PAL Seeks Concessions from Government

Philippine Daily Inquirer

Sunday, December 10, 1998

Doris Dumlao

With its search for a strategic partner still uncertain, cash-strapped Philippine Airlines has requested the national government for a fresh package of support and assures to improve its viability alongside its 10-year rehabilitation plan, official documents showed.

According to a proposal submitted to Malacañang, PAL is seeking a commitment from the Civil Aeronautics Board (CAB) to make the airline the "designated carrier on all routes subject of air services agreements to which the Philippines is and will be a party.”

"New frequencies or capacities, or increases thereof, shall be granted pursuant to law, to foreign carriers only with the approval of the President of the Republic," the proposal said.

PAL said temporary operating permits should be granted or renewed pursuant only to a well- defined set of guidelines while all its fares, rates and charges should be deregulated.

PAL has also asked the CAB to remove the temporary operating permits granted to other airlines under the previous administration in respect of the Middle East, Hong Kong, Taipei and Singapore routes.

"Traffic rights historically given away by government agencies have cost PAL a substantial reduction in load factors and yields and revenue from commercial agreements," PAL said.

"Likewise, deregulation of the domestic market (and allowing lower civil aviation standard for domestic competitors) has eroded one-third of PAL's market share," it said.

PAL said its operation of the missionary routes, for instance, had cost it P633 million in bottom-line losses in fiscal year 1997 to 1998.

Government sources confirmed that a number of joint government-PAL working parties have already been established to address the perks requested by the airline.

PAL also wanted the government to confirm its exemption from landing fees and other charges by the Air Transportation Office, the Manila International Airport Authority, the Mactan Cebu International Airport Authority and other airport authorities in the country. It is also asking confirmation of certain tax privileges by the Bureau of Internal Revenue.

The flag carrier is also asking for the immediate payment of PAL's receivables from the Philippine government and its agencies.

Other concessions requested by PAL from the government were to:

• Enforce equivalent safety standards for all domestic airline operators;
• Provide landing and obstacle lights as well as other necessary infrastructure at leading provincial airports in order to allow night operations;
• Invest in overseas tourism promotional expenditure to the level of regional competitors in PAL’s core markets, and
• Mandate that all government and overseas workers' travel will be on PAL.