Manila Standard
Saturday, December 5, 1998
By JAY-ANNE DANCEL AND LEE ANN PATTUGALAN
President Estrada was able to coax Cathay Pacific Airways Ltd. back to the negotiating table yesterday to finalize the latter's entry into Philippine Airlines as a strategic partner with a 40 percent stake.
In return, taipan Lucio Tan removed the first of two roadblocks which had stalled the deal. Tan conceded to an immediate management takeover of the local airline before any actual cash infusion by the foreign carrier.
Cathay then agreed to honor the terms of a referendum which would prevent the retrenchment of some 3,000 PAL employees. As a result, the agreement which was considered dead just two days ago can now be considered done.
Cathay will now wait for Monday, when PAL is scheduled to submit its rehabilitation program to the Securities and Exchange Commission, before infusing the committed $100 million (P4 billion) equity investment in the national flag carrier.
Earlier, a Malacañang official said cash-strapped PAL could continue operating without relying on the resources of a foreign partner. Executive Secretary RonaIdo Zamora said this was bolstered by Thursday night's meeting between PAL's management and the airline's creditors.
"In a reply to our question when we discussed this last night with some representatives of creditors, they did not say that the loans will become due if PAL does not conclude an agreement with a foreign partner. So it is possible in the end, PAL will be rehabilitated by a stand-alone all-Filipino investor group," Zamora said.
He added the management of PAL was now looking at the possibility of presenting a stand-alone rehabilitation plan since separate negotiations with Cathay and United States-based Northwest Airlines for a possible merger had seemingly collapsed.
"I understand they are now confident enough about this stand-alone rehabilitation plan so that they are not even asking for an extension of the original deadline, which is supposed to end Dec. 7," Zamora said.
He also revealed that the management of the flag carrier had expressed confidence that they would have enough money to turn the airline around.
Zamora pointed out that PAL has been flying without any foreign investor over the last month, so it may be worthwhile to consider the credibility of a stand-alone rehabilitation and investment plan.
He said PAL was now considering an investment that would not require foreign partners since the airline's management fears there would not be enough "give" on the part of the foreign investors that would be commensurate to their "take."
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