PAL Says It Can Finance Itself

Today

Saturday, December 5,1998

By RECTO MERCENE

FORGET foreign investors, Philippine Airlines can go it alone–or so it now believes.

Executive Secretary Ronaldo Zamora, emerging Thursday evening from a meeting with PAL officials, said the beleaguered airline is so confident of its “stand-alone” option that they are “not even asking for an exemption on the original December 7 deadline for which they must submit a rehabilitation plan.”

According to Zamora, PAL is confident that it has money to turn the airline around.

Zamora noted that pal has so far managed to mount local and international flights without hitch.

“Over the past month, PAL has been flying without any foreign investors,” Zamora said. Because of this, he concluded, “the credibility of a stand-alone investment plan may in fact be worth considering.”

Whether or not PAL can actually fly on its own resources for long, however, is still in serious doubt.

Zamora acknowledge, after all, that “in fact, [PAL is still] losing several billions, several tens of billions of pesos. But in the end, discussions with foreign investors require a certain amount of give and take and PAL management feels that there is not enough ‘give’ in the part of the foreign investors.”

Asked about the identity of a strategic partner allegedly willing to infuse $90 to $150 million for PAL, Zamora replied: “Remember at one point the president was considering the possibility of government financial institutions offering credit lines to PAL?”

Without giving any more details, Zamora said the only condition being asked is for PAL to have sufficient collateral.

“I don’t see why we cannot do that right now,” he added.

   

“President Estrada wants to do everything possible to make PAL fly, which is the same sentiment being harbored by the flag carrier’s management,” Zamora said.

“There is no question in my mind that nobody wants PAL to fold up,” he added.

In this regard, if PAL is not going to get any foreign investors, it is looking at ways that internal investments can be generated.

The government may go along with the plan to protect its 20-percent share in the company, Zamora said.

The claim of Estrada that Cathay wrote him a letter was a reference to the many instances where Cathay expressed its interest in rehabilitating PAL, Zamora pointed out.

Cathay Gets In; Tan Yields PAL Control

Manila Standard

Saturday, December 5, 1998

By JAY-ANNE DANCEL AND LEE ANN PATTUGALAN

President Estrada was able to coax Cathay Pacific Airways Ltd. back to the negotiating table yesterday to finalize the latter's entry into Philippine Airlines as a strategic partner with a 40 percent stake.

In return, taipan Lucio Tan removed the first of two roadblocks which had stalled the deal. Tan conceded to an immediate management takeover of the local airline before any actual cash infusion by the foreign carrier.

Cathay then agreed to honor the terms of a referendum which would prevent the retrenchment of some 3,000 PAL employees. As a result, the agreement which was considered dead just two days ago can now be considered done.

Cathay will now wait for Monday, when PAL is scheduled to submit its rehabilitation program to the Securities and Exchange Commission, before infusing the committed $100 million (P4 billion) equity investment in the national flag carrier.

Earlier, a Malacañang official said cash-strapped PAL could continue operating without relying on the resources of a foreign partner. Executive Secretary RonaIdo Zamora said this was bolstered by Thursday night's meeting between PAL's management and the airline's creditors.

"In a reply to our question when we discussed this last night with some representatives of creditors, they did not say that the loans will become due if PAL does not conclude an agreement with a foreign partner. So it is possible in the end, PAL will be rehabilitated by a stand-alone all-Filipino investor group," Zamora said.

He added the management of PAL was now looking at the possibility of presenting a stand-alone rehabilitation plan since separate negotiations with Cathay and United States-based Northwest Airlines for a possible merger had seemingly collapsed.

"I understand they are now confident enough about this stand-alone rehabilitation plan so that they are not even asking for an extension of the original deadline, which is supposed to end Dec. 7," Zamora said.

He also revealed that the management of the flag carrier had expressed confidence that they would have enough money to turn the airline around.

Zamora pointed out that PAL has been flying without any foreign investor over the last month, so it may be worthwhile to consider the credibility of a stand-alone rehabilitation and investment plan.

