PAL Hopes Kept Alive

Philippine Journal
Saturday, September 19, 1998

UNDAUNTED by his initial setback to work out a compromise to save Philippine Airlines (PAL), President Estrada said yesterday he would try his best to help Asia's oldest airline get out of the tailspin that threatens to send it crashing.

Last Thursday night. the President failed to convince PAL's ground crew union to accept a 20 percent equity in exchange for a 10-year suspension of labor bargaining.

Yesterday he had scheduled talks with PAL Chairman Lucio Tan.

"We will work it out this afternoon," the President told reporters ahead of his meeting with Tan.

He said Tan told him "he cannot continue bleeding. He's lost a lot. We cannot also blame him at the same time we are trying to as much as possible to preserve PAL."

Presidential Spokesman Jerry Barican said Mr. Estrada "remains hopeful that the parties can be persuaded in the national interest to reach an agreement."

"The President realizes that while any solution will cause pain to both the union and the PAL management, the non-resolution of the issue will result in even greater pain — not just to the affected parties — but to the whole economy," Barican said.

The 57-year-old PAL, ravaged by labor conflicts and citing "enormous losses," announced plans on Thursday to shut down at midnight of Sept. 23.

The announcement came after the Philippine Airlines Employees’ Association (PALEA) rejected management's proposal to take up a 20 percent equity stake in exchange for a 10-year suspension of labor bargaining.

Mr. Estrada was scheduled to again meet officials of the union on Monday to prod them to work out a compromise with Tan. He last talked to them on Thursday night.

But PAL officials said they were preparing to close shop.

"What's happening right now is that the different departments within PAL had put into motion...the closure proceedings," PAL Executive Vice President Manolo Aquino said at a news conference.

"We have informed our major creditors the plan to close the airline on Sept. 23 and if that happens most of the creditors will take (our) airplanes," said PAL Chief Finance Officer Jaime Bautista.

PAL owes about $2.2 billion to a group of local and foreign banks led by the Philippine National Bank (PNB) and the Chase Manhattan Bank.

"As we come closer to the deadline...the possibility of stopping the closure is getting dimmer," Aquino said.

Finance Secretary Edgardo Espiritu shared the pessimism. Unless PALEA accepts the equity offer, the airline is doomed, he said.

"The way it looks it's going to be difficult to reopen what has already been approved by the PALEA board of directors previous to the reversal (of PALEA's approval of Tan's offer)," Espiritu said.

Labor Secretary Bienvenido Laguesma was still hoping the situation might change before next week's deadline. Bernadette Tamayo, Tita C. Valderama, Fernando Cariaso and Reuters