added.

To stave off failure and protect company assets, PAL said it had to act quickly. “Given this grim scenario, PAL has no choice but to restructure. It must also sell and/or cease operations of non-core businesses since no airline in Asia, or the world for that matter, continue to operate non-core businesses. Moreover, PAL has to meet its huge outstanding obligations as they fall due to prevent creditors from taking over the business,” it stressed.

San Miguel Corp. keen on acquiring majority stake in PAL

By Ma Elisa P. Osorio (The Philippine Star) Updated July 09, 2010 12:00 AM

MANILA, Philippines - Diversifying conglome-rate San Miguel Corp. (SMC) has expressed inte-rest in acquiring a controlling stake in flag carrier Philippine Airlines (PAL) from the Lucio Tan Group.

In an interview with reporters Wednesday evening, SMC president and chief operating officer Ramon S. Ang said, however, that they will only buy PAL if they can get at least 51 percent.

“We need to at least get 51 percent so that we are the majority. If not, then what is it for,” he said.

However, Ang said he expects Tan to sell PAL only to foreign companies. “It’s a pride thing. They will not sell to local companies. They will sell to a foreigner but not to locals.” Early this year, Tan surrendered control of his cigarette company Fortune Tobacco to Philip Morris.

When asked if they can make PAL more profitable, Ang said “the airline business is a very simple business,” adding they will definitely make more money for PAL.

In the same event, PAL president Jaime Bautista pointed out they have not yet discussed any plans of selling the flag carrier. “That matter has never been discussed in our meetings.”

Bautista noted that the airline is doing well and they are looking forward to a good year due to the opening of new flights.

But a source from PAL said a number of companies have been doing due diligence on the firm but the case between PAL and its workers have delayed the proceedings. The source noted that some companies are waiting for the final resolution of the labor problem. The source said although there are a number of firms that have expressed interest in buying PAL, they have been approaching the wrong people.

Tan ejects brother as turbulence hits PAL

August 25, 2009
Manila Standard Today
by Roderick T. dela Cruz

PAL Holdings, the holding company of Philippine Airlines, has elected a brother of taipan Lucio Tan as its chairman to replace another brother, Mariano Tanenglian, who was removed from the board.

In a disclosure to the stock exchange, PAL Holdings said Harry Tan was appointed the holding firm’s new chairman, replacing Tanenglian as a part of a reorganization of its board committees.

The company did not cite the reasons for the change, but it was believed to have been caused by an unresolved feud between Lucio Tan and his younger brother Tanenglian.

Tanenglian was earlier removed from the board of the Philippine National Bank and Eton Properties Philippines, both of which are controlled by Lucio Tan.

The rift between the two brothers reached a boiling point when Tanenglian threatened to testify for the government in its ill-gotten-wealth cases against his older brother.

Lawyers representing Tanenglian yesterday distributed a copy of a letter to the Presidential Commission on Good Government dated Aug. 19, reminding the agency of their client’s offer to testify against his brother in exchange for immunity for himself and his family.

“Up to the present... after the lapse of more than one month, our client’s offer of cooperation and request for such grant of immunity have not yet been acted upon,” the letter from the Azura Quiroz & Campos law office said.

“In the meantime, the window of opportunity is fast approaching (sic).”

The letter ended with the suggestion that further delay by the commission would be interpreted as the result of pressure “by a very influential party” involved in the case.

In its board reorganization, PAL Holdings also appointed Michael Tan, a son of the taipan, a member of the Audit Committee in place of Enrique Cheng.

Lucio Tan Jr., another son of the taipan, and Juanita Tan Lee were appointed alternate members of the same committee.

Lucio Tan remains chairman of the airline itself while Bautista remains president.

The directors of PAL Holdings nominated for fiscal year 2009-2010 include Lucio Tan, Harry Tan, Jaime Bautista, Domingo Chua, Lucio Tan Jr., Michael Tan, Juanita Tan Lee, and Wilson Young. The independent directors were Johnip Cua, Antonino Alindogan Jr. and Enrique Cheng.

PAL booked a comprehensive income of $35.5 million in the April-June period, which represents the first quarter of its fiscal year.

But the airline said the amount was down by $9.6 million over the same period last year because of declining passenger volume.

The airline incurred a net loss of $301 million in the fiscal year ending March 2009, reversing a net profit of $30.6 million a year earlier.

The airline operates 47 aircraft that fly to 29 domestic destinations and 31 international routes. It employs 8,052 workers and does not expect to hire more employees within the next 12 months.

Estrada Says PAL Will Find Partner in January

The Manla Times

Tuesday, December 29, 1998

By Marc Crowe

Bloomberg

PRESIDENT Estrada said he expects Philip­pine Airlines (PAL) to find a new partner by next month that will pump cash into the debt-strapped flag-carrier.

PAL is still in talks with foreign airlines interested in buying a stake in the carrier, including Cathay Pacific Airways Ltd. of Hong Kong, Estrada said. Cathay has repeatedly said it broke off talks with PAL.

“They're still negotiating and I hope they will settle it, hopefully by next month.” Estrada said. “We are trying our best to save PAL.”