He said PAL was now considering an investment that would not require foreign partners since the airline's management fears there would not be enough "give" on the part of the foreign investors that would be commensurate to their "take."

Cathay Agrees to Resume PAL Talks; Rehab Plan Mulled

Malaya
Saturday, December 5, 1998

By PEARL O. BANTILLO and REGINA BENGCO

Cathay Pacific Airways (CX) has softened its stand on labor-related issues and has resumed acquisition negotiations with Philippine Airlines (PAL) provided that the transfer of management control is done immediately, a well-placed government official said yesterday.

PAL majority shareholder Lucio Tan has expressed willingness to give up management control as soon as possible to facilitate the flag carrier's recovery and rehabilitation, the source noted.

Even as this developed, Executive Secretary Ronaldo Zamora said Malañang and PAL management are looking into the possibility of PAL getting a P1.5-billion bridge financing loan program from government financing institutions.

The source said Cathay has agreed to recognize the conditions jointly drawn by PAL management and the labor union or PAL Employees' Association (PALEA) under which Tan guaranteed job security and board seats to employees in exchange for suspending collective bargaining for 10 years.

"Cathay will no longer push for (further) retrenchment of employees and for the guarantee on Investments. Cathay is willing to follow the referendum accord between PALEA and management. The only thing they are threshing out is the transfer of management," the source said.

The government source, who is privy to the ongoing PAL-CX talks, said that the Hong Kong- based airline company wants to assume management control prior to the actual infusion of the $100 million pledged investment into PAL.

"CX wants to see that the rehabilitation program of PAL is working before it infuses the capital."

The capital injection is slated for April next year to enable the potential strategic partner to assess the results of the designed rehabilitation program.

"What is definite is that PAL will not close down," the source said.

Zamora said PAL management appears confident it can do it alone because it will not be seeking an extension of the Monday deadline for it to submit its rehabilitation plan to the Securities and Exchange Commission.

"Over the last month, PAL has been flying without any foreign investor which is why the credibility of a stand-alone rehabilitation and investment plan may in fact be worthwhile," Zamora said.

He said if PAL cannot find any foreign investors, government will have to come to its aid in the interest not only of its 28 percent share but of the flying public. "You remember at one point, the President was considering the possibility of GFIs offering credit lines to PAL, provided there is sufficient collateral. I do not see why we cannot do that right now," he added.

Hamon sa Karisma; Erap Papasok sa Pag-iisa ng Cathay at PAL

Taliba

Friday, December 4, 1998

Tess Badico

Sa isa pang paghamon sa kanyang karisma, susubukan muli ni Pangulong Estrada na himukin ang Cathay Pacific na ipagpatuloy ang pakikipag-usap sa Philippine Airlines para sa posibleng pag-iisa.

Sinabi ng Pangulo na hindi siya nawawalan ng pag-asa na kapwa malulutas at magkakaroon ng maayos na kasunduan ang dalawang partido upang sagipin ang flag carrier at tiyakin ang security of tenure ng mga manggagawa.

Itinanggi ni Mr. Estrada na tuluyan nang tinalikuran ng Cathay and pakikipag-usap sa PAL dahil sumulat umano sa kanya ang pamunuan nito na nagsasabing handa sila sa isa pang negosasyon.

“Hindi pa ako lubos na sumusuko kaya sana ay kayo rin,” sabi ni Mr. Estrada at idinagdag na inaasahan niyang magpapatuloy ang kanyang pakikipag-usap kay PAL president Lucio Tan pagdating nito mula Guam.

Sinabi niyang kukumbinsihin niya si Tan na bumalik sa negotiating table ng Cathay para pag-usapan ang isyu.

Ayon sa Pangulo naniniwala siya na maaayos niya ang gusot sa pagitan ng Cathay at PAL kasabay ng paghimok niyang kumbinsihin ang mga ito na punan ang mga rutang naiwan ng PAL matapos ang welga noong Setyembre.

