Mayday! Mayday!

Business World

Thrusday, September 24, 1998

Across the Board

By Ismael G. Khan, Jr.

There's no love lost between Lucio Tan and the employees of PAL. This message was communicated loud and clear in the results of the PALEA referendum concluded by the DOLE the other evening. The "no" votes which edged out the "yes" votes, albeit by a slim margin, indicated that the employees would rather PAL shut down its operations than for them to continue working for Lucio Tan. There's some validity to the observation that the employees toted down the company's proposals because if the element of duress printed on the ballot - that Tan would close down the operation of the "no" votes won. PAL's personnel refused to be cowed any longer.

Unless the government steps in and bails out the national flag carrier, the whole economy would suffer - and that is an understatement. Various industrial sectors are already in panic, and their dire apprehensions are reflected in the further decline of the peso and the market slide. It is obvious that a national emergency is in the offing. Allowing Asia's oldest airline to crash this way would be a permanent blot on President Estrada's administration. There is more than ample justification for a government take-over of the 57-year-old flag carrier. Article XII, Section 17 of our Constitution states: "In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected by public interest."

Senator Blas Ople has submitted a rational and practical plan for a government take-over. He proposed that the Securities and Exchange Commission, which is currently thrashing a rehabilitation scheme for the airline, convene a management committee and override the decision of the PAL Board of Directors (read Lucio Tan) to close down PAL's operations. I recall that is was also Senator Ople who first sounded the warning against a Lucio Tan take-over of PAL four or five years ago. He was concerned that permitting the Filipino-Chinese taipan to become the majority share-holder of the national flag carrier would not be in the nation's best interest. Subsequent developments have proven him to be unerringly right. A national emergency is at hand, and President Estrada and his economic advisers do not have much time to head it off'.

It is neither fair nor accurate to blame the unions for PAL's troubles. On hindsight, many of the corporate decisions which the Kapitan, as his admiring minions refer to him, made early on have proved and are proving to be egregious blunders.

It is far too simplistic to blame the pilots, cabin attendants, and the rank-and-file personnel for the company's losses. For one thing, PAL's total labor costs, including all benefits, are still much lower than those of other major airlines in the region. And although PAL may be over-staffed in some divisions, comparing the number of its personnel with those of Cathay Pacific or Singapore Airlines is akin to comparing apples and oranges. Neither of those airlines has domestic destinations enabling it to concentrate on profitable international routes with the utilization of long-haul, wide-body aircraft which are far more economical to operate than most of the airplanes in PAL's domestic fleet. Moreover, the personnel count in either Cathay's or Singapore's workforce does not include those of their catering, ground-handling and maintenance services as these lucrative operations are perforated by separate corporate entities.

With PAL's closure, Lucio Tan will now be able to spin off these profitable operations into separate corporations in which he, of course, will have the controlling interest.

Finally, there is the all-important aspect of national security. Many states retain majority ownership of their flag-carriers precisely for this reason. Until it was privatized, PAL's planes comprised the country's reserve airlift wing for military and emergency services.

There is a need to look anew into the circumstances which enabled Lucio Tan to gain control of PAL. I remember a high NISA official saying that they are concerned that Lucio Tan's extensive business interests in the People's Republic of China may make him susceptible to manipulation by a foreign power. Even as he astutely surrounds himself with retired AFP generals whom he has appointed as figurehead heads of his many corporations, it will help if he is made to come clean with the scope and extent of his business interests in China and foreign holdings elsewhere. The main businesses in which he is engaged in locally – the so-called sin products of cigarettes and beer as well as his alleged proclivity for tax evasion should be incentive enough for the honorable members of Congress to forget that many of them are the recipients of Lucio Tan's largesse and do right by the nation.