Last week, PAL’s European creditors rejected a rehabilitation plan proposed by the airline because it failed to include the entry of a new partner or $200 million in new capital.

The plan, submitted more than two weeks ago, called for an immediate capital infusion of $90 million from current stock­holders. It also proposed a longer repayment period for $2.2 billion in debt and slashing the PAL fleet to 22 aircraft from 52 at the start of the year.

“The presence of a strategic partner is of paramount im­portance for a viable rehabili­tation of PAL,” said Credit Agricole Indosuez, which repre­sents owners of 12 Airbus Industrie aircraft leased to PAL.

PAL is expecting a cash in­fusion of $90 million from local investors -- mostly from PAL chairman Lucio Tan – as soon as the plan is approved by regulators.

An additional $60 million would be pumped in within half a year after the plan takes effect. PAL is still seeking a foreign airline to cover that investment.

Social Security System admi­nistrator Carlos Arellano said the state pension fund would be willing to invest up to P1 billion in PAL if the airline can find a partner, according to news reports.

Talks with Cathay and Northwest Airlines Inc. of the US collapsed amid disagreements over management control of the carrier, future job cuts and constitutional limits on foreign ownership of an airline.

Without a capital infusion, PAL’s future appears grim. PAL’s net loss surged to P3.9 billion in the three months to Sept. 30. The flag carrier halted payments on its debts in June after a pilots’ strike pushed the airline to the brink of collapse.

About half of PAL's debts are owed to export credit agencies and their insurers, such as the Export-Import Bank of the US Hermes of Germany, Coface of France and UK-based Export Credits Guarantee Dept.

Erap Vow to Save PAL Firm

People’s Journal

Tuesday, December 29, 1998

President Estrada is confident that negotiations to save Philippine Airlines would reach a happy conclusion by January next year.

The President yesterday said he remains hopeful that there would be a settlement with Hong Kong-based Cathay Pacific Airways, ”hopefully by next month.”

“They’re still negotiating, and I hope they will settle it, hopefully by next month,” Mr. Estrada said when asked by reporters at the Ninoy Aquino International Airport about the progress of the negotiations.

He reiterated his administration’s commitment to save PAL “at all costs,” saying too much is at stake if the airline shuts down.

He explained that among the airlines now operating in the Philippines, only PAL has the capability to fly to all domestic routes and carry passengers and cargoes to these destinations.

“We are trying our best to save PAL because if PAL closes, all businesses will be affected,” the President pointed out.

Mr. Estrada was at NAIA yesterday morning to lead government officials in welcoming overseas Filipino workers who came home for the holidays.

Last week, Executive Secretary Ronaldo Zamora said talks are still ongoing between PAL and possible strategic partners, including Cathay.

Zamora said in a radio interview that the parties are keeping the talks under wraps because they do not want any side issues to surface at this time.

However, he reiterated the Estrada administration’s position that the government would not take over PAL and assume its huge debts.

Earlier, Cathay announced it was pulling out of talks following speculations that a takeover of PAL management may violate the 1987 constitution.

Under the Constitution, foreign companies can own only up to 40 percent of any business firm in the Philippines.

Negotiations for a possible strategic partnership is one of two options to save PAL, the other being an infusion into the airline of part of the $30-billion Miyazawa Fund initiative for crisis-hit economies in East Asia.

The Philippines stands to get $3 billion in short-term loans and another $3 billion in long-term loans from the fund, according to Finance Secretary Edgardo Espiritu.

Espiritu also said the request to use Miyazawa Funds must come from the government task force for its rehabilitation of PAL, the Securities and Exchange Commission and PAL management.

PAL Fate Still Up In Air

Philippine Daily Inquirer

Saturday, December 26, 1998

Martin P. Marfil

Philippine Airlines is still holding talks with foreign investors other than Cathay Pacific Airlines and Northwest Airlines to revive the national carrier, Executive Secretary Ronaldo Zamora yesterday said.

“Singapore Airlines had been mentioned but there are other companies which have expressed interest. However, they want sensitive discussions kept secret for now, away from public view, to avoid side issues,” Zamora said in a Malacañang statement.

He disclosed that PAL was still holding negotiations, this time in secret, with both the Hong Kong-based Cathay and Northwest Airlines of the United States.

“The discussions are still going on, but these are not being made public for the moment to avoid snags. They are talking in private,” he said in Malacañang statement.

“That is shy PAL is still hopeful that at least one of its talks --- either with Cathay or Northwest --- would produce positive results,” Zamora added.

PAL, which closed down its 57-year-old operations for two weeks in September because of a $2.1-billion debt and labor problems, already slashed its labor force and its flights and cancelled deliveries of new planes to try to cut cost and keep flying.

It then opened negotiations with Cathay Pacific, but the Hong Kong carrier announced early December it was pulling out of the talks. Northwest also was reported to be out of contention early this month.

Zamora did not say how Cathay Pacific officials agreed to resume talks, although President Estrada, a close ally of Tan, said earlier this month that “at all cost we will save PAL because it is the flag carrier of the Philippines.”

