IATA files P1.4-B claim against PAL

Manila Bulletin
Monday, December 7, 1998
James A. Loyola

The International Air Transport Association (IATA), some of its members, and the IATA clearing house.

Based on documents filed with the Securities and Exchange Commission (SEC), the sum represents net claims owed by PAL to the IATA group arising out of multilateral interline traffic agreements, miscellaneous multilateral agreements, UATP claims, bilateral agreements with IATA members, and obligations to IATA and the clearing house.

The amount owed is for clearance months June to September and additional amounts may be due for October 1998 and subsequent clearance months. IATA said such amounts may be subject to offset due to claims made or to be made by PAL in respect of the IATA group.

PAL has been a member of IATA for about 50 years, participating in virtually all interline and IATA activities, including multilateral interline passenger, cargo and other agreements, miscellaneous bilateral agreements with other IATA members and IATA clearing house participants.

PAL's liabilities to IATA clearing house were those due prior to the airline's suspension from the membership. PAL owes the clearing house some $19.8 million as of September 1998 and had advised that it did not have sufficient cash to pay such amount to the call date of August 11, 1998. PAL paid a partial amount leaving a balance of $16.91 million.

After PAL’s suspension from IATA clearing house, additional claims have been presented by the IATA carriers and other participants. Total amount owed was $18.78 for clearance months July to September.

Earlier, the SEC approved a request by the Philippine Airlines interim receivership committee (PAL-IRR) to disburse $7.8 million (about P320 million) to a group of banks in exchange for the release of airplanes under mortgage.

Based on the order issued by the SEC hearing panel, the amount will be used as partial payment to some banks in consideration for the execution of partial cancellation of chattel mortgage for two Airbus A300B4s.

The money will be sourced from the proceeds of the sale of the aircraft to Aviation Sales Leasing Company (AVSL). AVSL has entered into a purchase agreement with PAL for the acquisition of four Airbus planes.

In a separate order, the SEC has also approved a clause in the purchase agreement that makes it “binding against and may not be revoked by any successor to the IRR, including any receiver, management committee or other entity appointed for PAL or PALs assets.”

The lucky banks that will receive partial payment for the loans to PAL (as a result of the release of the planes) are: Security Bank Corporation, Philippine National Bank, Rizal Commercial Banking Corporation, China Banking Corporation, Union Bank of the Philippines, Banco de Oro, Allied Banking Corporation, Westmont Bank, International Exchange Bank, and Equitable Banking Corporation.

A PAL official said the airline will seek debt forgiveness from some of its thousands of creditors as part of its rehabilitation program.

“Some of the creditors would have to agree to some restructuring and some forgiveness in terms of payments,” Manolo Aquino, PAL executive vice-president for administration and services, told Reuters.

He added the rehabilitation plan would specify the terms and conditions of the debt forgiveness and restructuring, not how much of the loans would be forgiven.

PAL, Asia's oldest airline, owes some $2.0 billion to 9,000 creditors, including suppliers, airline officials said earlier.

PAL is to submit its long-delayed rehabilitation program to the Securities and Exchange Commission (SEC) on Monday.

The plan, whose deadline with the SEC has been extended at least twice, will call for debt restructuring, a capital injection, fleet reduction, manpower adjustments and a spinoff program of the airline's non-core businesses.@