Workers Ask Palea a to Save PAL

The Manila Times
Monday, September 21, 1998
 By Dennis Carcamo
Reporter

AS THE Wednesday deadline for the closure of Asia's oldest carrier draws near, intense pressure on the defiant members of the Philippine Airlines Employees' Association (Palea) continued to mount as some airline workers joined government in asking the union to accept management's proposal to keep the airline afloat.

"Save the PAL Movement," a group composed of employees opposed to the stand of the three labor unions within PAL, have expressed willingness to "sacrifice and bite the bitter pill" just to keep the airline going.

The PAL board has reached a decision last week to shut down operations by midnight of Sept. 23 after talks between management and the unions collapsed.

The Estrada administration had also endorsed the PAL management's plan to save the airline.

Meanwhile, government regulators are keenly awaiting today whether the airline would submit a rehabilitation plan or forward a liquidation of its assets.

Officials of the Security and Exchange Commission (SEC) said they are also eagerly awaiting results of Malacañang's last ditch efforts to broker a compromise agreement between management and labor to end the impasse.

Sacrifices

Malacañang is worried about the impact of PAL's closure, especially on the country's domestic trade, tourism, and banking system.

"We are willing to bite the bitter pill management has offered us, just to keep the national flag carrier flying beyond Sept. 23," said Capt. Juan de Jesus, a leader of the Save the PAL Movement.

De Jesus, a 23-year veteran, was a former member of the Airline Pilots Association of the Philippines (Alpap), one of three labor unions in the airline.

At the launching yesterday of a signature campaign to save PAL at the airline's sports center in Pasay City, De Jesus said the movement would also conduct a round-the-clock "telephone brigade" to convince workers to support their group.

People who are concerned about PAL's problem have, so far, only heard talking heads and representatives of the employees. I think it is high time for the rest of the workers to come out in the open and express what they truly feel," De Jesus said.

Accept the offer

He said two-thirds of the airline's workforce, or 6,000 out of the remaining 9,000 PAL employees, are in favor of keeping PAL afloat. Thus, these workers would take management's proposal for a 10-year moratorium on collective bargaining agreement (CBA) negotiations.

PAL has offered the airline workers at least 6,000 shares of stocks and three seats in the PAL executive board in exchange for the CBA moratorium.

Emerson Bonoan Jr., of PAL's corporate development division, another organizer of the group, said they think management's offer is practical and very reasonable.

Bonoan said the airline industry is having a nightmare because of the deepening financial crisis that has been battering the Asian economies.

"There must be sacrifices to be made. If it (CBA suspension) is necessary for the airline's survival, we must take it," Bonoan said, noting that several of the hotel owners and other businessmen have signified their support for the movement.

Waiting game

At the SEC, officials said they are still unsure of the airline's next move.

They said they haven't heard from the airline's interim management committee, which oversees the operations and safeguards its assets, whether the carrier would voluntary seek its own liquidation.

The SEC has scheduled today a hearing on PAL's proposed rehabilitation plan and restructuring of its $2-billion debt to a group of local and foreign banks.

If PAL decides to declare bankruptcy, it has to withdraw its petition for a debt relief first before it can seek the SEC's nod for the liquidation of the company's assets.

PAL submitted to the SEC last June a petition for suspension of payments after a strike by its pilots crippled the airline's operations and worsened its cash-flow problems. The debt moratorium would have allowed PAL to chart a rehabilitation program for the airline.

At present, PAL has an order from the SEC allowing it to suspend debt payments and preventing creditors from initiating foreclosure proceedings. Once the company ceases operations, the SEC can lift the suspension order and creditors can start attaching claims on PAL's assets.

Workers first

PAL management said the airline's total assets are now about the same as its total liabilities of $2.1 billion. About $1.5 billion of PAL's loans are with collateral while debts worth $300 million are unsecured and another $300 million are in the form of reserves and accruals.

Employees will get the first crack at the company's assets, followed by government claims and the secured creditors. Unsecured creditors would have to appoint someone to facilitate the orderly liquidation of the PAL's assets. Payment of separation benefits to employees will depend on funds available.

Once PAL is closed down, management cannot immediately liquidate its assets unless it obtains prior approval from the SEC. A liquidator must be immediately appointed by the government to gather all the company's assets to ensure the orderly liquidation and disposition to creditors.

PAL said it decided to "push through (with the closure) 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."

Documents filed with the SEC showed that Chase Manhattan Bank was PAL's biggest lender with loans $244 million. This included an unsecured $182.4-million loan made in January 1997 and another $51.4-million loan in November 1996 which was secured with future ticket sales. Other foreign creditors include HSBC Holdings Plc, Kredietbank NV, Credit Lyonnais SA. Banque National de Paris, and Nisshop lwai Corp.

Philippine National Bank (PNB), on the other hand, accounted for bulk of the carrier's domestic loan obligations with an exposure of $75 million. Allied Bank, controlled by tobacco and beer magnate Lucio Tan, has an exposure of $38 million. Other local creditors include Philippine Commercial International Bank (PCIB), Security Bank, Land Bank of the Philippines; LBP), United Coconut Planters Bank (UCPB), Equitable Banking Corp., Westmont Bank and Urban Bank.