Following the collapse of the talks, Zamora and Finance Secretary Edgardo Espiritu floated the idea of having PAL rehabilitation using the Miyazawa Fund, which Japan set up to combat the Asian economic crisis.

However, the proposal received flak from a financial expert who pointed out that tapping the $30-billion fund would send the “wrong signals” to the Japanese government as Tan was Mr. Estrada’s supporter.

The Miyazawa Fund was subject to numerous conditions like the approval of its rehabilitation plan by its creditors and entry of a new management team, according to Socioeconomic Planning Secretary Felipe Medalla.

Espiritu said PAL might have to close down again unless a new financing package is found.

He admitted that, despite his earlier suggestion, the airline was unlikely to get help from Miyazawa Fund.

“There will be no government bailout. If it has to close, it has to close,” Espiritu said.

He said the only solution was for Tan, chair of PAL, to get other investors to put new capital into the airline.

But Espiritu also admitted that PAL’s creditors had already said they wanted a strategic partner to take over management before they agree to a rehabilitation plan.

A competitor of PAL said it did not really want the flag carrier to close down.

“I don’t wish PAL any harm. In fact, it’s bad for the industry,” said Diego Garrido Jr., new executive vice president of Air Philippines.

“If PAL falls, all will fall,” Garrido said.

PAL has a hold on people traveling for business, while its competitors corner those traveling for leisure, according to the Air Philippines official.

“Their business traffic can be our leisure traffic,” he said. PAL has about five competitors in the domestic market. (With reports from Armand Nocum and Inquirer wires)

Estrada to Save PAL ‘At All Costs’

Today

Sunday, December 13, 1998

President Estrada has pledged to save ailing Philippine Airlines “at all costs,” pointing out that too much is at stake because the airline is a vital component of Philippine commerce and industry.

“You know, it is a must for the President to save PAL because if PAL closes down, all business here in the country will be affected,” he said. “At all costs, we will save PAL.”

But he would leave it to PAL management as to which strategic partner to take in.

Two interested foreign airlines – Northwest and Cathay Pacific – have withdrawn from talks with PAL. But Estrada said “we are not losing hope.”

The President noted that PAL according to its executives, is losing P21 million a day. He conceded that the airline suffers from overstaffing and from the “open skies” policy adopted by the previous administration.

Last week, PAL submitted to the receivership committee a stand-alone rehabilitation program that its management believes will allow the airline to become viable again. R. Mercene

Erap’s Hopes Spring Eternal for PAL-Cathay Agreement

The Philippine Star News

Sunday, December 13, 1998

News

President Estrada expressed hope yesterday that both Philippine Airlines and Cathay Pacific Airways will resume their negotiations and reach an agreement on a proposed buy-in partnership before Christmas.

Mr. Estrada reiterated his holiday wish as he voiced his administration’s concerns about the adverse impact of PAL’s closure on the economy if the flag carrier is unable to get fresh capital investment from new partners.

In his weekly radio program “Jeep ni Erap, Pasada ng Pangulo,” the President disclosed that PAL’s negotiations with Northwest Airlines have already bogged down. “It looks like Northwest Airlines is really out. But with Cathay, I have not lose hope.”

Mr. Estrada said there are still positive signals coming from Cathay that the Hong Kong-based airline is still interested in resuming negotiations with PAL after both sides abandoned talks two weeks ago due to PAL’s refusal to trim its large workforce.

He admitted, however, that the proposed buy-in partnership remains “up in the air” with no final word yet from either party.

“PAL is very important. If this closes, many businesses will be adversely affected, not only big industries but also the small ones,” the President pointed out.

Mr. Estrada noted with concern reports given to him by PAL which show the flag carrier has been losing as much as P21 million a day in scaled-down operations since the airlines resumed flights last October after a two-week shutdown.

He said PAL continues to lose not only because it is said to be “overstaffed” – despite cutting down from 13,000 to 8,000 employees – but also due to “open skies policy” implemented by previous administration.

“Foreign airlines were allowed to come here (which) resulted in much competition,” Mr. Estrada said.

The President earlier offered to act as mediator between Cathay officials and PAL majority owner Lucio Tan. He even urged Filipino businessmen and investors to “chip in” and invest in PAL instead of relying too much on foreigners to save the long-ailing flag carrier.

He said the government will do everything – short of granting bail out money – to prevent the airline from closing down again if talks with Cathay fall through.

“I believe we will be able to settle this. If Cathay and PAL do not come to an agreement, there are many other businessmen to help PAL,” Mr. Estrada said.

One such option mentioned by Presidential Spokesman Fernando Barican was government assistance in the form of “bridge financing” to help ride PAL over until new partners come in.

“The government’s policy is unchanged. There will be no government bailout or subsidy to PAL,” Barican stressed.

Bridge financing requires that PAL’s continued operation is commercially viable and that PAL will be subjected to the usual credit evaluation, among other terms.

