Burying PAL

Malaya 

Monday, September 21, 1998

By DUCKY PAREDES

PUT yourself in a position to buy an airline. If you were rich enough as, say, Bill Gates, the Sultan of Brunei, Imelda Marcos, the Queen of England or someone else with fabulous wealth, would you buy Philippines AirLines? Probably not.

Not, anyway, until after midnight of September 23, 1998. After the stroke of midnight, with the airline officially closed, PAL would then have no more employees — being a closed company — and, more important, no more union. Buying the airline while the unions are still in existence and with the same employees would be dumber than dumb.

The unions of PAL are the dumbest ones that ever were put together. The Pilots' Union — ALPAP — brought on their problems on themselves. The ALPAP designed the coffin for themselves and their airline and the workers' union—PALEA — hammered in the last on the coffin. By the 23rd, the airline and its unions would be defunct, and the employees no longer employed.

When Lucio Tan took over PAL, he saw that it was over-staffed. PAL had the lowest productivity per employee of any airline of similar size in the world. Employees were goldbricks; stealing was rampant; inefficiency all around. Rather than downsize the airline, Tan decided, instead, to increase the size of the company by buying more aircraft. Obviously, this was the wrong move. The increase in aircraft only convinced the pilots that they were even more undependable. The goldbricking employees decided that they could do even more of it.

Today, PAL is saddled with some $2.1 billion in loans, mainly foreign borrowings. A European consortium led by Credit Agricole Indosuez accounts for $1.2 billion, while an American consortium led by the US Export-Import Bank lent $400 million.

A nine-bank consortium accounts for $230 million, or 11 percent, of the foreign-denominated local loan. The local banks are China Bank, PCIB, PNB, Union Bank, Westmont Bank, Allied Bank, RCBC, Equitable Bank and Security Bank.

Persistent labor problems had pushed PAL deeper in the red; PAL losses totaled P40 million a day. The airline's liabilities now almost equaled by its assets. Thus, with an end to its operations, PAL would be able to just about cover all of its liabilities. That is a better deal to the investor than continuing to fund the company's losses.

The creditors told PAL they would only agree to the restructuring plan if new capital is infused into the airline. But fresh capital was difficult to come by — prospective investors were driven away by recurring labor disputes that have beset PAL.

From April to June this year, PAL lost P2.2 billion mainly because of work stoppages. In last June's 22-day pilots' strike alone, PAL lost P200 million per day.

In this sort of situation, PAL management had to have some sort of assurance for its creditors. Why should the creditors agree to a stop-payment on their loans and a suspension of payment for any length of time?

The only way possible was if there was some assurance that PAL would not stop operations because of actions of its labor unions just when business would have been specially good — as when we had the APEC leaders coming for a meeting or when we had invited the world to attend our centennial celebrations and so many of them were interested in coming. They needed to have this breathing spell at least until the loans to them were paid. Once the creditors were paid, they would no longer care what would happen to PAL. That would be ten years hence.

Can the airline still be saved? Possibly, if the real sentiment of the employees prevails. One is sure that they would rather be working than, like the pilots, be jobless. Getting to know their sentiments officially, however, with Edcel Lagman as their lead counsel and his kid brother Popoy Lagman as their shadow leader, is an impossibility. They are there to prove a point. What it is, we do not know. The Lagman brothers used to be Communists but they have been rejected by those who are committed to the ideology and to social reform. As one respected communist says: They have become too commercialized.

The real loser in the deal is not the PAL Management or the Lagmans. They can find other work or enterprises for themselves. The PAL employees, because of what their unions did to them, are now well-nigh unemployable.

If you were a personnel manager accepting applications for job openings, how would you react if you find that the applicant before us used to work for a company that the employees wrecked and forced to closure? Surely, there must be better candidates who would be more acceptable for the job than those who were formerly with PAL. Who would hire a former PAL employee after September 23?