Air Force to Handle Currency, Mail Runs

Malaya News

Tuesday, September 22, 1998

AIR FORCE TO HANDLE CURRENCY, MAIL RUNS (3)

BY GERRY DE BELEN

Defense Secretary Orlando Mercado said President Estrada was "receptive" to an immediate takeover by the Air Force of vital functions of Philippine Airlines such as currency and mail runs and servicing of missionary routes.

"The nation is faced with a potential emergency situation. This is a major concern that will require the concerted effort of all government agencies to cushion its impact on the economy and security of the country;" Mercado said.

But, he said, the move "should not be misconstrued as an initial step toward the nationalization of the flag carrier nor a government takeover of PAL."

Mercado also urged Estrada to meet leaders of Congress to discuss appropriate response to the PAL crisis, including adoption of emergency legislation.

Mercado said: "It is imperative that all the assets of PAL are secured and that vital government airlift services, specially currency runs, mails, administrative requirements, and functions should be maintained.”

Under the emergency takeover, PAL pilots, who are all reserve Air Force officers, will be called to active duty to fly government’s three C-130 cargo planes and two Fokker aircraft.

“But if PAL would allow Air Force pilots, who are actually their pilots, to fly their planes, it would be better,” Mercado said.

At the Senate, the proposal for a government takeover gained ground as more members urged the President to consider temporary directing the flag carrier’s operations.

Sen. John Osmeña (LAMP) said there are no legal barriers for a government takeover.

Osmeña proposed that the National Development Corp. take over "as much of PAL operations as required," and hire pilots and workers on a casual basis.

"There must also be a more realistic pricing. This means fares will increase by as much as 80 percent," he said.

As a parallel move, he said, bilateral air transport agreements should also be reviewed.

"Homecoming Filipinos from the US pass by Seoul or Taipei taking Korean Airlines or China Airlines. US-based Koreans or Taiwanese do not take PAL on their way home. Such agreements are too one-sided and extremely detrimental to PAL and the country's economy," he said.

Sen. Francisco Tatad (GAB) said Estrada should use his constitutional powers and order a temporary takeover to prevent a "crippling transportation and economic standstill."

In a letter to Estrada, Tatad said the carrier's abrupt decision to close shop "creates a national emergency which can only be addressed adequately by invoking the powers of the State under the Constitution."

Sen. Bias Ople (LAMP) has said government can temporarily assume the operations of PAL until it has recovered from its financial and labor problems and the Asian economic crunch has abated.

He said Section 17, Article XII of the Constitution allows the national government to temporarily direct the operation of any privately-owned public utility or business when the public interest so requires.

At the House, a former stockbroker said the government can cede its remaining shares in the airlines to the unions.

Rep. Joey Salceda (LAMP, Albay) said the 19 percent stake of government in PAL, roughly worth P1.9 billion, would raise the union’s stake to more attractive and more strategic 39 percent plus three more seats in the board.

Government has a 5.25 percent exposure in PAL; Development Bank of the Philippines has 2.5 percent; Government Service Security Insurance System, 7.5 percent; and Land Bank, 3.75 percent.

This excludes the PAL shares of semi-state-owned Philippine National Bank and the AFP Retirement Service and Benefits System which have 2.5 percent and 1.65 percent and 1.65 percent, respectively.

Salceda said the 19 percent government stake will be “sold” to the workers in the form of a “concessional loan” payable through the earnings to be derived by the workers as new stakeholders of PAL.

"Since these stakes currently contribute little, if any, to the coffers of the national government or the balance sheets of the GFIs, then, they are put to better use as a sweetener of the compromise deal for the unions," Salceda said.

"In contrast, the government stands to lose much more, if not all it has invested in PAL, by doing nothing," he said.

Tan earlier offered the unions a compromise package which gives the workers a 20 percent stake in PAL plus three board seats in exchange for a 10-year freeze on collective bargaining agreement.

The offer was subsequently rejected by the PAL unions, forcing PAL to announce its closure tomorrow. (With Joan Revoltar and Prudencio Cadil)