The Presidential Task Force on PAL headed by Finance Secretary Eduardo Espiritu said the financing package will involve a consortium of private banks and strategic partners. The package will form part of a rehabilitation plan approved by PAL creditors and the Securities and Exchange Commission. Marichu Villanueva, DPA

Estrada Not Giving Up on PAL-Cathay Deal

Manila Standard

Sunday, December 13,  1998

With this help, the differences between Philippine Airlines (PAL) and Cathay Pacific Airways will be settled to ensure that the merger between the two airlines will push through before Christmas, President Estrada said yesterday.

“For now, negotiations (with foreign airlines) are still hanging. Northwest Airlines is backing out. But until now, I have not lost hope in the PAL-Cathay deal,” Mr. Estrada said in his weekly radio program.

The President said he would try to see to it the fate of the flag carrier is resolved before Christmas.

He said the management of PAL informed him that the airline is still losing P21 million daily because it is overstaffed.

PAL management said the “open skies” policy adopted by the Ramos Administration is also one of the major factors why the flag carrier is losing a lot of money.

The policy allows foreign airlines to enter the country, which means greater competition for local airlines.

Mr. Estrada said PAL’s continued operation is important to the country because its closure would affect both big and small businesses.

Recently, the President said he would call for a meeting with PAL and Cathay for another round of negotiations after talks between the two collapsed.

He added there is still a chance for the two airlines to come to an agreement  despite reports that Cathay Pacific had irrevocably pulled out of talks to buy a controlling stake in the national flag carrier.

Mr. Estrada expressed hope that the proposed merger between PAL and Cathay Pacific will push through, noting  that the latter is a worthy partner for PAL. Lee Ann L. Pattugalan

Negosasyon ng PAL-Cathay Sisikaping Magtagumpay

Taliba

Thursday, December 10, 1998

Bhaby See

Hindi papayagan ng Pangulong Estrada na mabigo ang negosasyon sa pagitan ng Philippine Airlines (PAL) at Cathay Pacific.

Ito ang sinabi kahapon ng Chief Executive kasunod ng pagbibigay katiyakan sa publiko na pinipilit niyang kumbinsihin pa rin ang Cathay na bilhin ang PAL.

Nakatakda sanang mag-usap ang kinatawan ng Cathay at PAL sa bahay ng Pangulo sa Polk St., Greenhills noong Linggo upang isara na ang negosasyon subalit hindi sumipot sa usapan ang mga executives ng Cathay.

Ang Pangulo ang siya mismong mamamagitan sa negosasyon sa pagitan ng dalawang airline companies.

Magugunitang ang Pangulo rin ang kumumbinsi noon sa Cathay na pansamantalang humalili sa mga rutang naiwan ng PAL noong panahong nagwelga ang mga piloto at empleyado nito.

Sinabi naman ni Finance Secretary Edgardo Espiritu na ang tunay na dahilan kung bakit bantulot ang Cathay na matuloy ang bentahan ay dahil sa dami ng mga restriksyon sa Konstitusyon hinggil sa pagmamay-ari ng mga dayuhan sa mga local na kumpanya.

Nakasaad sa Saligang Batas na ang dayuhang kumpanya at mamumuhunan ay maaaring makapagmay-ari lamang ng hanggang 40 porsiyento sa bawat lokal na kumpanya at ang mas malaking 60 porsiyento ay dapat na Pilipino ang siyang magmay-ari.

Binigyang konsiderasyon din umano ng Cathay Pacific ang panukala ng PAL na manatili sa serbisyo ang nakararami nitong empleyado dahil sumang-ayon naman ang PAL Employees Association (PALEA) na walang welga o pag-aaklas at Collective Bargaining Agreement (CBA) sa loob ng 10 taon.

Nagpahayag ng kumpiyansa ang Pangulo na malapit ng magkasundo ang Cathay at PAL sa usapin ng bentahan.

GFIs ang Bubuhay sa PAL

Kabayan

Thursday, December 10, 1998

Manuel I. Sanchez

Umaasa ang Philippine Airlines (PAL) na makakakuha ito ng bridge financing mula sa mga government financing institutions (GFIs) upang mapunan ang kinakailangan nitong pondo para sa rehabilitasyon nito.

Noong Lunes ay naghain ng rehabilitation plan ang PAL sa Securities and Exchange Commission (SEC) kung saan binuksan nito ang kompanya sa mga local at dayuhang mamumuhunan na nais maglagak ng bagong kapital sa PAL.

Ayon kay Manolo Aquino, executive vice president ng PAL, tatanggapin umano ng PAL ang anumang alok mula sa mga GFIs at handa umano ito na makipagkasundo sa isang commercial loan agreement.

Ilan sa mga GFI na inaasahang maglalagak ng bagong kapital sa PAL ay ang Social Security System (SSS), Government Service and Insurance System (GSIS) at Land Bank of the Philippines (LBP).

"Mayroon kaming mga naririnig about that but there is no serious offer yet coming from them,” pahayag pa ni Aquino.

Sa kabila ng kawalan ng bagong kapitalista na nais pumasok sa PAL, sinabi ni Aquino na sisiguruhin nila na manunumbalik ang dating sigla ng PAL bilang pinakaunang airline sa Asya.

