IFC Still Keen on PAL

Malaya

Wednesday, December 2, 1998 (6)

Digest

Finance Secretary Edgardo Espiritu yesterday said that the International Finance Corp. is still interested in buying into the Philippine Airlines as long as a new partner is found. Espiritu said that IFC is willing to put up 20 to 30 percent of the 40 percent stake that will be sold to the foreign partner.

RP Needs Air Carrier

People's Journal

Wednesday, December 2, 1998

THE COUNTRY needs a dedicated cargo carrier to Japan to provide reliable and adequate air transport service to Filipino exporters.

This was the consensus of cargo forwarders as they expressed support for the entry of CLA Air Transport Inc. in the air cargo business.

CLA, a joint venture between the Philippine government, and Filipino and Japanese investors, plans to fly the Manila-Cebu-Japan route to primarily serve the air transport requirements of Filipino exporters to Japan, one of the country’s major trading partners.

“The entry of a new and dedicated cargo carrier is a much needed relief for expanding export-oriented industries in Cebu,” said Marose F. Borromeo, General Manager for Southern Philippines of Rapid Air Freight Inc.

Asian Airlines Call for Lower Airport Fees

The Journal

Wednesday, December 2, 1998

THE Asia-Pacific Airlines Association (AAPA) has called for lower airport fees and aeronautical charges to help the industry cope with the regional financial crisis.

AFX-Asia reported that AAPA Director-General Richard Stirland said airport charges and aeronautical fees had become a major cost for Asian airlines, already among the “worst affected sector of the regional economies as a consequence of the Asian financial and economic crisis."

A resolution approved during a president’s assembly here called on airport operators, air traffic service providers and government authorities to help ensure the viability of the airline industry “by not levying onerous fees and charges."

Cebu Pacific Adds Flights

Malaya

Wednesday, December 2, 1998

Updates

Cebu Pacific will start flying Manila-Zamboanga-Manila twice daily and Manila-Kalibo-Manila starting December 16. On the same day, it will also start flying Cebu-Bacolod-Cebu. It now flies to Iloilo and Davao from Cebu. The airline has been using Cebu as its hub to serve passengers who need to travel within the Visayas-Mindanao region. Now, Mindanao travelers no longer need to fly to Manila to catch another for Visayas. From its Manila hub, Cebu Pacific flies to Cebu, Davao, Cagayan de Oro, Tacloban, Bacolod and Iloilo. Cebu Pacific will have Zamboanga and Kalibo as its eighth and ninth city-destinations. The airline will add more destinations in the coming months. It is acquiring two more jets for delivery in December and January to expand its fleet and its service areas.

PAL Negotiations: Cathay Doesn't Deserve that Flak

Manila Bulletin

Wednesday, December 2, 1998

By TONY ANTONIO

In the last few days, there were a lot of reports and coffee shop talks on the on-going negotiations between the Philippine Airlines (PAL) and Cathay Pacific Airways on the possible entry of the Hong Kong-based airline as an investor in our country’s flag carrier. Many of the reports are confusing and misleading, and some airline industry leaders suspect that these were “planted” in an attempt to derail the negotiations.

Some of the reports are obviously intended to make Cathay Pacific look bad in the eyes  of the Filipino People. It seems to us that these are uncalled for because in the first place, Cathay did not make an offer to invest in beleaguered PAL. The fact is that Cathay was invited to infuse substantial investments  into the perennial loser PAL.

The fresh funds are badly needed because PAL foreign creditors are all preparing to foreclose on PAL assets, including its planes and airbuses. Since last June, PAL has stopped paying its creditors who were told that they will be paid soon as a new PAL partner comes in.

It was recalled that upon the request of the Philippine government, Cathay got involved in PAL last Sept. 28 when it undertook at cost charter flights to the sought. This was the time when PAL planes were grounded to a halt as a result of the strike staged by the pilots.

For its benevolence, Cathay received a commendation from  the Davao City government and “thank you” letters from the individuals and private firms. They appreciated the fact that Cathay was there when its services were needed most.

Now these unsavory reports about Cathay. This is unfair because Cathay does not deserve that flak. It seems that the reason, if we can call it “reason” for the attacks on Cathay is a provision in its investment offer that it wants a say in the management of PAL. We think this is a reasonable provision. If you are investing much money, you would also demand the same thing because you would want to be assured that your money is not wasted.

The other day, we talked over the phone to a Cathay executive who was understandably indignant over the unfounded reports.

On the claim that Cathay is insisting on the retrenchment of 200 pilots, the executive said this is a simple lie. He explained: “How can we do that? At present, PAL has 208 pilots, and if we retrench 200, there would only be eight pilots left. You can’t simply run as airline as big as PAL with only pilots.”

On the reports that it is going to dismiss 3,000 ground personnel, the executive clarified that the retrenchment plan is based on Plan 22 formulated by PAL last September during which Cathay had no involvement at all in the Philippine flag carrier. He said that Cathay is to manage PAL in the future, it might “need to retrench some ground staff, but definitely it would be far fewer  than 3,000 and this would be done on a voluntary basis.”

