PAL backs spin-offs, seeks open skies limit

PAL backs spin-offs, seeks open skies limit

MANILA (Reuters): With its equity problems out of the way, Philippine Airlines (PAL) is getting down to business -- pushing for a revision of the country's open skies policy and the sell- off of non-core businesses, officials said on Friday.

PAL officials said the government has promised to consider restricting the number of foreign airline flights servicing the Philippines, which have posed stiff competition for the financially ailing flag carrier.

"The government has already expressed the assistance they would give Philippine Airlines in that regard," PAL president Avelino Zapanta said at a news conference.

PAL, which has US$2.2 billion in debt, would have been liquidated if $200 million in fresh equity had not been forthcoming by the end of Friday.

But chairman Lucio Tan deposited the money in PAL's bank accounts only hours before a deadline expired.

Zapanta said the government has begun to tighten up the issuance of permits to other airlines and added that the airline was talking with Lufthansa on a possible consultancy and about the spin-off of some non-core businesses.

"We are in discussion with Lufthansa on various subject matters, particularly related to our spin off of maintenance and engineering and some other areas of the airline's operations," he said.

Other airline officials said no management changes were envisaged, confirming that Tan would remain as chief executive officer and that the team advising PAL on its rehabilitation, led by former Cathay Pacific executive Peter Foster, would also keep their posts.

The spinoff of maintenance and engineering businesses would mean the retrenchment of about 1,600 people, but Zapanta added he expected no widespread job losses within the airline.

He said the airline employee unions have given their commitment to 10 years of labor peace with their acceptance of new shares offered by Tan.

Tan put in $100 million of the required equity himself and procured the rest from friends and associates.

The Securities and Exchange Commission (SEC), overseeing the rehabilitation of the airline, said the immediate next step would be to change the interim receivership committee into a permanent receiver, which would be done on Monday.

"The commission will be issuing an order creating a permanent rehabilitation receiver whose task it will be to monitor and supervise very strictly the implementation of the plan," SEC chairman Perfecto Yasay said.

PAL, which reported 8.08 billion pesos ($212.63 million) in losses in the 1997-98 fiscal year (April-March) and over 10 billion pesos in losses in the nine months to December 1998, projected in the plan that it would return to profit in the 1999/2000 year itself.

A major part of the plan included the restructuring of its debt, the reduction of aircraft and routes, and the sale of non- core businesses including maintenance facilities.