PAL Gets 60 Days to Set New Flight Plan

The Asian Wall Street Journal
Tuesday, September 22, 1998
By staff reporter Jon Liden and Cris Larano of Dow Jones Newswires

MANILA — Philippine Airlines was granted a 60-day extension on its debt-servicing moratorium by the Securities and Exchange Commission.

In June, the airline secured a suspension of payments on its $2.1 billion debt on the condition that it provided a rehabilitation plan, but last week, the airline announced plans to end operations at midnight Wednesday. It said the lack of an accord with its labor unions made it impossible to find new investors and rehabilitate the unprofitable airline.

It is unclear whether PAL will actually submit a rehabilitation plan before the new deadline expires on Nov. 20 or just use the reprieve to liquidate its assets in an orderly fashion.

Meanwhile, President Joseph Estrada continued his last-ditch efforts to forge a compromise that both management and the unions could accept to prevent the shut-down of the country's national carrier.

"I am practically begging on bended knees for management and the workers to come to their senses and reach an agreement," said Mr. Estrada.

"We are doing everything to save PAL, that's why I'm still talking to labor and management," he said in a radio interview. "They should not only think of themselves but also of the country because PAL's closure will affect a lot of people." On Monday, in an attempt to circumvent union leaders, the government's Department of Labor began conducting a two-day referendum among PAL employees to measure the amount of support for a deal that would keep the airline flying.

The airline's majority owner, businessman Lucio Tan, had offered workers a 20% stake in the flag carrier and three board seats in exchange for a 10-year suspension of the collective-bargaining agreement, a deal that, in Mr. Tan's view, would guarantee industrial peace.

Union leaders have rejected the plan, saying such a condition means a "total abrogation of our collective-bargaining agreement and thus surrender our rights as a union and employees."

An overwhelming vote in favor of Mr. Tan's rescue plan could persuade union leaders to reconsider their decision, said Jerry Barican, a presidential spokesman.

Union leaders themselves are conducting a petition drive among the airline's more than 8,600 workers to gather support for their rejection of Mr. Tan's offer.

A government official said he is "optimistic PAL will not close," and that the current drama involved a lot of brinkmanship by both the management and the unions.

"I've been talking to the management for the past few weeks and they were looking into the rehabilitation plan," said William Evangelista, undersecretary of the Department of Transport and Communication.

"They seem very eager to continue (operation of PAL), but it has become a personal conflict between Mr. Tan and some personalities in the unions," he added.

Mr. Estrada ruled out the possibility of the government taking over the airline to stop its closure, saying his administration has no money to run the cash-strapped airline.

PAL has been devastated by a series of strikes and by Asia's currency crisis. which hit just as the airline was launching an ambitious 54 billion expansion and refleeting plan.

It owes $2.1 billion to creditors, who reportedly are insisting on guarantees of labor harmony before they approve a restructuring plan.