Two Lufthansa units are in talks with Philippine Airlines (PAL) on business tie-ups as the troubled Asian flag carrier continues the battle to rehabilitate itself.
Lufthansa chairman Jürgen Weber says Lufthansa Technik has "intensified" talks with PAL on a possible investment in its engineering operation at the carrier's Manila base. At the same time, Lufthansa Consulting continues to study a contract for a restructuring programme, adds Weber.
Lufthansa Technik vice-president of marketing and sales, Karl Rupprecht, is "confident" about an engineering investment, although he will not say whether the company is interested in buying PAL's maintenance operation outright or whether a joint venture is being discussed.
Lufthansa Technik has held on-off talks with the Philippine carrier since early last year about setting up a joint venture aircraft maintenance company in the Philippines.
The two parties confirmed the talks in April last year - two months before PAL went into receivership with debts of more than $2.2 billion. Talks were soon suspended, but restarted when PAL began to implement a rehabilitation plan ordered by the Philippine Securities and Exchange Commission (SEC).
The plan, approved by the SEC in May, provides for new equity investors, a smaller fleet and scaled-back route network, the resumption of debt payments to creditors, and the sale of non-core businesses.
It also provides for a $200 million cash injection. The airline's chairman, Lucio Tan, secured the new equity just before a 4 June deadline set by the SEC and key creditors.
Tan, one of the richest men in the Philippines, provided $100 million of his own, and $30 million came from two Manila-based holding companies closely linked to him. PAL identified a Hong Kong-based company, Top Wealth Investments, as the source of the remaining $70 million, but analysts in the former UK colony say they have never heard of it.
Weber says that, in Lufthansa Consulting's case, the company has "a two-month period to come up with a proposal for a consulting contract and, after that, a decision will be taken on whether it is worthwhile".
But he says it is "absolutely wrong" to assume that Lufthansa Consulting might accept a contract to manage PAL. The deal could involve an overall restructuring of PAL through a contract similar to one drawn up with Garuda Indonesia last year, under which it is working to reduce costs by improving fleet and yield management.
Source: Airline Business
