Palace Upbeat on Happy Ending to Keep PAL Flying

The Journal

Tuesday, December 29, 1998

Negotiation to save Philippine Airlines will reach a happy conclu­sion next January, President Estrada predicted yesterday.

Mr. Estrada said he remains hope­ful that there will be a settlement with Hong Kong-based Cathay Pacific Air­ways, "hopefully by next month.”

"They're still negotiating and I hope they will settle it. Hopefully by next month,” he said when asked by reporters at the Ninoy Aquino International Airport (NAIA) about the progress of the negotiations.

The Chief Executive reiterated his administration's commitment to save PAL "at all costs," saying too much is at stake if the airline shuts down.

He explained that among the air­lines now operating in the Philippines, only PAL has the capability to fly to all domestic routes and carry passen­gers and cargoes to these destinations.

"We are trying our best to save PAL because if PAL closes, all busi­nesses will be affected," the President pointed out.

Mr. Estrada was at NAIA to lead government officials in welcoming overseas Filipino workers who came home for the holidays.

Last week, Executive Secretary Ronald Zamora disclosed that talks are still ongoing between PAL and possible strategic partners, including Cathay.

Zamora told in a radio interview that the parties are keeping the talks under wraps because they do not want any side issues to surface at this time.

However, he also reiterated the Estrada administration's position that the government will not take over PAL and assume its huge debts.

Earlier, Cathay announced it was pulling out of talks following specu­lations that a takeover of PAL man­agement may violate the 1987 Con­stitution.

Under the Constitution, foreign companies can own only up to 40 percent of any business fin in the Philippines.

Negotiation for a possible strate­gic partnership is one of two options to save PAL. The other is an infusion into the airline of part of the $30 billion Miyazawa Fund initiative for crisis-hit economies in East Asia.

The Philippines stands to get $3 billion in short-term loans and an­other $3 billion in long-term loans from the fund, according to Finance Secretary Edgardo Espiritu.

Espiritu also said the request to use the Miyazawa Funds must come from the government task force for the rehabilitation of PAL, the Securi­ties and Exchange Commission, and PAL management.