The Manila Times
Friday, September 18, 1998
The management of Philippine Airlines yesterday announced it would cease operations on Sept. 23. It blamed the closure on the breakdown of negotiations with the airline's labor unions.
The announcement prompted President Estrada to convene an emergency meeting in Malacañang last night in an effort to prevent the shutdown of the nation's flag carrier.
The meeting failed to come up with a solution but union representatives indicated they were now ready to meet halfway with management.
President Estrada said he would also be meeting on Monday with Lucio Tan, the airline's majority owner, to discuss the results of last night's discussion.
"Gagawin ko ang lahat ng magagawa ko para huwag magsara ang PAL. Maraming kapakanan ng manggagawa ang nakataya rito. Hindi naman ako worried kay Mr. Tan, hindi naman magugutom iyan," he said. [I will do everything I can to prevent the closure of PAL. So much is at stake for the workers here. I do not worry for Mr. Tan; he won't go hungry anyway.]
A ploy?
The airline held an emergency board meeting yesterday afternoon after its ground crew union rejected management's proposal to take up a 20-percent equity stake in exchange for a 10-year suspension of labor bargaining.
The agreement of the employees was a condition required by creditors and potential investors to ensure uninterrupted industrial peace while the airline tackled its various financial problems.
The Securities and Exchange Commission, however, expressed doubts that PAL’s closure would be permanent.
An SEC lawyer said management could just be using the shutdown as a ploy to force labor to accept the terms of a settlement drawn up by Lucio Tan, the airline's majority owner.
Mismanaged
Gerry Rivera, Vice President of PAL Employees' Association which rejected the deal, said, "We are still praying for a harmonious, amicable, and intelligent decision."
The Airlines Pilots' of the Philippines (Alpap), for its part, said PAL management, not the unions, were to blame for the airline's downfall.
PAL has been "mismanaged," according to Capt. Florendo Umali, Alpap spokesman. He said the airline incurred losses amounting to P14.8 billion after Tan's group took over airline operations in 1993.
In raising doubts about the finality of PAL management's decision, an SEC lawyer said, "I think the closure is just temporary because if they really wanted to dissolve the company, why are they still keen on preserving PAL's assets?"
He said once PAL is closed down, management cannot immediately liquidate the firm's assets unless it obtains prior approval from the SEC.
Under SEC rules, voluntary dissolution would need the approval of the PAL board and the two-thirds vote of the shareholders. PAL must also file an amended article of incorporation to revise its corporate life.
On the other hand, an involuntary dissolution can be sought by management even without the green light from the board or the shareholders. This, however, would require SEC approval.
No gov't money
Finance Secretary Edgardo Espiritu, head of the interagency committee tasked to resolve the problems of the 57-year-old airline said government is banking on a referendum among rank-and-file employees to save the situation.
Earlier, the Estrada administration said it had no intention of using government money to save PAL.
"We will rule out any bailout…We will not open the coffers of government especially at a time of economic hardship," Presidential Spokesman Fernando Barican said.
In a statement, PAL said the decision to close "pushed through when it became clear that this was the only way to preserve the company's assets to ensure their orderly liquidation and disposition to creditors and other claimants."
An interagency committee tasked to resolve the problems of the 57-year-old airline had recommended PAL’s closure after the union rejected the compromise offered by its management.
Benefit of all
Palea's 21-man board earlier signed the compromise agreement offered by Tan, but withdrew from it Wednesday following criticisms from its members and other labor groups. The pilots and flight attendants were also reportedly against management's equity offer.
Under that agreement, PAL offered its employees a chance to own 20-percent of PAL, translating into 3 of 15 board seats in the company. This would be in exchange for a 10- year suspension of the collective bargaining agreement (CBA).
Critics of the agreement said the suspension of the CBA was illegal and violated the rights of workers.
Finance Secretary Edgardo Espiritu, who helped craft the agreement along with other government agencies—including the Departments of Transportation, Labor, Tourism, and Foreign Affairs—defended the 10-year suspension of the CBA.
"There is already a study showing that PAL will need at least 10 years to recover. And it is not just the decision of Tan but also of the new investors and its creditor banks," he said.
PAL was scheduled to submit a rehabilitation plan to the Securities and Exchange Commission by Sept. 21, which would seek to re structure its 82-billion debt owed to several local and foreign banks.
PAL was forced to seek debt relief after its 600 pilots went on a 22-day strike in June.
If PAL shuts down for good, government financial institutions with equity exposure in the firm are expected to incur losses. Among the GFIs with shares in PAL are the Government Services Insurance System (GS1S), Land Bank of the Philippines (Land Bank), Development Bank of the Philippines (DBP), Philippine National Bank (PNB), and Armed Forces of the Philippines-Retirement Services and Benefits System (AFP-RSBS).
GSIS holds 150 million PAL shares; Land Bank, 75 million; DBP, 49 million; PNB, 50 million; and, AFP-RSBS, 33 million. For the past few years, the value of these shares had gone down as PAL accumulated substantial losses.
Guarantee of peace
In his last conciliation meeting with PAL unions, Tan claimed that the airline was losing billions of pesos because of the pilots' strike. He said an infusion of capital from new investors was needed to continue operations.
Investors, however, wanted a guarantee of “industrial peace" for the next 10 years before they dig into their pockets, Tan said.
If PAL’s shutdown is finalized, it would cease operations 30 to 60 days from the date it filed its notice of closure.
Lawyer Jose Blanco, counsel for PAL, said the airline would need "skeletal" force to take care of some of the services, like catering.
Cebu Pacific
Meanwhile, Cebu Pacific Senior Vice President and General Manager Diego S. Garrido, Jr. said his company has already leased two DC9-32S in anticipation of PAL's closure.
"We are definitely capable of servicing some major routes to the Pacific and the United States," he said.
Garrido added that Cebu Pacific officials are meeting with a regional airline company and an American airline company regarding possible commercial agreements and strategic alliances.
Cebu Pacific has a pending petition to fly international routes with the Civil Aeronautics Board.
"We submitted our petition before the turnover at the CAB. In case PAL shuts down, we believe the Board and the government will not allow the foreign carriers to take over those routes that will be left by PAL," Garrido explained.
He however clarified that the main focus of Cebu Pacific would still be the domestic market.
PAL pilots not needed?
Teodoro Fojas, Cebu Pacific's vice president for flight operations, said they do not need to hire PAL pilots in case they have to fly international routes right away.
"What we'll probably do is take out a wet lease and start upgrading the training of our senior pilots so they can fly the bigger aircraft," Fojas said. He said they will probably hire new pilots to fly their DC-9s.
In a statement, PAL apologized to its passengers and customers and advised them "to make the necessary alternative travel arrangements to minimize the inconvenience."
PAL first took to the skies on March 15, 1941, when a Beech Model 18 aircraft carried five passengers from Manila to Baguio. It was Asia's first airline. On July 31, 1946, it became the first Asian carrier to cross the Pacific. — With reports from Jun Ebias, Sandra Aguinaldo, Dennis Carcamo, Zinnia B. dela Peña and Reuters
No comments:
Post a Comment