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.