RP seek new carriers ahead of PAL closure

RP seek new carriers ahead of PAL closure

MANILA (AFP): The Philippine government on Monday dangled new
aviation franchises as it scrambled to avert economic disruptions
threatened by the scheduled closure of the debt-ridden flag
carrier.

President Joseph Estrada's administration is "actively seeking
the entry of new investments into domestic airline routes," be
they "from existing players and/or from new ones," presidential
spokesman Fernando Barican told reporters.

Philippine Airlines (PAL), Asia's oldest air carrier,
announced last week that it would cease operations on Wednesday
after unions rejected an agreement that would have ensured a
strike-free environment for 10 years.

The 10-year suspension of a Collective Bargaining Agreement
would have enabled PAL to recoup losses, pay off its 2.1 billion-
dollar debt and attract new investors.

Philippine law prevents foreign airlines from plying domestic
routes but Barican said "the president is prepared to fast-track,
consistent with public safety, the approval process to speedily
get enough planes as are needed flying domestically should PAL
close on Wednesday evening."

Estrada had on Thursday rejected calls by union officials and
several legislators for the government to take over the airline,
in which it maintains a minority stake.

"That is not feasible," he said over radio station DZMM in an
interview.

"First of all, we don't have the money. Second it's a
complicated process. Even if we had the money we would first have
to go through Congress and that takes time."

Barican added: "The president believes that a commercial
solution, led by the private sector, -- with public sector
support -- is better than a legal one enforced by government
fiat."

The 57-year-old PAL accounts for about 80 percent of domestic
traffic in the Philippine archipelago. Three other airlines have
set up shop since the industry was deregulated in the early
1990s, but none could approximate PAL's extensive network and
flying assets.

Estrada warned Monday that a closure of the flag carrier
"would hurt the whole country" since the airline is a key mode of
transport of people and cargo, and tourism.

Barican said that if need be, the Philippine Air Force would
be ordered to "carry temporarily the mail and other essential
documents important to the financial sector and the public to
destinations where PAL used to fly."

Estrada said the government was pursuing mediation efforts
with the PAL management and its unions.

Union members will be holding a non-binding "referendum" later
Monday to reconsider PAL chairman and majority shareholder Lucio
Tan's offer of a 20 percent stake in the airline and three board
seats, he added.

The president said he threw in an offer of a fourth board
seat, one of several now held by the government.

The results of the secret vote should be known in a couple of
days, Barican said. Estrada also said he was meeting with union
officials later Monday.

The president criticized the PAL unions for their
intransigence after their officials declared that they were not
prepared to give up the workers' rights.

"How can you surrender something when Philippine Airlines is
already closed?" he said. The unions should "make sacrifices," he
added.

PAL sustained losses of 2.2 billion pesos (US$50 million) in
the three months to June when it was crippled by a 22-day pilots'
strike.

This forced the airline to downsize and seek protection from
creditors.

If it ended operations as scheduled Wednesday it would become
the first flag carrier to succumb to the Asian financial crisis.