The spectre of fleet repossession is once again looming over Philippine Airlines (PAL), with the carrier's leading creditors warning that proposed changes to its rehabilitation plan are "not acceptable".
Those changes stem from the assumption of direct management control over the airline by its former chief executive Lucio Tan. A letter from US Export Import Bank secretary and deputy general counsel Elaine Strangland says the creditors "reserve all their relevant lessors' rights to terminate the leases and repossess the aircraft concerned and seek the necessary remedies".
The letter is backed by export credit agencies (ECAs) of France, Germany, the UK and the USA.
PAL seemed to have laid to rest repossession threats in January, but is struggling to convince the creditors that its rehabilitation efforts will not be upset, insisting the institutions have been "misled" about the changes. The airline says their "fears have no basis in fact".
Tan removed chief executive Luis Virata and reappointed himself to the post on 19 April, having been forced to step down in January. The move was announced at a board meeting where he promised to put together a group of investors to provide an essential $200 million cash injection into the airline.
The ECA letter says that among the conditions Tan is demanding in return for the cash are that the government should withdraw fifth freedom rights for foreign carriers, that the conditions of the existing rehabilitation plan should be renegotiated and that labour agreements should be renegotiated.
The ECAs say these conditions "cannot realistically be implemented" by the 4 May deadline for the plan's approval. The cash injection must be made by 4 June.
Tan's tactics may also have jeopardised PAL's five-year contract with Regent Star, the consultancy founded by ex-Cathay Pacific executives to help turn the airline back from the brink of liquidation.
Source: Flight International
