PAL-Cathay talks still on -- Zamora

The Philippine Star
Saturday, December 26, 1998
Marichu Villanueva

Closed-door talks are being held between Philippine Airlines (PAL) and potential foreign investors in the ailing flag-carrier so as not to derail any forthcoming agreement, officials said yesterday.

“In order not to disturb the talks, they are not disclosing this to the public,” Executive Secretary Ronaldo Zamora said in a radio interview. “They are talking in private."

The potential investors include Cathay Pacific Airways of Hong Kong and US-based Northwest Airlines.

And like a merry refrain, Zamora also said that the government is prepared to help the airline “under commercial terms" but it will not take over PAL.

The government, as a last option, is always prepared to help PAL but not take over PAL. That is completely out of the question,” he said.

Zamora added President Estrada has previously authorized a possible financial bailout for PAL in the form of a “bridge financing" loan to be pooled by government financial institutions (GFIs).

He recalled the GFI loan was being pooled for PAL “to (help) tide it over” pending completion of its efforts to get new investors.

PAL closed for nearly two weeks in late September and early October following labor disputes and mounting losses worsened by Asia’s financial crisis. Its problems worsened with a 22-day pilots' strike last June.

It then opened negotiations with Cathay Pacific, but the Hong Kong carrier announced early this month it was pulling out of the talks.

Zamora did not say how Cathay officials agreed to resume talks although Mr. Estrada has pledged to bring the two sides back to the negotiating table.

Finance Secretary Edgardo Espiritu has said the airlines disagreed over management control of PAL and the timing of Cathay Pacific's capital infusion into the Philippine carrier.

Cathay Pacific also refused to put its money into PAL until after a PAL rehabilitation plan has been approved by creditors and the Securities and Exchange Commission, Espiritu said.

PAL submitted the plan to the SEC on Monday. The plan must be approved by the SEC and the airlines’ local and foreign creditors, to whom it owes $2.1 billion.

PAL's European creditors, however, rejected the rehabilitation plan because it did not ensure the participation of a “strategic partner” and the infusion of $200 million in fresh capital.

The creditors control the leases on 12 of the 22 Airbus jets PAL would operate under the proposed rehabilitation plan.

Earlier, Espiritu disclosed a possible endowment by the Philippine government for PAL to apply its $215 million corporate debt rehabilitation under Japan's $30-billion Miyazawa financial assistance plan.

Zamora also disclosed yesterday that even as Cathay and PAL have resumed talks, the Palace was aware that PAL majority owner Lucio Tan was conducting separate discussions with other potential partners such as Northwest and Singapore Airlines.

"PAL is still hoping that one of their discussions with their potential partners will bear fruit, particularly in the case of Cathay," Zamora said.@