Article in Manila Bulletin

Manila Bulletine

Sunday, September 20, 1998

Government officials and executives of ailing Philippine Airlines held out little hope Friday of stopping the scheduled closure of Asia's oldest carrier.

On Thursday, PAL announced it will halt operations next week after 57 years because of its unions' rejection of a management-proposed rescue plan.

The closure of the flag carrier would be a devastating blow to the country, leaving many areas of the sprawling archipelago of 7,000 islands without air service.

President Joseph Estrada met separately with PAL majority owner Lucio Tan and union officials to try to broker a last-minute deal to save the airline.

But Executive Secretary Ronaldo Zamora said the ground workers' union rejected the president's proposal for a referendum among union members on whether to accept the management proposal.

PAL has offered workers 20 percent ownership of the company in exchange for a I0-year suspension of their collective bargaining agreements — a condition which officials of all three PAL unions say is unacceptable.

Zamora said no more meetings were scheduled with either side in the dispute."I think management is not going to change its mind about the closure," he said.

PAL has been devastated by a series of strikes and by Asia's currency crisis, which hit just as the airline was launching an ambitious dlrs 4 billion expansion and reflecting plan.

During a crippling 22-day pilots' strike in June, it fired the pilots, cut most of its routes and laid off 5,000 of its nearly 14,000 workers. But the layoffs triggered a strike by ground personnel.

PAL Executive Vice President Manolo Aquino said some hope still remained that the airline could survive, but "as we come closer to the deadline, the possibility of stopping the closure becomes dimmer."

He said the unions would have to make "a big move" to stop the closure process. The management proposal would give workers three seats on PAL's board. Each worker would receive 60,000 shares of stock worth P300, 000.

Even with the support of the unions, the airlines' creditors, owed $2.1 billion, might withdraw their support if they feel the viability of the airline is in doubt, Aquino said.

Foreign creditors have loaned the airline an estimated $1.6 billion, with the bulk coming from a consortium of European banks led by Credit Agricole lndosuez to help finance the fleet modernization program.

Zamora admitted there was little the government could do to compel Tan to keep the airline open, saying the tycoon was incurring P30 million to P40 million a day in losses while PAL was open.

Transportation Undersecretary Willie Evangelista said other options were to allow foreign airlines to fly PAL's domestic routes and the third and most radical scheme is for the government to take over the 57-year-old PAL Asia's oldest airline.

“The third option is our last option," Evangelista said. "It would not be easy to do this. We first have to look into the financial record of PAL."

Cebu Pacific said it was prepared to fly commuters to local destinations. According to Cebu Pacific Vice President Diego Garrido, the airline has embarked on an expansion program that would help sustain the country's air transportation industry.

"Cebu Pacific is definitely poised and capable to capitalize to take over key routes," Garrido said.

Garrido said they are studying the possibility of going international, although such a plan "can be suicide due to the economic crisis."

Lufthansa General Manager Wolfgang Schmidt said the airline was already making other arrangements for kitchen catering in three non-stop flights to Europe, which used to be serviced by a subsidiary of PAL. (Based on AP, DPA and Reuters reports)