Saving PAL

The Philippine Star

Monday, December 21, 1998

Demand and Supply

By BOO CHANCO

So it turns out government will bail out Philippine Airlines after all, The Miyazawa fund is being tapped to provide $150 million (P6 billion) to help rehabilitate PAL. The National Development Co. (NDC) is being looked at as the vehicle through which government will channel the proceeds from the Miyazawa fund to PAL.

Iran understands the obvious desperation on the part of government to rescue PAL. Talks with Cathay Pacific are over. Northwest Airlines does not seem inclined to even start talking. And the nervous creditors of PAL seem eager to pull out whatever assets they can salvage. For now anyway, it seems rehabilitating PAL will have to be a Philippine affair — Lucio Tan's and the Estrada administration's.

Saving PAL is an emotional and symbolic task. As our flag carrier for over 50 years, losing PAL reflects as much on us as a nation as it will for its current owners and the administration. Even if its performance may have been spotty at limes, seeing a PAL plane in a foreign airport is always a source of pride for a Filipino. Having Filipina stewardesses’ take care of you on a taxing long flight eases the pain of travel.

Pulling more money into PAL given its troubles, does seem an exercise in futility. But if we must do it somehow, government must make sure the airline will finally be able to fly. Outside of the new capital requirement there were two items in the rehabilitation plan of PAL that caught my attention and which government can easily implement if it truly wanted to help save the airline.

First is that item about government settling its overdue payables to PAL. I don't know how it is now with the Estrada administration but past administrations are notorious for delaying payment to PAL. Imelda Marcus was of course, the worst of the lot. She takes over PAL aircraft anywhere in the world and forgets to pay. There was this story about how the Toda family lost control of PAL: they sent Imelda a collection notice.

I wonder if ex-President Ramos paid all his PAL bills, given that he was so footloose during his term, making a record number of nips all over the world. If government pays its bills, PAL will in turn be able to liquidate some of its overdue bills.

Secondly is the matter of regulation. The Civil Aeronautics Board had been giving away landing rights to foreign airlines without at the very last, assuring reciprocity. The CAB had been so indiscriminate in issuing so called temporary operating permits to the point that it is reasonable to suspect corruption in the process. Since 1993, more than 500,000 seats per year in fifth freedom rights (right to pick up passengers in intermediate points and fly them to Manila) had been given to foreign airlines. This has siphoned off traffic – mostly Filipino overseas workers and businessmen that would have otherwise flown PAL. Other countries, including Japan and the United States have been more protective of their carries. We should be too.

Giving PAL access to the Miyazawa fund is one thing. Making sure the country gets maximum benefit for this privilege is another. All agencies of government must get its act together. Saving PAL, if that’s the path we want to like, must be carried out with planning, coordination and precision. Or else, why bother?