Matatandaan na bumagsak ang negosasyon sa pagitan ng PAL at ng Cathay Pacific Airways at Northwest bunga na rin ng mga isyu na hindi napagkasunduan.

Pinabulaanan din ng Singapore Airlines na balak nilang pumasok sa PAL kung saan nag-isyu na ito ng pagpapabulaan para matigil na umano ang espekulasyon.

Naniniwala si Aquino na hindi na rin maglalagak ng bagong kapital ang pamahalaan sa kabila ng naisin nito na muling pasiglahin ang flag carrier ng bansa.

Ayon naman kay dating Pangasinan Gob. Oscar Orbos, kinakailangan na mag-ingat ang pamahalaan sa muling pagpasok sa PAL dahil sa ito umano ay magbibigay ng hindi magandang senyales sa mga investor.

Sa kanyang radio program sa DZXL, sinabi ni Orbos na mawawala umano ang credibility ng pamahalaan hinggil sa ipinatutupad nitong privatization program.

Sinabi ni Orbos na dapat ding mag-ingat ang mga GFI sa paggastos lalung-lalo na ang GSIS at SSS dahil sa ito umano ay pera ng taongbayan.

“There has to be a transparent process in the decision-making because this will really create a negative impact,” pagdidiin pa nito.

Ang pera umano ng GSIS at SSS ay pinaghihirapan ng mga miyembro nito at kinakailangan din na maging maingat ang mga ito sa paggamit ng pondo.

Nanawagan rin si Aquino sa riding public na tangkilikin ang PAL dahil sa ito lamang umano ang magiging pangunahing hakbang para muling maibangon ang PAL.

Sa kasalukuyan, patuloy umanong gumaganda ang operasyon ng PAL at 90 porsyento ng serbisyo nito ay naibalik na sa normal.

Bagama’t mayroon pa ring mga problemang kinakaharap ang PAL, naniniwala naman si Aquino na malalagpasan ng PAL ang krisis na ito.

Kapag inaprubahan ng SEC ang rehabilitation plan ng PAL, ito ay ikokonsulta pa sa mga creditor para sa credit restructuring.

Gov’t doing its best to push PAL-Cathay deal

People’s Journal
Thursday, December 10, 1998

President Estrada assured the public yesterday his administration is giving its best efforts to convince Hong Kong-based Cathay Pacific Airways to buy into Philippine Airlines.

Interviewed at Villamor Air Base before leaving for Bukidnon, the President told Palace reporters he remains hopeful that both sides could strike an agreement soon.

“Well, we’re trying our best to settle an agreement,” he said, even as he downplayed reports that the PAL-Cathay talks might be derailed by the move of former first lady Imelda Marcos to contest the ownership  of the national flag carrier.

Mr. Estrada is an active participant in negotiations between PAL and Cathay, which has expressed interest in acquiring a controlling stake in the airline.

In an earlier radio interview, Finance Secretary Edgardo Espiritu said Cathay feels concerned about the constitutional restrictions of foreign investors.

Espiritu explained that while Cathay wants to manage PAL’s day-to-day operations, it is wary of the constitutional provision limiting foreign investors to own a maximum of 40 percent of any local company.

He added that Cathay appears amenable to honoring PAL management’s proposal to preserve the jobs of PAL employees, which the employees approved overwhelmingly in a referendum last September.

Asked whether a settlement can be hammered out soon, the President said, “hopefully, hopefully” but made clear that there is no time frame.

Talks With PAL Over, Cathay Reiterates

The Business Daily

Thursday, December 10, 1998

By RODEL A. ALZONA

Cathay Pacific Airways Ltd. reiterated yesterday that talks to acquire a stake in Philippine Airlines Inc. (PAL) were over.

“As far as we are concerned, this is behind us,” Chief Operating Officer Philip Chen told reporters.

Responding to reports that the Philippine government has been trying to resurrect talks between Cathay and PAL after Cathay pulled out of talks last week, Chen said, “We have had no formal approach.”

Asked whether Cathay would be interested in buying certain parts of PAL, Chen said: “We actually have not come down to those details.”

He declined to say how much Cathay had spent on due diligence work on PAL. “Cathay has put in a lot of resources – financial and manpower,” he said.

Adding to the already sufficiently curious developments was former First Lady Imelda Marcos’ claim of ownership of PAL, which has prompted President Joseph Estrada to assure would-be investors of PAL that such claims would not affect matters.

Aside from downplaying reports that the mystery talks between PAL and Cathay Pacific might be derailed by the move by Mrs. Marcos, the Chief Executive dared her to show proof of ownership.

“If she is really telling the truth, she could produce a document to prove her claim,” the President said.

In spite of persistent denials out of Hongkong, Estrada again made mention of the supposed renegotiation process with Cathay.

In an ambush interview, the Chief Executive said “We’re trying our best to reach an agreement with Cathay.”

“You know this a negotiation, and you cannot set the time when they will agree. Maybe they will not agree, maybe they will agree,” Estrada said.

