Careful review needed if airline liberalization is to be amended

Business World
Tuesday, September 1, 1998

Transportation and Communications Secretary Vicente Rivera yesterday warned that a proposal to overhaul Executive Order (EO) 219, the law which liberalized the airline industry, is not as simple as leveling the playing field for the sake of the national carrier, Philippine Airlines, Inc. (PAL).

"We will have to balance this matter as to which is good for the country and what is good for the national carrier. Babalansihin natin yan (We will weigh things)," Mr. Rivera said in an interview in Malacañang.
"If the problem is the national carrier, we will see what have to be threshed out, resolved, rectified,” he added.
Finance Secretary Edgardo Espiritu last Friday said the government is planning to review EO 219 which was signed by former President Ramos in 1995 "to level the playing field” for PAL against domestic and foreign airlines.

Mr. Espiritu pointed out that the airline's financial woes have worsened with the liberalization of the industry which paved the way for the entry of more local carriers and international airlines.
He even blamed the previous administration for "discriminating" against PAL by signing a number of bilateral agreements which he claimed had proven to be disadvantageous to the airline.
Mr. Rivera, however, refused to categorically answer whether he thinks the industry is too overcrowded now with seven local carriers flying various routes. He stressed, however, that the sector's liberalization should not be reversed just because the flag carrier is losing money.

He also said bilateral agreements entered into by the Philippines with other countries which provide international airlines access to the country and vice versa have to be reviewed.
"We need to study that (bilateral agreements) and evaluate the situation, the pros and cons, advantages and disadvantages as to who we are going to beat, the international carriers or the Philippine carrier,” the Transportation and Communications chief added.

Chinese-Filipino magnate Lucio Tan owns 70% of the flag carrier, 14% is held by government financial institutions such as the Government Service Insurance System, Development Bank of the Philippines and the Land Bank of the Philippines, and the remaining 16% is controlled by minority stockholders.
President Estrada last Friday also issued an administrative order creating an interagency task force which will be headed by Mr. Espiritu. The body has been tasked to come up with a plan to rescue PAL from its financial woes and labor problems.

The airline is saddled with a $2.1-billion debt to local and foreign creditors and has dramatically reduced its fleet to 21 from 54 air planes, translating to sales of P30-P35 million from P100 million,
Mr. Rivera, as Transportation and Communications chief, is also a member of the task force. However, he said he still has no clear idea as to what the task force will do since he was only informed by Mr. Espiritu of his appointment to the body yesterday.

He told reporters that they were scheduled to meet late yesterday afternoon.@