Estrada gov’t creates PAL rehab task force

Business World
Wednesday, September 2, 1998
Patrisha F. de Leon

The Estrada administration has created an interagency task force to help cash-trapped Philippine Airlines. Inc. (PAL) gets back on its feet.

BusinessWorld sources, privy to the formation of the task force, disclosed the committee will be headed by Finance Secretary Edgardo Espiritu. The newly created agency has received instructions to draft recommendations by Friday.

Sources revealed the task force is set to hold marathon meetings to discuss all problems concerning PAL for the whole week in order to immediately prepare the flag carrier expand its fleet further under a newly hatched "Plan 25”.

However, the sources explained the details of the new plan are still being finalized.

At present, PAL is undertaking "Plan 21” which provides for flying 21 of its 54-aircraft fleet.

Sources said the task force has already met with PAL chairman Lucio Tan last Monday where the latter presented his plans of transferring 20% of the flag carrier's shares to its employees.

A union source added that during the Monday meeting, the task force had already formed a consensus that PAL's labor problems should first be resolved before other matters could be discussed.

Aside from Mr. Espiritu, the source said other members of the task force include Labor Secretary Bienvenido Laguesma, Foreign Affairs Secretary Domingo Siazon, Tourism Secretary Gemma Cruz-Araneta, and a representative from the Department of Transportation and Communications.

As of yesterday, the task force had begun meeting with the heads of PAL's pilots, flight attendants and ground crew unions to work out possible settlements to their respective cases.

Of the three, it was only the PAL Employees Association (PALEA) — which represented the flag carrier's ground employees -- that was able to reach a dispute settlement with the PAL management.

The union source added that even the dismissed members of the Airline Pilots Association of the Philippines (ALPAP) stand to receive their own separation benefits if all goes well with the interagency task force.
It will be recalled that it was the pilots' June 5 strike which led to the flag carrier's near closure.

In a related development, PAL has reported a P2.2-billion net loss from April-June, the first quarter of its fiscal year 1998.

The amount is three times more than the P502.9-million loss incurred in the same period of 1997, according to unaudited financial statements PAL disclosed yesterday to the Securities and Exchange Commission (SEC). PAL attributed this lackluster performance to a P1.3-billion drop in its revenues equivalent to a 15% slide to P7.67 billion. The sharp drop in revenues was due mainly to the labor strike staged by the pilots association in June, which paralyzed 69% of PAL's flight operations.

Higher foreign exchange losses, financing charges, and other non-operating expenses also accounted for the firm's substantial net loss during the period under review, said PAL.

During the period, PAL's foreign exchange loss totaled P80.58 million, a reversal from foreign exchange gains of P11.34 million in 1997. Financing charges likewise registered an alarming increase ballooning to P1.147 billion, almost twice the P407.71 million it shelled out in 1997.

Equally alarming was PAL's disclosure that its total liabilities jumped "by P4 billion” between June and March this year. "This was due to the increase in obligations under capital lease, also on account of foreign exchange adjustments, and increase in accrued expenses,” PAL said. The financial statement, however, did not have an entry on the total liabilities it incurred during the period. But its assets stood at P92.8 billion as of June, as against P91.1 billion in March this year.

“The increase of P1.7 billion was brought about mainly by the increase in flight equipment due to the effect of foreign exchange adjustments on loans obtained in the acquisition of new aircraft,” said PAL.
Last June, PAL filed a petition before the SEC seeking the creation of a rehabilitation receiver to help it pay off its debts.

PAL blamed its prolonged labor problems and its $4-billion refleeting program among the major reasons for its financial difficulties. According to documents filed with the SEC, PAL's biggest creditor is Chase Manhattan Bank and its Manila-based affiliate Chase Manhattan International Finance Ltd. Their total exposure amounts to some $244 million. Of the figure, some $182.432 million is unsecured.

Among local creditors, the Philippine National Bank (PNB), which owns a minority stake in PAL, is the biggest lender with its exposure reaching more than $75 million. At present, all claims against PAL had been indefinitely suspended by the SEC pending the creation of a rehabilitation plan to be drawn up by an interim receiver body appointed by the SEC.