Doomsday Scenario

As more details are made available each day by the Securities and Exchange Commission (SEC) regarding the rehabilitation plan of PAL, it has become obvious that the airline, in spite of professing faith in rehabilitation, has also made provisions for a doomsday scenario.

The five-member interim receivership committee (IRR) said in the event a liquidation process should be needed, PAL would be facing a shortfall of $976.70 million.

Cuervo Appraisers Inc., the company which made an estimate value of the airline company’s assets should they be diagnosed of in the next three to six months – indicated that PAL could raise $1.37 billion against total claims of $2.34 billion, including pre-petition interest of $94.90 million.

“The immediate sale value of PAL’s assets would be ended by the current state of the airline industry a...PAL’s operating fleet,” the IRR stated.

It added: “The liquidation analysis assumed the aircraft would be sold on an individual basis. Further discount may be appropriate if a large part of the fleet were to be sold on a portfolio basis. The liquidation value of the non-aircraft aviation-related assets may be further influenced by the limited number of potential purchasers of such special purpose assets.”

The largest portion in the claims against PAL consists of secured aircraft claims amounting to $1.49 billion, with PAL only able to pay a maximum of $1.24 billion if its entire fleet is sold.

Secured debt from banks amounts to $206.70 million, which PAL could only match with $108.40 million. Of trade creditor claims of $195 million, PAL could only settle $12 million. PAL, meanwhile, does not have any provision to deal with its debt in the form of floating rate notes worth $178.50 million, due on January 2000.

In addition to that, PAL has no resources to match unsecured debt, claims for early return of operating leases, and subordinate claims.

Claims Piling Up

Meanwhile, another claim worth $3 million against the airline company was filed yesterday before the SEC by Security Bank Corp. (SBC).

In a four-page petition, SBC said it was the trustee of $3 million worth of Eurodollar bonds set to mature in January 2000.

“SBC as a trustee is filing the claim to protect, preserve, and prevent the asset from being dissipated,” the petition stated, adding that it is now seeking payment of the amount including interest.

The three-man task force created to review the rehabilitation plan of PAL is set to submit recommendations to the hearing panel within the next 30 days.

PAL officials have been showing concern over the future viability of the company as passenger loads are only averaging 65% during this Christmas season when the company traditionally should be running on at least 80% capacity.

The IRR further stated that with the huge deficit of assets against the total debt of the company, it foresees secured creditors taking possession of their securities.

The fact that the IRR is expecting a huge asset deficit in the event of a liquidation process might have been the main reason for the airline company to ask SEC for an extended maturity date on its debt once the plan is approved.

Under the plan, fully secured creditors will be asked to extend debt maturity by three years to 15 years; partially secured should extend maturity of loans by five years to 15 years.

Lease rental payments, on the other hand, will commence this month at a reduced rate, and unsecured creditors will be issued bonds which can be claimed within one to 12 years. – With reports from Marie A. Surbano and Reuters

PAL Seeks Concessions

Malaya News

Thursday, December 10, 1998

Cathay turns back on further talks

By PEARL O. BANTILLO

The Philippine Airlines wants concessions from the government to be able to fully rehabilitate itself.

Under its rehabilitation program submitted to the Securities and Exchange Commission last Monday, PAL wants that it be exempted from landing charges and that the government require government and overseas workers to use only PAL.

In another development, Cathay Pacific Airways Ltd. Reiterated that talks to acquire a stake in Philippine Airlines Inc.(PAL) were over.

“As far as we are concerned this is behind us,” Chief Operating Officer Philip Chen told reporters in Hong Kong.

The government has been trying to resurrect talks between Cathay and PAL after Cathay pulled out of talks last week. “We have had no formal approach,” Chen said yesterday.

Asked whether Cathay would be interested in buying certain parts of PAL, Chen said: “We actually have not come down to those details.”

He declined to say how much Cathay had spent on due diligence work on PAL. “Cathay has put in a lot of resources – financial and manpower,” he said.

Asked whether Cathay was looking at other acquisitions, Chen said the carrier’s policy had “always been very prudent.”

“We do not go around hunting or shopping for shares,” he said.

The government was also asked to help in such a way as to “remove the temporary operation permits granted to other airlines under the previous administration in respect of the Middle East, Hong Kong, Taipei and Singapore routes.”

PAL Senior Vice President for Sales and Operation Avelino Zapanta said: “We are not asking for monopoly but trading of natural resources like skies through a mutually beneficial arrangement.”

The rehabilitation plan also showed PAL wants a commitment of support from the Civil Aeronautic Board by making the flag carrier as the “designated carrier on all routes subject of air service agreements to which the Philippines is and will be a party.”

Zapanta noted that the permits given to other airlines to fly into the country must be removed or have them formalized in recognizing the “reciprocal rights” of aircraft in common skies.

“TOP, by their nature, are temporary. They ought to be formalized through a bilateral treaty on the basis of reciprocal rights,” he said.

The PAL executive noted that the privileges of some airlines to come  and go as they please into the country were not necessarily afforded to PAL in other airlines’ skies.

