Three major Asian carriers have signalled a new round of ownership changes to help fund up to $9 billion of aircraft orders. Garuda has begun a major restructuring ahead of privatisation, Philippine Airlines plans a public share offering, and Malaysia Airlines may sell 10 per cent of its stock to employees.
A recent government announcement said Garuda would be privatised by late 1996 or early 1997, but the carrier's president-director, Soepandi, foresees a slower process starting with a private placement next year and a public float later. Indonesia's state enterprises director-general, who would give the final go-ahead, says the timing will depend on how fast Garuda's performance improves.
The Indonesian flag carrier has announced four major restructuring steps:
* A $475 million capital contribution by the government;
* Restructuring a $1.6 billion Boeing aircraft order by converting some B747-400 orders to options and switching others to smaller jets;
* Plans to eliminate 4,300 jobs over the next five years, with middle management already halved;
* Plans to sell up to 60 per cent of wholly owned subsidiary Aerowisata, which operates six hotels.
Jakarta's capital contribution, made in the form of a debt assumption, reportedly reduced Garuda's debt:equity ratio from 5:1 to 1.2:1, and followed a major shakeup of Garuda's board that brought in a new finance director.
The restructured Boeing order converts high capacity and long range aircraft into smaller jets with regional ranges. Garuda replaced an earlier order for six B747-400s and 11 B737s with a new order for six B777-200s, 17 B737s, and options on six 747-400s. All widebody deliveries are delayed until 2000.
Meanwhile 22 pilots, many of them senior captains, have resigned from Garuda after being told of a plan to restrict salary increases. The pilots are all joining Korean Airlines.
PAL's chief financial officer Jaime Bautista says the carrier plans to offer shares on Manila's stock market as soon as it meets financial regulations, which require it to report a profit for three consecutive years first.
Bautista says PAL has yet to decide how much will be offered for sale but he forecasts PAL will break even in the current year to March 1997 and move into profit in 1997/8. The initial public offering would help fund a new expansion programme, including the US$3 billion of new aircraft already announced.
Bautista says plans for the share sale were included in a recent agreement between PAL chairman Lucio Tan and the airline's government shareholders. That accord puts Tan in overall charge, ending a three-year tussle for control.
Tan has invested US$152 million in PAL to help buy aircraft and repay debt. 'With the investment, Mr Tan will have 56 per cent of the company,' says Bautista.
Malaysia Airlines is considering offering 10 per cent of its stock to staff to help cover capital funding requirements involved in its US$4 billion fleet re-equipment programme. Majority shareholder Tajudin Ramli says MAS also is considering a secondary listing on a foreign stock exchange, probably London.
Ramli has said that 70 per cent of the finance for 25 new B747-400 and B777 jets ordered from Boeing would come from internal resources. Placing 70 million shares with the airline's 20,000 employees would generate around $200 million. In May the carrier raised around US$200 million through a private placement of 70 million shares to institutional investors in Europe, Asia and North America. This amounted to 10 per cent of MAS' share capital and reduced its debt:equity rato from 1.8:1 to 1.6:1. The company currently has US$2.4 billion in debt.
D Knibb/T Ballantyne
Source: Airline Business
