PAL Trying to Revive Talks with Cathay

Manila Standard

Wednesday, December 9, 1998

Ailing Philippine Airlines is trying to revive talks with prospective investor Cathay Pacific Airways, which backed out of negotiations for a possible con­trolling stake in the Philippine flag carrier, a PAL official said yesterday.

If Cathay Pacific is unwilling to re-start the talks, PAL will consider investment offers from other for­eign airlines, PAL Executive Vice President Manolo Aquino said.

Cathay Pacific officials were not immediately available for comment.

Meanwhile, Malacañang yesterday reiterated its policy that '”There will be no government bailout of or subsidy for Philippine Airlines," Presidential Spokesman Jerry Barican said.

At the Securities and Exchange Commission, a task force composed of SEC lawyers and examiners has begun to study the rehabilitation plan submitted by PAL Monday.

The task force will submit to the SEC hearing panel its recommendation within 30 days from the date of the order of the commission (December 7).

PAL closed for nearly two weeks on September 23 following labor disputes and mounting losses worsened by Asia's financial crisis. It then began negotiations with Cathay Pacific, but the Hong Kong carrier announced last week it was pulling out of the talks.

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

Cathay Pacific wanted full management control of PAL but the companies were unable to agree on how to deal with a constitutional prohibition of for­eigners controlling key industries in the Philippines.

Cathay Pacific also refused to put its money into PAL until after a PAL rehabilitation plan is approved by creditors and Manila's corporate watchdog, the SEC, Espiritu said.

PAL submitted the plan to the SEC on Monday. It calls for an injection of $150 million in new capi­tal, a workforce reduction, fleet downsizing and abandonment of unprofitable routes.

The plan must be approved by the SEC and the airline's local and foreign creditors, to whom it owes $2.1 billion. If the proposed rehabilitation plan is approved, local investors, including PAL chairman and chief stockholder Lucio Tan, will invest $90 million of the $150 million needed by the airline, PAL said.

The rest would be provided within six months by a still undetermined "strategic partner," the airline said.

Meanwhile, Singapore Airlines (SIA) said it has "no interest" in purchasing PAL.

Asia's most profitable carrier, SIA said in a state­ment that it had "decided to put an end to specula­tion" it would buy a substantial stake in the belea­guered airline.

SIA has "no interest in purchasing Philippine Air­lines and contrary to recent press reports, no team from SIA is visiting Manila this week,” the state­ment added. With AP.