PAL's Closure Triggers Scramble in the Industry

Manila Bulletin
Sunday, September 20,1998

Transportation authorities scrambled last Friday to look for alternatives to plug the void to be left by the closure of beleaguered Philippine Airlines (PAL) next week, as President Joseph Estrada vowed to save the 57-year-old firm.

Government officials warned the closure of Asia's oldest airline will be "disastrous" for the country's battered economy, while other foreign and local airlines expressed shock over the announcement PAL is shutting down operation at midnight of Sept. 23.

Transportation Undersecretary Willie Evangelista said the government has already come up with three possible schemes aimed at minimizing public inconvenience with PAL’s scheduled closure.

The options are to allow foreign airlines to service domestic routes, to authorize local airlines to fly PAL's domestic routes, and the third and most radical scheme is for the government to take over Asia's oldest airline.

“The third option is our last option," Evangelista said. "It would not be easy to do this. We first have to look into the financial record of PAL."

Congressman Mar Roxas, Majority Floor Leader in the House of Representatives, said the scheduled closure of PAL will be "disastrous" for the country's economy as the delivery of goods and services nationwide will be affected.

"A closure of PAL, which is about 85 per cent of the market, would be disastrous particularly to our countrymen outside of the urban areas," he said. "Many goods and services will not be reaching other parts of the country. People will be separated from their families. It will be disastrous."

While smaller Philippine airlines are expected to take on some of PAL's domestic routes, the services of these young companies are still not as extensive as PAL's domestic operations. Such firms include Cebu Pacific Air, Grand Air and Asian Spirit.

PAL said it was shutting down due to heavy financial losses caused by recent strikes and the currency crisis. The decision also followed the rejection by its union of a stock proposal intended to keep the ailing firm from collapsing.

"Management has exhausted all efforts to keep the company in operation," its notice of closure said. "Unfortunately, the insurmountable burden of continued losses has become too heavy for the company to bear."

"Closure is inevitable because this is the only way to preserve the company's assets to ensure their orderly liquidation and disposition to creditors and other claimants," the notice added.

Estrada, who ruled out a bailout following the closure announcement Thursday, met with the management of PAL to convince them not to shut down domestic and international operations.

An 11th-hour meeting with PAL and union officials failed. The Chief Executive is also scheduled to meet union officials on Monday.

"I’m keeping my fingers crossed," Estrada said. "The closure will not only affect PAL but the whole country and several thousands of employees."

The closure of PAL, the largest Philippine firm to cease operations amid the financial crisis plaguing Asia, will leave at least 8,000 workers jobless. Customers to be affected have been told to get refunds for their tickets and make new arrangements.

Cebu Pacific assured the public it was prepared to fly commuters to local destinations. According to Cebu Pacific Vice President Diego Garrido, the airline has embarked on an expansion program that would help sustain the country's air transportation industry.

"Cebu Pacific is definitely poised and capable to capitalize to take over key routes," Garrido said.

Garrido said they are studying the possibility of going international, although such a plan "can be suicide due to the economic crisis". (DPA)