Sia on PAL: Not Interested

The Philippine Star

Wednesday, December 9, 1998

Singapore's flagship airline said yesterday it has “no interest” in purchasing troubled Philippine Airlines (PAL), which has been seeking a foreign partner as it staggers under heavy debts.

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

PAL had hoped for an infusion of foreign capital to keep it flying and help resume payments on its $2.1 billion in debts. Talks with Hong Kong's Cathay Pacific Airlines ended last week because of irreconcilable differences during their negotiations.

Following Cathay Pacific's withdrawal, attention focused on Singapore Airlines, which earlier expressed interest in PAL following its brief closure last September and October.

But the city-state's flag carrier 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.

But in another development yesterday, President Estrada said the PAL-Cathay talks are “still on" as he had secured assurances from Cathay officials that they would renegotiate for a possible controlling stake in PAL.

“That is still on. They (Cathay officials) are willing to renegotiate,” the President told Malacañang reporters in a chance interview.

However, Mr. Estrada admitted that he has yet to formally talk with Cathay officials who he asked to meet with PAL majority owner Lucio Tan.

PAL Executive Vice President Manolo Aquino, on the other hand, said PAL is trying to revive talks with Cathay, which earlier backed out of negotiations.

If Cathay is unwilling to restart negotiations, PAL will consider investment offers from other foreign airlines, Aquino said.

PAL closed for nearly two weeks on Sept. 23 following labor disputes and mounting losses worsened by Asia's financial crisis. It then began negotiations with Cathay Pacific, which took over PAL’s domestic routes during its closure.

Cathay Pacific said it continues to have informal contact with the Philippine government despite the collapse talks with PAL.

Cathay also dismissed a newspaper report (not in The STAR) last Sunday that said its officials snubbed President Estrada by failing to show up for a meeting.

“We were never called to a meeting last Sunday and we continue to maintain informal contact with the executive branch,” Cathay Pacific regional manager for Taiwan and the Philippines Peter Foster said in a statement.

Disagreement on management control and valuation issues forced Cathay Pacific to break off talks with PAL last week. Cathay had expressed interest in acquiring up to 40 percent of the loss-making Philippine flag carrier.

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

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

Cathay Pacific also refused to put its money into PAL until the airlines’ rehabilitation plan is approved by the Securities and Exchange Commission (SEC), Espiritu said.

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

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

Yesterday, the SEC gave PAL creditors 15 days to file their comments on the proposed rehabilitation plan, which will determine whether the debt-ridden airline is to be liquidated or rehabilitated.

If the proposed rehabilitation plan is approved, local investors, including Tan, will invest $90 million of the $150 million needed by the airline, PAL said Monday.

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

The government said yesterday it will not bail out PAL.

The government's policy is unchanged. There will be no government bailout or subsidy to Philippine Airlines," Presidential Spokesman Fernando Barican said. — Marichu Villanueva. Des Ferriols AP. AFP