The Philippine Star
Saturday, September 19, 1998
By Jess Diaz
The government won't bail out troubled Philippine Airlines (PAL) and will continue encouraging labor and management to arrive at an "acceptable solution" to their dispute, Labor Secretary Bienvenido Laguesma said yesterday.
"We are working out an arrangement and we are hopeful that we can arrive at an acceptable solution within the next five days," he said.
Laguesma told a House budget hearing that the proposal for a government bailout of PAL would go against the state policy of privatization.
It is precisely in the pursuit of this policy that the airline, previously controlled by the government, has been privatized, he said.
Besides, he added that the cash-strapped government is not in a position to infuse capital in PAL to keep it from closing down.
To save the airline, Laguesma said he and other administration officials, including President Estrada, have been encouraging labor and management to resolve their differences.
Interviewed by reporters after the hearing, the Labor Secretary refused to comment on the merits or defects of the compromise deal offered by PAL Chairman Lucio Tan to the airline's employees.
But Laguesma said making employees stakeholders or shareholders is an ideal setup in any company.
He noted that in some firms, workers even clamor for stock options just to make themselves shareholders in the businesses they are working for.
Laguesma revealed that one option the government is exploring to save PAL is enticing foreign investors to sink money into the troubled airline.
But the labor unrest that continues to plague PAL has turned off potential investors, including Northwest Airlines, he said.
Makati Rep. Agapito Aquino suggested that "creative approaches" should be explored to save Asia's first airline.
One such approach is to allow PAL pilots and other personnel to invest in it and convert the company into a cooperative, he said.
He also said PAL remains "fairly solvent" since its assets are valued at P92.8 billion, while its liabilities amount to P85.1 billion, or a net worth of P7.7 billion.
He said Land Bank, the Government Service Insurance System, the Development Bank of the Philippines and the Philippine National Bank should have first claim on PAL assets if it folds up.
According to Aquino, Land Bank, GSIS and DBP own 14 percent of PAL, while PNB, which is majority-owned by private investors, has an exposure of $5 million in the airline.
The airline’s other creditors and the extent of their exposures are Chase Manhattan, $244 million; China Bank, $17.5 million; Westmont Bank, $5.5 million; United Coconut Planters Bank, $3.4 million; and International Exchange Bank, P300 million.
PAL also owes Allied Bank, another firm owned by Lucio Tan, but the bank's exposure has been substantially cut from $58 million to $6.6 million, Aquino said.
Meanwhile, House Majority Leader Mar Roxas said PAL's closure would be disastrous for the economy.
"The delivery of goods and services and our linkages will be severely disrupted," he said.
For instance, businessmen won't be able to ship fresh fish from General Santos City or Capiz, he said.
"People will not be able to visit their relatives. The tourism industry will perish. Patients will not he flown to hospitals in urban centers. Newspapers, supplies and other vital products will likewise be affected," he added.
Roxas urged the protagonists “to give it one more chance."
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