PAL May Be Forced to Close Anew – Espiritu

The Philippine Star

Friday, December 25, 1998

Business

By MARIANNE V. GO

Finance Secretary Eduardo Espiritu has raised the possibility that the Philippine Airlines (PAL) may have to close again if government fails to obtain assistance for the flag carrier through the Miyazawa Fund and if businessman Lucio Tan is unable to find other investors for the ailing airline.

The Department of Finance (DOF) has included in the government’s official request to the Japanese government under the Miyazawa Fund a $150 million loan through the Japan Export Import Bank (Jeximbank) of PAL’s rehabilitation program.

Sources however, said that the Japanese government is lukewarm to the idea of bailing out PAL and has subtly informed the DOF that extending assistance to  PAL is not among the priority projects that the Japanese government wants to provide immediate funding for.

Espiritu said the Japanese government still has not given any definite word if it is amenable to extend financing to PAL under the Miyazawa Fund.

The finance secretary had earlier said that the Japanese government would be able to give notice before Christmas on whether PAL could be eligible for financing under the Miyazawa fund.

Espiritu will be out of the country until Jan 3.

Espiritu acknowledged that if Pal does not qualify for assistance under the Miyazawa Fund, its owner businessman Lucio Tan would have to look for investors.

But at the same time, Espiritu also confirmed that creditors of PAL will not settle for anything less than a strategic partner/investor for PAL.

Espiritu confirmed that at the moment there are no foreign airlines or strategic partners interested in buying into PAL.

The finance chief agreed that creditors of PAL would not approve of the rehabilitation plan of PAL if there is no new management team for the ailing airline.

Espiritu firmly stressed that “there will be no government bailout of PAL. If it has to close, it has to close.”

He also confirmed that PAL has “voluntarily surrendered” another aircraft, an Airbus to its European consortium of creditors.

PAL’s existence is being threatened anew following the rejection by its European creditors of its submitted rehabilitation plan. Without the approval by the creditors of the rehab plan, PAL may be forced to shut down anew.