PAL folds up; PAL decides to fly no more

People’s Journal
Friday, September 18, 1998
Jeffrey Tiangco, Conrad Ching, Yul Baritugo

Philippine Airlines — proudly Asia's first — finally closes shop after 57 years.
A debt load of roughly P90 billion, a combative labor union, and a relatively weak passenger market — all combined to finally deliver the lethal blow to PAL — the country's foremost flag carrier until the government decided to give "flag carrier status" to other upstarts.

PAL chairman Lucio Tan yesterday called an emergency meeting of the board of directors at the 8th floor of Allied Bank building in Makati City after militant PAL unions withdrew support to a compromise deal that would have enabled the company to restructure its debts and buy at least 10 years of industrial peace.

PAL's closure, originally scheduled to take effect today, was deferred to Wednesday (September 23) due to some legal technicality. Under Department of Labor and Employment regulations, companies planning to shut down need to submit a closure plan providing details of the gradual phase-out of operations.

As of press time, Tan and other PAL officials were meeting with President Estrada and other key government officials to craft a compromise.

The notice of closure was released by the Department of Labor and Employment late yesterday afternoon.

Manolo Aquino, PAL senior vice president, said shutting down its operations became inevitable since it is the only way to preserve the company's remaining assets and ensure the orderly liquidation and disposition of claims of creditors and other parties.

"Management has exhausted all efforts to keep the company operational pending the outcome of negotiations with the labor unions. Unfortunately, the insurmountable burden of continued losses has become too heavy for the company to bear. With no fresh capital infusion, PAL operated viably in the face of losses and harsh business environment," the closure notice said.

"We apologize to the riding public and all those affected by the airline's closure. We appreciate your understanding and patience during this difficult period," PAL management said.

It said: "It is not easy to preside over the demise of a great Filipino institution that has been a partner in nation-building for over half a century. Sadly, our sincere effort to keep PAL flying and serve the riding public have not been matched by a similar commitment from our employees," the closure notice added.

PAL Employees Association (PALEA) president Alex Barrientos, in a hurried last-minute decision, apparently succumbed to the pressure exerted by other more militant officers of the union and scrapped the agreement he had forged Friday with Tan.

The agreement would have given the union at least three seats in the 15-man board and control of 20 percent of the company divided into 60,000 shares among all PAL employees.

In exchange, PAL management sought a moratorium on the collective bargaining agreement for 10 years.
The industrial peace could have been used as a bargaining chip with new investors who could have infused fresh capital into the sputtering airline.

Management decision to close shop could affect a number of banks with huge loan exposures to the airline.
It could also affect an oil company, Petron Corp, which had cornered the avturbo supply contract for various PAL routes.@