Monday, December 28, 1998
NEWS
The Estrada administration has formally requested the Japanese government to help bail out the ailing Philippine Airlines (PAL) through the Miyazawa initiative.
The Department of Finance, which submitted the request to the Japanese government, proposed a grant of a $150-million loan under the Miyazawa Fund, to be released through the Japan Import-Export Bank to finance PAL’s rehabilitation.
Finance Secretary Edgardo Espiritu earlier raised the possibility of another shutdown by PAL if the government failed to obtain financial assistance for the flag carrier, or if PAL Chairman and majority stockholder Lucio Tan was unable to find other investors ready to infuse fresh capital.
Espiritu said the Japanese government still has to send word if it’s amenable to the proposal. He said the aid falls under the objective of Japanese Finance Minister Kiichi Miyazawa to help ailing firms stuck by the Asian financial crisis restructure their debts.
He said the scheme has been done in Thailand and Indonesia, which were also bodily affected by the regional economic crunch.
Espiritu also said the Japanese government was expected Christmas to decide on whether PAL was qualified for financial assistance under the Miyazawa Fund.
Sources said the Japanese government was reluctant in helping revive PAL.
The Philippines stand to get at least $3 billion from the $30 billion Miyazawa Fund for crisis-hit Asian economies.
The Estrada administration hoped to pump part of the money into PAL’s rehabilitation after talks with prospective strategic partners collapsed.
Espiritu noted, however, that PAL may have to go public to qualify for the fund.
PAL is not yet listed in the stock exchange.
The 57-year-old PAL grounded its local and domestic planes for two weeks starting Sept.23, weighed down by a 52.1 billion debt aggravated by a crippling 22-day pilots’ striking in June.
However, it partly reopened last October after securing a commitment from its labor union on a 10-year strike moratorium.
PAL later began negotiations with Hong Kong-based Cathay Pacific Airways for a 40-percent stake.
Cathay eventually pulled out from the talks over disagreement on management issue.
Meanwhile, PAL submitted a $150 million rehabilitation plan to the Securities and Exchange Commission to keep airborne without a new strategic partner.
Mr. Estrada said he was exerting last-ditch efforts to lure back Cathay Pacific into the negotiating table with PAL even as he admitted differences between the two airlines appeared to be irreconcilable.
“I am not giving up easily,” the President said as he appealed to both parties to reconsider their respective positions.
A source, who was close to the Cathay Pacific team during the discussions, charged that the present shareholders of PAL appeared to be the biggest stumbling block in the negotiations.
“The Philippines is a difficult place at the best of times, even if we had a cast iron, solid local partner,” the source said.
“The (local) airline industry is very political, very high-profile and everybody is involved in it. The only way you can possibly do it here is with an absolutely rock-solid partner, and I’m afraid these guys just don’t qualify, ” the source added.
On the other hand, a source at PAL claimed the talks bogged down because Cathay wanted complete management control without legal liability.
Talks with other foreign airlines, including Northwest Airlines of the United States, also fell through.
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