“Humingi ako ng tulong sa Cathay at tumugon naman silang tutulong sa problema kaya’t umaasa akong malulutas lahat nang ito,” sabi pa ng Chief Executive.

GFIs, Tan to Infuse New Equity in PAL

The Manila Times

Friday, December 4, 1998

Jun Ebias, Sandra Aguinaldo, Carmina Reyes, Reuters

Five government financial institutions (GFIs) might try to save Philippine Airlines, by helping it raise a part of the needed capital to rehabilitate the airline and avert its closure following the collapse of talks with its prospective strategic partners.

The information which Finance Secretary Edgardo Espiritu hinted yesterday coincided with PAL's announcement that it will pursue a stalled down rehabilitation plan even without Northwest Airlines of the US or Hong Kong's Cathay Pacific Airways.

The two other airlines announced the other day that they have dropped separate negotiations to acquire a 40 percent stake in PAL because of fundamental differences with Lucio Tan, the airlines chairman.

Espiritu's disclosure coincided with admission made by PAL Executive Vice President Manolo Aquino, that Tan, a close ally of President Estrada, belongs to a local group that plans to infuse $90-million fresh capital to PAL. PAL's earlier rehabilitation plan called for $150 million in fresh capital.

“The $90 million, that is initially required under the rehabilitation plan, will come in as soon as the plan is approved by the Securities and Exchange Commission (SEC),” Aquino told a hastily called news conference.

For his part, Espiritu said, "There are interested investors coming in. However, they will no longer be a strategic partner.”

As it turned out, the interested investors included present stockholders of PAL. Five GFI’s, including the Retirement and Separation Benefit System (RSBS), the equally ailing military pension fund, are PAL stockholders.

“Present stockholders are preparing to infuse additional capital to PAL,” Espiritu said. He did not say if the GFIs will take a bigger stake or just maintain their combined 19 percent holdings in PAL.

Espiritu added the Estrada administration will reactivate an inter-agency task force that will study other options to keep PAL operating. Espiritu, however, did not say what other options the task force will consider.

Talks with PAL's prospective strategic partners ended just two months after PAL closed down its operations due to differences with its militant labor union. The closure triggered a transport crisis that stranded thousands of travelers.

PAL reopened after the workers, upon prodding of the President, agreed to observe a 10-year moratorium on strikes, a precondition from Tan demanded.

Espiritu's statement also coincided with calls from the militant labor group Kilusang Mayo Uno for the government to “buy out" Tan in PAL and stop the airline industry's privatization.

“The government should save itself the trouble of looking for a buyer for PAL. It should infuse money into the national flag carrier and be the main shareholder in the company,” the KAM said in a statement.

Aquino said PAL has kept the “stand alone” rehabilitation plan even while it held negotiations with Cathay and Northwest.

"lt (the rehabilitation plan) does not provide for a foreign airline partner, but if there is one in the future, that will be an enhancement,” he said in a statement.

“The plan, which will be submitted next week to the SEC, includes the retention of 22 aircraft in the PAL fleet and the restructuring of its outstanding obligations,” Aquino said.

But in Malacañang, it appears Estrada has not given up hope in persuading Cathay to get back to the negotiating table.

“Let us not lose hope. Maybe there's still a chance for them to come to an agreement,” Estrada told reporters in a press conference in his Greenhills residence. According to the President, Cathay is willing to return to the negotiating table to find ways to come to an agreement with Tan.

President Estrada said Cathay Pacific wrote to him a letter to express their willingness to reopen the negotiations. Cathay said forging such partnership between the Hong Kong firm and PAL may take some time.

But from Hong Kong, Cathay denied Estrada's claim.

"We have not taken the decision to withdraw from the negotiations lightly," said Cathay spokeswoman Katherine Wang. “The decision was made after serious consideration. We wouldn't revisit it unless there is a fundamental change in the situation.”

She declined to comment on what fundamental changes could make Cathay revisit its decision to abandon talks. The Hong Kong flag carrier on Wednesday confirmed it had abandoned negotiations for a stake in PAL and said talks had broken down because of differences on issues such as management control and valuation.