PAL wants Marcos tax perks revived

The Manila Times
Monday, September 14, 1998
BUSINESS
By Jun T. Ebias

PHILIPPINE Airlines (PAL), the country's ailing flag carrier, has asked the Estrada administration to help get the airline back on its feet by reviving PAL’s Marcos-era tax perks and removing alleged undue concessions granted by the government to its competitors.

Department of Finance (DoF) Undersecretary Solomon Cua said PAL's requests represent two of five main issues raised by airline officials before an inter¬agency government task force organized earlier to help reverse PAL's dismal operations.

But Cua disclosed PAL's request just days after the government made a commitment before the International Monetary Fund (IMF) to further plug loopholes in its fiscal incentives regime for investors so it can reduce a yawning budget deficit expected this year and in 1999.

Cua said PAL'S fiscal incentives, which include various tax and duty exemptions for its importation, were decreed by the late president Marcos. But the succeeding Aquino and Ramos administrations discontinued them, he said.

PAL is now controlled by controversial taipan Lucio Tan, a suspected Marcos crony who did not enjoy any political clout under the Aquino and Ramos governments. Tan, however, is said to maintain close ties with Estrada.

Cua said the Estrada administration is now asking the Department of Justice for an opinion as to the validity of Presidential Decree No. (PD) 1590, the Marcos law that provided PAL with its own tax incentive package. Marcos issued this decree while Tan did not yet control PAL.

"We are requesting the Department of Justice to come up with a legal opinion on this (or the validity of PD 1590)," Cua said.

Aside from PD 1590, PAL raised four other issues affecting its operations. The issues revolve around government's operating permits to other foreign air carriers; its air pact agreements with other countries; its open skies policy; and the adequacy of the country's airport infrastructure facilities.

Cua said PAL wants a review of government's policy regarding all these other issues. PAL often airs its concern over the adverse effects of these government policies on its operations.

PAL lost P8.08 billion during its fiscal year ending March 1998, or way above the P2.5 billion net loss it incurred during the previous fiscal year, mainly because of a global slump in the airline industry

To aggravate matters, its workers, along with its pilots, staged a debilitating strike early this year. The firm allegedly lost P200 million a day during the strike, prompting Estrada to form the DoF-led task force on PAL.

Cua said PAL is asking the government to review the temporary operating permits that it earlier granted to foreign air carriers. PAL also wants its rivals to service the country's "missionary routes," or non-lucrative destinations.

Cua said the task force is trying to address this problem through a proposal, dividing the missionary routes among the airline firms.

PAL wants the country's air agreements with other countries renegotiated, and government's open air policy reviewed to level the playing field," Cua said.

Cua added the task force is trying to address these concerns, but he stressed "we are not trying to be a protectionist. We just want. to work within the confines of liberalization."

In exchange for a favorable government action PAL promised to make its employees part-owners of the company by giving them 60,000 fully-paid shares. These will give the worker three seats in PAL's nine-man board. Beneficiaries of the stock offer are employees in active payroll as of September 15, 1998.