SEC Allows PAL to Pay Maintenance Fees

The Manila Times

Monday, December 14, 1998

Carmina E. Reyes

The Securities and Exchange Commission (SEC) has given Philippine Airlines (PAL) the go-signal to settle over P198.7 million in unpaid maintenance fees and other expenses it incurred last month.

In an order issued Friday, the SEC hearing panel tasked to handle the PAL case approved the disbursements requested by the PAL interim rehabilitation receiver (IRR) for the carrier's maintenance cost for the period of Nov. 17-27, 1998.

The total amount of P198.7 million would cover the carrier's services rendered for the period, food and supplies, cargo and other handling services, maintenance assistance, ground handling, towing, parking, and other services.

The amount would be paid to Allied Bankers Insurance Corp., Government Service Insurance System (GSIS), and Allied Perils Insurance of PAL Properties.

PAL, whose fate now lies at the hands of the SEC and its creditors, is not allowed to spend more than P3 million without the approval of the Commission.

In an order issued last July 1, 1998, the SEC said that all disbursements that would be made by PAL should have the prior approval of the Commission to avoid the dissipation of its assets.

The SEC earlier gave the creditors of PAL until Dec 22, 1998 to comment on the proposed rehabilitation program for the ailing airline.

The plan calls for an immediate capital infusion of $90 million, slashing its fleet from 54 to 22 planes, and rescheduling its $2.2 billion debts over the next 15 years. The smaller fleet will service 17 domestic and international mutes.

Even without a partnership, PAL said it could return to profitability by March 2000. It forecasts a profit of $35.2 million for that fiscal year, assuming a “modest economic recovery over the next three to five years.”

However, PAL can still attract foreign partners if only the government helps in leveling the playing field in the airline industry. An investment analyst said investors eyeing stake in the national flag carrier would readily put in money when and if the airline could exercise all its worldwide landing rights.

He said the government's aviation policy failed to give reciprocal landing rights to PAL, citing the case of Saudia Airlines which was allowed by the Civil Aeronautics Board to unilaterally cancel the PAL-Saudia commercial agreement. Landing rights are governed by air services agreements which are negotiated bilaterally.