PAL Wants to Renegotiate Bilateral Air Agreements

Business World
Monday, September 7, 1998

Philippine Airlines, Inc. (PAL) has found a new ally in the Estrada administration as it asked an inter¬agency task force facilitating its re¬habilitation to recommend the renegotiation of a number of the coun¬try's ongoing bilateral air agreements with foreign carriers.

Business World sources privy to the task force hearings revealed that PAL has submitted a report blaming the Ramos administration for going on a "Santa Clause spree” with sev-eral foreign airlines.

PAL reportedly said that from 1993 to 1997, the Ramos govern¬ment's Civil Aeronautics Board (CAB) amended or instituted new air service agreements (ASAs) as well as issued Temporary Operating Permits to several foreign airlines at a rate detrimental to the country's local carriers.

In the report, the PAL manage¬ment said the past administration granted "outrageously excessive traf¬fic rights" to various foreign carriers regardless of market size, actual growth prospects and even "com¬mon sense.”

Sources said the PAL manage¬ment pointed out although the Asian currency turmoil had significantly dampened demand in air travel in the region, those carriers covered by the "Santa Clause agreements" had ex¬panded their Philippine operations with the primary intention of corner¬ing the lucrative RP-US market.

Sources disclosed that among the "worst offenders" cited by PAL in¬clude Cathay Pacific Airways of
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Hong Kong. Singapore Airlines, Korean Air and Asiana Airlines of South Korea, and China Airlines and Eva Airways of Taiwan.
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Sources quoted the PAL management as saying these airlines used the currency crisis as an opportunity to "go for the kill" and expanded their operations to and from the Philippines in order to divert substantial portions of the RP-US market from the flag carrier.

"PAL is sustaining continued attacks on the RP-USA, RP-HongKong, RP-Taiwan, RP-Middle East and RP-Singapore routes — all of which are crucial to its rehabilitation plan, the PAL management re¬ported.

This as one industry source re¬vealed that the flag carrier was plan¬ning to resume its flights to Saudi Arabia by this November.

The source added that the PAL management is also currently study¬ing the possibility of reopening its flights to Canada and Europe.

Meanwhile, the sources also said the PAL management had accused the past administration – as seen through certain CAB officials' "prof¬ligate ways” – of being remiss in its responsibility to develop a healthy aviation industry for the country.

Because of the proliferation of the Santa Clause agreements, the PAL management pointed out that aside from the flag carrier, up and coming international airlines such as Grand International Airways (GrandAir) have also been robbed of substantial business opportunities.

At present, the Panlilio-owned GrandAir has reportedly withdrawn its RP-Hong Kong and RP-Taiwan routes due to financial and opera¬tional problems.

Earlier this year, it was reported that GrandAir's expansion plans were put on hold due to revenue losses which, in turn, were caused by low passenger load.

A top-ranking PAL official told BusinessWorld over the weekend that the flag carrier management has also asked to be consulted when the Estrada government decides to rene¬gotiate its bilateral agreements with the foreign air firms.

However, the official denied that the PAL management was attempt¬ing to unload the blame for its bad business on the past administration.

"We're not blaming anyone...What's done is done. What we did is to just tell the government how it can help us save Philippine Airlines," the official said.

The task force was scheduled to submit a report on its week-long hear¬ings on the PAL rehabilitation to President Estrada last Friday.