“Traffics rights historically given away by the government agencies have cost PAL a substantial reduction in load factors and yields revenues from commercial agreements. Operation the missionary routes cost PAL $633 million in bottom-line losses,” the documents stated citing the factors that aggravated that financial malaise of PAL.

PAL Seeks Gov't Support...As Cathay Pacific Denies Resumption of Talks

Business World

Thursday, December 10, 1998

By MA. SALVE I. DUPLITO

Reporter

If it wants the flag carrier to recover its health, the government should take up the cudgels for Philippine Airlines, Inc. (PAL).

In fact, PAL's recovery partly depends on the government extending several forms of support as contained in the rehabilitation plan submitted to the Securities and Exchange Commission.

Nevertheless, PAL is confident it will be able to keep itself afloat, judging from its present healthy load factor, and at the same time, hold its creditors at bay.

President Estrada, meanwhile, remained optimistic and still insisted on brokering an agreement between Hong Kong's Cathay Pacific Airways Ltd. and PAL within the week. He, however, refused to set a deadline.

"You know, in negotiations, you cannot set the time (for an agreement to be reached). Maybe they will not agree, maybe they will,” he told reporters at Villamor Air Bose before leaving for Maramag, Bukidnon, where he was scheduled to inaugurate a sugar mill.

The other day, Finance Secretary Edgardo Espiritu said PAL and Cathay resumed negotiations and a result was to be expected within the week.

However, Cathay chief operating officer Philip Chen told reporters in Hong Kong yesterday that talks to acquire a stake in PAL were over. "As far as we are concerned this is behind us”

Still, Mr. Estrada remained hopeful. "We're trying our best to (reach) an agreement,” he said.

KEY AREAS

Among the "key areas” where PAL is asking for government assistance is a commitment from the Civil Aeronautics Board (CAB) to limit the entry of foreign carriers by controlling the grant of new frequencies or capacities to foreign carriers.

“New frequencies or capacities, or increases thereof, shall be granted pursuant to law, to foreign carriers only with the approval of the President of the Republic of the Philippines,” the rehabilitation plan said.

But by asking for this requirement, PAL is effectively seeking a disincentive to other airlines to service the Philippines, a measure that is contrary to the liberalization policies espoused by the government.

In fact, PAL is calling for the cancellation of all temporary operating permits to service the Middle East, Hong Kong, Taipei and Singapore granted to other airlines by the previous administration.

Cathay Good-bye is Final

Today

Thursday, December 10, 1998

YES, it's final. Cathay Pacific is not interested in pursuing any tie-up with Philippine Airlines. Period. And that's despite President Joseph Estrada's avowed intent to get the two sides to sit down and resolve their differences.

This was confirmed to us by an impeccable source in Swire House, Cathay's head office in Hong Kong. We understand that the Cathay hierarchy feels it has spent enough time unsuccessfully courting PAL and its chairman Lucio Tan, and now it's time for both parties to move on.

As our source succinctly put it: "We realized in due course that anything to do with Philippine Airlines is an emotive subject in Manila. At times it seemed as if we were not just negotiating with a company but the whole country."

Cathay officials were also anxious to refute any suggestion that they had snubbed President Estrada by not attending a meeting he had called at Polk Street a few days ago.

Explained our source: "We are very respectful of the President and his efforts to save the national carrier. It’s just that we were not informed that any such meeting was taking place."

A member of the PAL board told us that middle management and other rank-and-file staff were all for the merger with Cathay. But it was the senior management who was vehemently against it.

He went on: "Senior managers, nearly all of whom are beholden to Lucio Tan, have everything to lose if Cathay comes in and brings its own professional team."

That leaves poor Lucio all alone by his karaoke machine singing "Come fly with me." Any takers?

PAL, Cathay Resume Talks

Business World

Wednesday, December 9, 1998

Merger talks between Philippine Airlines. Inc. (PAL) and Hong Kong-based Cathay Pacific Airways Ltd, are said to have been revived and the final results will be known within the week.

In a radio interview yesterday morning, Finance Secretary Edgar Espiritu said talks were reopened after President Estrada spoke with a Cathay official on the telephone last Sunday.

However, Cathay Regional Manager for Taiwan and the Philippine Peter Foster would neither confirm nor deny what Mr. Espiritu said, He merely told Business World in a telephone interview there has been no “direct-“ contact be­tween the (PAL and Cathay) since the breakdown of their two-month- long talks last week.

"I can only confirm that we are not engaged in any direct talks with the PAL management. As for talks with other parties, I am not at liberty to comment on that, “he said.

Mr. Espiritu said both the government and PAL are determined to find a partner for the flag carrier within this week to appease its foreign creditors.

"The President was able to speak on the telephone with a Cathay official involved in the negotiations. I could say that the discussions have been revived and we will know the results within two to three days,” Mr. Espiritu said in the vernacular. “We are hoping the talks can be concluded within the week so the creditors will stop worrying," he added.

“We are still willing to renegoti­ate,“ Mr. Estrada told reporters in an ambush interview. He had earlier asked for a meeting last Sunday with Cathay officials and PAL Chairman Lucio Tan. However, Cathay representatives failed to show up.