The executive did not mince words about the false reports. He said: “Cathay is distressed by these incorrect reports which it finds damaging to its good name and reputation.”

For some hidden agenda and dark motive, certain quarters want the Cathay-PAL negotiations to collapse. If that happens, the ultimate losers would be the Filipino people.

PAL to Get Better Deal from Northwest

Filipino Monitor

November 26 – December 9, 1998

Headliners

MANILA, Nov. 26 Malacañang has expressed hope that Philippine Air­lines (PAL) can get a better deal from US-based Northwest Airlines, which can make Manila its

operation hub in Asia.

President Joseph Ejercito Estrada said that PAL Chairman Lucio Tan is now in the United States to get the best terms possible for the national flag car­rier.

Tan reopened negotiations with Northwest after calling off talks with Hongkong-based Cathay Pacific Airways due to a major disagreement over Cathay’s insistence to retrench thousands of PAL pilots and other employees.

This downsizing plan, which Tan found unacceptable, runs counter to the President's earlier commitment to pro­tect the security of tenure of PAL workers.

"As a businessman, he is looking for the best partner for PAL,” he said. “That's a private matter between PAL and Northwest which we won't interfere with.”

Earlier, Estrada called on the management of PAL to ensure the retention of its workers “at all costs" when negoti­ating with foreign investors wanting to buy into the financially-troubled airline.

For his part, Executive Secretary Ronaldo Zamora said he believes PAL can become an operations hub instead of a mere subsidiary should it link up with Northwest Airlines instead of Cathay Pacific.

Zamora said Cathay, a competitor of PAL in the Asian market, had planned to make its Manila operations a mere subsidiary.

"Even before, many were saying that PAL would fit better with North­west,” he said.

Tan earlier turned down Cathay's demand to fire workers, including 200 pilots who stuck with him when PAL went on strike two months ago. According to reports, these 200 pilots are among 3,000 PAL employees Cathay plans to fire as part of its streamlining program for PAL.

Zamora said that even without the labor issue, a merger with Cathay would not have been the best for PAL since both are competitors in the region.

He pointed out that the government, which continues to have a stake in PAL, was not fully in favor of Cathay's plan to make its Manila operations a mere sub­sidiary.

Northwest, on the other hand, have the resources to transform PAL into its operations center in the region, Zamora said.

Tan Stands Firm Behind PAL Workers

Filipino Monitor

November 26 – December 9, 1998

Editorial

MASS LAYOFF of Philippine Airlines workers under a proposed Cathay Pacific rehabilitation program is enough good reason for PAL officials to call off merger talks with the Hong Kong-based airline.

Disagreement over the retrenchment plan may yet force Philippine Airlines to resume negotiations with Northwest Airlines, which is also interested in a merger.

Cathay’s retrenchment plan was just too much for PAL chairman Lucio Tan who felt he has an obligation to the workers, especially the pilots who stayed on with PAL at the height of the crippling pilots’ strike.

It would, indeed be a bad idea for PAL to enter into a deal which would involve the layoff of workers who remained loyal to the airline during rough times.

Remarks from Malacañang Executive Secretary Ronaldo Zamora revealed Mr. Tan’s feelings toward PAL workers.

“Mr. Tan would not want retrenchment which is more than what he had committed to the union. He will not sacrifice more than what is needed,” he said.

This was the view of President Estrada who said the main concern of the government are the workers; that there will be no layoffs when PAL decides to merge with either Cathay or Northwest.

By standing firm behind the PAL workers, Mr. Tan had displayed an enlightened attitude toward labor-management relations.

When he took over the PAL management from the government, Mr. Tan ruled out retrenchment measures even when he knew that the airline had more than enough.

The PAL Chairman reportedly flew to the United States, presumably to renew negotiations with Northwest, a much bigger airline than Cathay Pacific and a non-competitor in the Asian route.

Cathay wants to trim the PAL workforce to about 5,000, but Mr. Tan did not want to cut the number of workers below 8,000 to avoid antagonizing the union.

Cathay also wanted to layoff some 200 pilots, a proposal also opposed by the PAL Chairman.

PAL had earlier accepted a preliminary investment offer from Cathay Pacific, the two companies had announced that they will draw up a comprehensive plan to rehabilitate the ailing Philippine flag carrier.

The International Finance Corporation, the investment banking firm of the World Bank plans to shoulder 20 percent of Cathay’s proposed investment.

PAL’s 20 percent stake in the airline was what the PAL management under Mr. Tan promised the workers in exchange for a 10-year period of industrial peace, while PAL is undergoing rehabilitation.

Based on management estimates, PAL needs some P6 billion for a smooth run of its domestic and international flight operations.

The government is right to intervene in the merger negotiations because at a time when a lot of people are losing their jobs, it must undertake all possible efforts to save these PAL workers. There is no reason why it should not encourage PAL to seek a better deal.