The Philippine Star News
Sunday, December 13, 1998
NewsPresident Estrada expressed hope yesterday that both Philippine Airlines and Cathay Pacific Airways will resume their negotiations and reach an agreement on a proposed buy-in partnership before Christmas.
Mr. Estrada reiterated his holiday wish as he voiced his administration’s concerns about the adverse impact of PAL’s closure on the economy if the flag carrier is unable to get fresh capital investment from new partners.
In his weekly radio program “Jeep ni Erap, Pasada ng Pangulo,” the President disclosed that PAL’s negotiations with Northwest Airlines have already bogged down. “It looks like Northwest Airlines is really out. But with Cathay, I have not lose hope.”
Mr. Estrada said there are still positive signals coming from Cathay that the Hong Kong-based airline is still interested in resuming negotiations with PAL after both sides abandoned talks two weeks ago due to PAL’s refusal to trim its large workforce.
He admitted, however, that the proposed buy-in partnership remains “up in the air” with no final word yet from either party.
“PAL is very important. If this closes, many businesses will be adversely affected, not only big industries but also the small ones,” the President pointed out.
Mr. Estrada noted with concern reports given to him by PAL which show the flag carrier has been losing as much as P21 million a day in scaled-down operations since the airlines resumed flights last October after a two-week shutdown.
He said PAL continues to lose not only because it is said to be “overstaffed” – despite cutting down from 13,000 to 8,000 employees – but also due to “open skies policy” implemented by previous administration.
“Foreign airlines were allowed to come here (which) resulted in much competition,” Mr. Estrada said.
The President earlier offered to act as mediator between Cathay officials and PAL majority owner Lucio Tan. He even urged Filipino businessmen and investors to “chip in” and invest in PAL instead of relying too much on foreigners to save the long-ailing flag carrier.
He said the government will do everything – short of granting bail out money – to prevent the airline from closing down again if talks with Cathay fall through.
“I believe we will be able to settle this. If Cathay and PAL do not come to an agreement, there are many other businessmen to help PAL,” Mr. Estrada said.
One such option mentioned by Presidential Spokesman Fernando Barican was government assistance in the form of “bridge financing” to help ride PAL over until new partners come in.
“The government’s policy is unchanged. There will be no government bailout or subsidy to PAL,” Barican stressed.
Bridge financing requires that PAL’s continued operation is commercially viable and that PAL will be subjected to the usual credit evaluation, among other terms.
The Presidential Task Force on PAL headed by Finance Secretary Eduardo Espiritu said the financing package will involve a consortium of private banks and strategic partners. The package will form part of a rehabilitation plan approved by PAL creditors and the Securities and Exchange Commission. Marichu Villanueva, DPA
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