THORNY ISSUE

A thorny issue which must be resolved by both parties is the schedule of capital infusion. Mr. Espiritu during his radio interview., said Cathay, which reportedly is willing to raise as much as $100 million, will give the amount next April but it wants an "immediate take over” of the flag carrier.

PAL, based on the rehabilitation plan it submitted to the Securities and Exchange Commission last Monday, said it needs $150 million to finance its rehabilitation.

Mr. Espiritu said Cathay’s demand may be borne out of the fact that the rehabilitation plan will take some time to be completed. The projection is that the plan will be finished by February or March.

But he expressed optimism that this time, the talks will make progress, saying the issue on management control—one of the reasons for the collapse of earlier talks—can be easily resolved.

“The basic issue was on the constitutional limitation on the participation of foreigners in the policy decision making. Conflict arose after the strategic partner wanted to have the final say over the board, on how to run PAL. But this may be sensitive because we may be violating the Constitution,“ Mr. Espiritu said.

To appease Cathay, Mr. Espiritu said PAL is “now looking for ways to assure foreign investors provisions in the Constitution will not be invoked on the management takeover.”

WILLING TO GIVE WAY

He also assured that PAL stockholders are willing to turn over control to Cathay. “If it involves the day-to-day management, they, the present PAL stockholders, are ready to give way. And if Cathay will be informed about this…..the Cathay (takeover) may push through,” he said.

The Finance secretary who heads an interagency task force on PAL, said reports claiming the talks collapsed allegedly due to Cathay’s insistence to lay off workers are inaccurate—there is no need to retrench workers since a voluntary separation program is already in place , as agreed by PAL and its employees during referendum last October.

The Finance chief also said a number of investors, including the World Bank’s International Finance Corp, are willing to invest should the PAL-Cathay deal pushes through.

He said the government financial institution (GFIs) will also contribute their share, provided PAL has a new partner. “(But) I would like to clarify that the GFIs (on their own) will not invest capital in PAL, ayaw na nila (they no longer want to).” He said a possibility is for the GFIs to grant a loan, but only if a new partner comes in. “On a credit evaluation basis, the GFIs and other banks can provide bridge financing while PAL is waiting for the capital infusion of the new partner,” he said in Tagalog.

If the PAL-Cathay talks will not prosper, PAL can still turn to other airlines, Mr. Espiritu said, adding that the flag carrier has been conducting “preliminary” talks with Singapore Airlines.

A Business World source at PAL said the flag carrier is now talking to at least two major groups of investors to add both equity and expertise.

The source claimed management is negotiating with “a Filipino group” and a foreign airline investment firm to put up $60 million for the flag carrier’s rehabilitation. A group led by Mr. Tan is said to be ready to contribute $90 million of the $150 million needed to finance PAL’s rehabilitation.

Presidential spokesman Fernando Barican, at the same time, reiterated the government will not use the taxpayer’s money to bail out PAL.

SEVERAL FACTORS

“The bridge financing referred to by Finance Secretary Edgar Espiritu will depend on several factors: that PAL’s continued operation is commercially viable; that the usual credit evaluation will be administered; the financing package will involve a consortium of private banks and strategic partners; and the financing package will form part of the rehabilitation plan approved by PAL creditors and Securities and Exchange Commission,” he said.

Mr. Barican added that the President is confident these conditions will be met to pave the way for the bridge financing.

TO BE DISCUSSED

For their part, the GFIs said they will have to discuss among themselves Mr. Espiritu’s suggestion.

For one, a senior official of the Government Service Institute System (GSIS) said the proposal will have to be approved by their board.

“GSIS president Federico Pascual can only recommend to the board. He has to secure the board’s approval. The board goes over the granting of loans and disbursement of funds. We have not seen the rehabilitation plan,” he said.

PAL Still Trying to Interest Cathay

Philippine Daily Inquirer 

Wednesday, December 9, 1998

AILING Philippine Airlines is trying to revive talks with prospective investor Cathay Pacific Airways, which backed out of negotiations for a possible controlling stake in the flag carrier, a PAL official said yesterday.

If Cathay is unwilling to restart the talks, PAL will consider investment offers from other foreign airlines, PAL Executive Vice President Manolo Aquitno said.

Cathay officials were not immediately available for comment.

PAL closed for nearly two weeks on Sept. 23 following labor disputes and mounting losses worsened by Asia’s financial crisis.

It then began negotiations with Cathay, but the Hong Kong carrier announced last week it was pulling out of the talks.

Finance Secretary Edgardo Espiritu said the companies disagreed over management control of PAL and the timing of Cathay’s capital infusion into the Philippine carrier.

Cathay wanted full management control of PAL but the companies were unable to agree on how to deal with a constitutional prohibition of foreigners controlling key industries in the Philippines.

Cathay also refused to put its money into PAL until after a PAL rehabilitation plan is approved by creditors and Manila’s corporate watchdog, the Securities and Exchange Commission, Espiritu said. AP