The Philippine Star
Sunday, December 6, 1998
Marichu Villanueva
President Estrada vowed yesterday to do everything within his power to keep ailing Philippine Airlines (PAL) flying.
“I will do everything in my power to keep PAL operations going because (if it shuts down) we are all affected,” the President said.
The Chief Executive also expressed optimism about a possible strategic partnership between PAL, and the Hong Kong-based Cathay Pacific Airways, despite the collapse of earlier talks.
“I believe I could have them work out a solution,” Mr. Estrada said.
Disagreement on management control and valuation issues forced Cathay Pacific to withdraw from the negotiations last Wednesday.
Cathay Pacific was eyeing 40 percent equity in the Philippine flag carrier.
Mr. Estrada said he has asked for a meeting with Cathay Pacific president David Turnbull and PAL chairman and majority stockholder Lucio Tan in a bid to persuade both sides to resume their talks.
While Tan has agreed to keep PAL temporarily afloat despite massive losses and a $2.1-billion debt, an absence of fresh funds from new investors could eventually force the airline to fold up.
“The problem now is that PAL might stop operations again after the collapse of negotiations, but I have talked to Tan who agreed to continue (PAL operations,” Mr. Estrada said.
“I will try my best to have them reach an agreement,” the President added.
Separate negotiations with Northwest Airlines of the United States also fell through, but government sources said PAL was eyeing Singapore Airlines (SIA) as another possible partner.
The source said a team from SIA is expected to arrive in Manila next week.
PAL has said if it does not find strategic ally, it will be compelled to go it alone and submit a rehabilitation plan to the Securities and Exchange Commission (SEC) tomorrow.
Executive Secretary Ronaldo Zamora revealed that government financing institutions may yet offer credit lines to PAL, while the airline’s creditors promised to give it a reprieve from its debts.
A pilots’ strike aggravated by financial problems forced PAL to shut down for 13 days last September. It has since resumed limited operations after its union agreed to a 10-year strike freeze in order to attract new investors.
In another development, President Estrada said he can only commiserate with Tan who is struggling with two major business problems - trying to preserve PAL and fighting off a P25.6-billion tax suit involving his flagship company, Fortune Tobacco Corp.
The President said he can do nothing to help Tan since he cannot interfere when the tax case reaches the courts.
Despite recommendations by the Bureau of Internal Revenue (BIR) to drop the tax case, the Department of Justice filed tax evasion complaints against Tan before the Marikina Metropolitan Trial Court (MMTC) last Tuesday.
Meanwhile, observers said Tan “sorely needs relief” amid stalled negotiations for a new strategic partner for PAL and with the government seemingly divided on how to proceed with the taipan’s alleged P25.6-billion tax case.
“The latest government move further compounds the troubles Tan, who was earlier mired in a labor dispute that nearly led to the demise of the flag carrier,” the source said.
The filing of the tax case surprised the business community, considering Finance Secretary Edgardo Espiritu, Justice Secretary Serafin Cuevas and BIR Commissioner Beethoven Rualo had earlier concluded that they had a weak case against the taipan.
“It seems Mr. Tan can’t find a breathing space,” one legal observer said, adding there appeared to be no end to his problems.
The source also noted the filing of the tax case “betrayed the apparent conflicting positions of the government on the case with the left hand not knowing what the right hand is doing.”
Tan’s lawyer, former Solicitor General Estelito Mendoza, said the case appeared “shoot through with legal infirmities” since under the law no civil or criminal action for the recovery of taxes may be filed with the BIR’s approval.
Mendoza said the filing of the tax evasion case by the justice department has a “fatal defect because it was patently done with the signature of the BIR commissioner.”
Mendoza’s statement formed part of a 17-page pleading he filed before the MMTC, asking the court not to order the arrest of Tan and his co-accused, saying “neither law nor evidence justified the filing of the information.”
Mendoza also described the filing of the case as “premature and a blatant violation of a Supreme Court mandate ordering the DOJ (Department of Justice) to conduct preliminary investigation of the case.” The SC remanded the case to lower court In February last year, saying Tan was denied due process of law.@
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