PAL Begins Liquidation Process

Manila Bulletin
Saturday, September 19, 1998

Philippine Airlines (PAL) has begun its liquidation procedures amid efforts by President Joseph Estrada to prevent the airline's closure, PAL Senior Vice President Manolo Aquino said yesterday.

"We are now preparing for the closure. We are drafting the guidelines on how to handle our passengers still holding PAL tickets," he said.

"We are also working on the liquidation of the assets and who will be given the priority in the payment of claims," Aquino said.

Management will first settle the claims of employees, then the creditors, preferred shareholders and finally the common shareholders,” Aquino said.

PAL will refund all unused tickets, particularly those issued to passengers taking international flights, since it cannot refer the passengers to other carriers after the suspension imposed by the International Air Transport Association, he said.

IATA suspended PAL for failure to settle obligations worth $30 million.

Finance Secretary Edgardo Espiritu said President Estrada has asked the PAL employees union to hold a referendum which will determine whether it is accepting or rejecting the stock transform scheme proposed by PAL Chairman LucioTan.

"If they accept it in a referendum, PAL might not close down. But if they reject it, then it's closed."

In a press conference late last night, Espiritu said the national government will take a hands-off policy to resuscitate the impending closure of PAL.

Espiritu, who heads the inter-agency which crafted the ultimate option to bring industrial peace in the beleaguered PAL, said the resolution of the problem solely lies in the hands of the labor unions and the airline management.

On Thursday, PAL management announced its decision to stop operations by midnight of Sept. 23, 1998 following the drastic rejection by PAL Employees’ Association (PALEA) to take the 20 percent stake in the company in exchange for a status quo on the Collective Bargaining Agreement (CBA) for the next ten years.

Espiritu pointed out that should the PAL closure pushes through and liquidation of its assets is undertaken, the priority in the settlement would be the government for the taxes, then suppliers and creditors and lastly the investors.

Should PAL pushes through its closure. Espiritu urged other airline firms to fill in the vacuum.

“The existing airlines can try their hand at becoming the nation's flag carrier, depending on their ability to secure a franchise from Congress," Espiritu said.

In a related development, a PAL top official said yesterday company Chairman Lucio Tan has no plans to form a new airline after PAL shuts down by midnight on September 23. When asked if Tan was bowing out of the airline industry, Aquino services told Reuters in a phone interview: "That's what he has declared."

PAL owes about $2 billion to a group of local and foreign banks led by the Philippine National Bank and Chase Manhattan Bank N.A. (FCS, BCM with reports from AP, Reuter, AFP and AFX Asia )