PAL's Moment of Truth

 Manila Bulletin
Sunday, September 20, 1998
Never on a Sunday
By Rene Espina Former Senator

IN the past I wrote about how important PAL is to the national economy. Let me quote data from various sources: According to the Department of Tourism, the closure of PAL will drastically reduce tourist traffic to the Philippines and to its out-lying island destinations including other livelihood opportunities that tourism generates. Based on DOT data, the national economy stands to lose about P259 million daily, in terms of tourism revenue with PAL's closure. P259 million times 365 days in a year equals a whooping P94.535 billion. Direct and indirect employment from tourism industry accounts for 8.71 percent of total manpower in the Philippines or roughly 2,350,000 jobs. DOT statistics indicate that PAL’s pre-crisis average international seat availability serviced 18 cities abroad with 122 flights per week which translated into 5,800 passengers a day or 36,534 a week. After the crisis, the airline serviced only six international routes representing 36 flights that carried an average of 11,058 passengers per week.

From the Department of National Defense, Sec. Mercado states that out of the 13 C-130 planes that it has, only three are in flying condition,. the rest are grounded for lack of spare parts. As for the DND Fokkers which were acquired by the PAF from PAL... none of them are in flying condition.

From the academe, Malou Neri, a UP professor of Tourism warned that the other smaller airlines flying domestic routes did not have the fleet size, time flexibility and routing to replace PAL.

From ATO (Air Transport Office), it has suspended one of the smaller airlines for failure to comply with safety standards and requirements specifically for operating procedures and aircraft maintenance. Let us recall that at one time or another, all the three smaller airlines were suspended from flying by ATO for serious infraction involving safety, maintenance and, operating procedures. Another smaller airline has cancelled its flights because or unpaid insurance and fuel bills, its employees said. The shut-downs of two of the three smaller airlines pose a very serious threat to the country's economy because it has left many areas without air service.

We must remember that ages ago PAL was owned and controlled by the government. I would like to believe that when the late Don Andres Soriano was managing it, PAL was indeed the only Asian airline worth mentioning. Unfortunately, with the PAL crash in Rome, then President Magsaysay decided to shut down PAL's international operations. PAL then concentrated in domestic operations which helped in developing the economy but more importantly, it united our country and gave our government the extra airlift capability for national emergencies. Later during President Macapagal's tenure, PAL was privatized. Mr. Benny Toda took over. After a series of (Hawker Siddely) plane crashes and due largely to financial problems, during President Marcos' regime, the Philippine government again took over control. Then GSIS manager Roman Cruz became its CEO. That was the first time that PAL again became world class with the acquisition of 747 planes that had "flying" beds in first class. Now, with privatization, PAL is again in a comatose condition.

Specially for the People of Visayas and Mindanao, to stop air service by PAL to their areas is worse than cutting off both of their legs. It's almost like cutting their necks, because of the devastating economic effect on their lives. To put it bluntly, we cannot afford during this economic crisis to close PAL for reasons already stated. Much more, I believe that every Filipino is entitled to the safest airline service possible. Just save a few pesos, can you imagine flying in an aircraft that is 20 years old which is operated by a smaller airline? Is human life really that cheap?   

I regret to say that this administration must have political will to close down all other airlines and restore the monopoly that PAL used about to enjoy. Based on past and present history, a third world country like the Philippines cannot afford a free and open competition in so vital an industry. For years that monopoly provided Filipinos good, reliable air service all over the Philippines, from Tawi-Tawi to Batanes, at comparatively cheap air fares.

PAL's main headache is the $1 billion dollar loan for the new airplanes. Since Mr. Lucio Tan has given up, why doesn't the government take over PAL by assuming or guaranteeing the said loan in exchange for shares of stock. This arrangement would not need any immediate disbursement of funds, furthermore, the loans could be renegotiated. The lenders would rather have a Philippine government guarantee, rather

than a paper issued by PAL. Other ideas could be explored. I’m sure that among Pres. Erap's advisers, there are many who could provide the managerial and financial solutions to PAL's problems. But let me repeat — the key to this is the return of PAL's monopoly. Pres. Erap should appoint a no-nonsense PAL CEO/COO who in the pursuit of the agenda for a meaner and leaner PAL, has the guts to face down politicians, businessmen, cronies and yes, even labor union leaders who have a political agenda.

Finally, PAL's moment of truth is also Pres. Erap's. How he deals with this problem will characterize the capabilities of his Presidency. If he solves the PAL problem satisfactorily, the investors’ confidence will be enhanced. If not, he might as well forget about his economic agenda.