How much longer?

Business World
Wednesday, December 16, 1998
Ninez Cacho-Olivares
My Cup of Tea

The money isn’t in yet, but already Joseph Estrada and his managers are making all sorts of plans for the Miyazawa fund aid.

And a big chunk of the money will be going to Philippines Airlines (PAL) to keep it airborne.

Justifying the nth PAL financial bailout by government through the Japanese regional aid fund, Finance Secretary Edgardo Espiritu says this type of aid falls under the objective of the Miyazawa fund since it is aimed to help ailing firms on a restructuring course due to reverses arising from the Asian financial crisis.

“We are now looking at the Miyazawa initiative. There is what you call a support for corporate restructuring,” says Espiritu, adding that the same type of financial support was granted in other ASEAN countries like Thailand and Indonesia.

Unfolding his plan for PAL, Espiritu says government is looking at the US$150 million requirement for PAL’s viability although PAL may have to go public with its stocks to qualify.

Small sacrifice, that – given that, usually, when a corporation goes public it sells only 20% of its shares to the public through the stock market. Then, too, through initial public offerings, companies make oodles of money.

There is nothing wrong with that if the funds are put to good use by the companies going public.

However, in this country, after making a pile of money through IPOs, when the majority stockholders sense their shares dropping in price in a bear market, they simply announce plans of delisting and there is no agency, whether the Securities and Exchange Commission (SEC) or the Philippine Stock Exchange (PSE), also known as the brotherhood club, that can provide the investing public any sort of protection.

While the PSE requires listed companies to submit their financial situation and plans in advance, the same agency refuses to provide the investing public with these documents, even when requested. There is too, no investigation being done by the PSE on charges of securities firms’ irregularities.

Still, this is probably just about the first time a beleaguered company like PAL gets listed on the stock market on grounds that it is bleeding.

Also, as there has already been a record of its having closed down, there are no guarantees that the company will fold up yet again, at some future time.

This fact hardly inspires the investing public to pour its money in an ailing company.

Usually, stock market players invest in a sound company going public on the basis of its expansion plans that would eventually provide public shareholders’ dividends, whether in cash or stock.

In the normal course of events, when a corporation is ailing, it cannot just run to government to seek funds to help it out of a financial mess. In PAL’s case, however, at least three governments have financially bailed out the country’s flag carrier.

When PAL was in the hands of Benigno Toda and even already losing heavily, then President Marcos ordered government to buy up the majority shares.

It was still a losing proposition for the government, even after its takeover. However, as it was a government-controlled corporation, PAL was allowed to continue flying despite mounting losses. PAL was, after all, the national flag carrier and keeping it flying was a matter of national pride and honor.

National pride and honor came at a steep price and the public was, as usual, made to foot the bill.

When Corazon Aquino was at the helm of government, plans were announced to privatize the airline.

There was, as usual, a catch to it all. The Aquino Government claimed that no one would be willing to buy PAL unless government (read: the Filipino People) first absorbed the huge losses.

And so it did, and a “privatization” package was offered.

Funny thing though, government, even as it claimed to be privatizing the airline, was both buyer and seller, having been part of PR Holdings, the “private” airline bidder and buyer.

To this day, government continues to be a sizable shareholder in PAL.

There was government talking of the urgency to privatize the airline, yet still keeping the airline in government hands.

This is probably also the first time a bidding company had, for its partner, the buyer and seller of the airline.

If memory serves, government money was again infused into PAL as it bled some more, the third time around, under the Ramos Administration.

Now the Estrada Government is again talking about bailing out PAL through a US$150-million bailout package courtesy of the yet undelivered Miyazawa plan fund and all because, so reports go, the talks between PAL and Cathay Pacific collapsed and that PAL can’t go it alone.

How much longer will Filipinos continue to bail out PAL? And, adding insult to injury, Filipinos don’t get anything in return for many bailouts.

Perhaps, like a patient afflicted with cancer, it is best for PAL to die quickly, instead of hanging on, hoping for a miracle cure.

Perhaps it is best that PAL should give up the ghost. It has become too expensive a proposition for the Filipino people to continue maintaining it.@