Pulling the Plug

Malaya
Wednesday, September 23, 1998
EDITORIAL

THE Philippine Airlines employes hammered the last nail to the airline's coffin when they rejected in a referendum an offer by PAL chairman Lucio Tan to cede 30 percent of his holdings plus three board seats in exchange for a 10-year freeze in collective bargaining.

The union members got to hold on to their constitutional right to bargain collectively. Now, they can bargain collectively with the liquidators that will soon be appointed by the Securities and Exchange Commission to sell PAL assets in order to satisfy the claims of government, labor and creditors. Let's see what CBA-stipulated benefits they could get from a company undergoing liquidation.

Under the original rehabilitation proposal, employes would get retrenchment and retirement benefits. Now, they'll get nothing. They have lost their jobs besides.

The employes are so jealous of their constitutionally guaranteed right that they forgot one thing. Stockholders have the superior right to close a losing business. Tan has lost an estimated P15 billion in his PAL misadventure. If he doesn't want to put in an additional peso more, who can blame him?

He has been called a thief, a tyrant and an exploiter by the very people whose jobs exist because of his money. He has had enough. He is prepared to give away the airline to anybody willing to get the burden off his shoulder.

Again the unionists miscalculated. They thought they could pressure the government into taking over PAL. A government task force looking into the possible rehabilitation of PAL, however, is intimately familiar with the company's finances. PAL is a financial black hole that will keep sucking in money unless it is overhauled. That proposal for government financial institutions to lend P1.5 billion as "bridge financing" did not fly because there was nothing to bridge finance as there is no money coming to PAL in the near future.

That P1.5 billion would have been eaten up in a month's time. The government would again be under pressure to put additional money when that P1.5 billion would have been gone.

The task force members, led by Finance Secretary Edgardo Espiritu, are familiar with the figures prepared by the PAL interim management committee. PAL needs at least P4.5 billion in additional capital to make a creditable stab at rehabilitation at sharply downsized operations.

The PAL unionists want to maintain the status quo, that P4.5 billion would be good for only three months of operations. That is prolonging PAL's agony at the expense of the taxpayer.

Better to pull the plug on PAL.