Agreement Still Remote for 2 Sides

The Manila Times

Saturday, September 19, 1998

THE MANAGEMENT and union of the beleaguered Philippine AirLines maintained their intransigent positions yesterday even as government scrambled to find solutions to avert a planned closure of the nation's flag carrier on Wednesday, Sept. 23.

Whether it would be able to broker an agreement between the two sides—whose positions are worlds apart—is a tough challenge facing the Estrada administration.

Labor Secretary Bienvenido Luagesma told senators in a hearing yesterday that government was still "working out a solution" that would be acceptable to both parties.

He did not elaborate but expressed optimism that PAL would not be folding its wings next week.

Should negotiations between the two sides fail, Luagesma said government was not ruling out a bailout.

“We're not exactly ruling out a bailout even if the thrust is really to privatize," Luagesma told members of the Senate subcommittee on appropriations during a hearing on the 1999 labor department budget "The government is mindful of national interest and concerns here."

The labor secretary said his department was hoping the parties would meet halfway and reach an agreement.

No more talks?

Yesterday's developments, however, have indicated otherwise. PAL management said it was definitely closing the airline, adding that it was now focusing on closure procedures, not negotiations.

"We are no longer negotiating with the unions, our concern right now is how to have orderly closure proceedings," PAL Executive Vice President Manolo Aquino said.

PAL union officials yesterday did not rule out a compromise deal with management but said the suspension of the collective bargaining agreement for the next 10 years was non-negotiable.

PAL Employees' Association (Palea) Vice President Gerry Rivera denied President Estrada 's announcement that the workers have agreed on a five-year CBA moratorium.

"These are wild rumors we have not yet discussed the details with management or with the President," he said.

Palea letter

In Malacañang, Zamora announced last night that Palea had sent a letter to Estrada through former congressman Edcel Lagman saying that it was not open to a referendum on the compromise agreement offered by Tan. The union also supposedly said it was seeking a renegotiation for the stock option plan.

Zamora did not provide media a copy of the letter.

Management, however, said it has shut its doors on further negotiations with the union.

Hopeless?

Aquino said not even Estrada can bail out PAL.

The President may help save the company—and he's doing everything to save PAL—but at a certain point it may be out of our hands already. (It will be) in the hands of our creditors," Aquinos aid.

"Maganda sana ang offer ng management na bibigyan kami ng 60,000 shares (of stock). Pero hindi naman siguro tama na patayin mo ang unyon," Rivera told THE TIMES in a phone interview. The offer of 60,000 shares would have been nice but it is not right to kill the union.)

He said the take-it-or-leave-it stance of PAL majority owner Lucio Tan in the negotiations was tantamount to "blackmail"

Meanwhile, Alpap yesterday claimed that Tan had used PAL as a milking cow for his other companies, citing at least 12 alleged dummy corporations where PAL owes billions of pesos.

Capt. Florendo Umali, Alpap spokesman, said PAL has outstanding loans from the following aircraft leasing firms allegedly owned by Tan: Paladin Aviation Limited, Pert Aviation Limited, and Peloras Aviation Limited. The beer and cigarette magnate, Umali said, also forced his companies' products on PAL.

What went wrong

"PAL does not have water fountains. Every last PAL employee and passenger drinks Absolute (mineral water) owned by Tan. Only Carlsberg beer for beer products, and Winston and Hope for cigarettes, are sold on board," he said.

Umali urged the government to take over PAL and to determine what went wrong. He pointed out that when the airline was handed over to Tan for privatization, it was debt-free.

"It was a simple case of mismanagement," Umali said.

Jaime Bautista, PAL Senior Vice President and Chief Financial Officer, said PAL has to cease its operations because it could not continue losing money.

"The fact of the matter is that losses continue. We continue to lose about P45 to 60 million a day at this particular stage, we have to cut the losses already to preserve the assets in order that the creditors will have something if the liquidation does come," Bautista explained.

Assets, liability

The flag carrier has total liabilities of $2.1 billion and an asset base of about the same amount. Its biggest liability is for aircraft financing which amounts to some $1 billion.

About $1.5 billion of PAL's loans are with collateral. Bautista said only about $300 million of PAL's loans are unsecured.

"Right now we have an order from Securities and Exchange Commission (SEC) allowing us to suspend payment and preventing creditors from attaching assets. The moment we stop operations, the SEC can lift the suspension order and the creditors can start attaching our assets," he said.

When that happens. Bautista said, it will already be a point of no return for the airline.

Merger possibility

PAL’s ground handling unit employees about 1,400 people while its catering unit employs about 700.

Espiritu did not discount the possibility that Tan might push through with PAL's closure only to merge with another firm with an existing franchise or even acquire another new franchise to operate a new airline company.

"It's a deregulated industry at present. It will require the franchise, so if there is a franchise then a re-opening is possible," Espiritu said.

"You can always by law establish a flag carrier," Espiritu said.—With reports from Sandra Aguinaldo, Dennis Carcamo, Joy M. Cabrillos and Pia Lee-Brago