Just when it seemed that Philippine Airlines was on a plausible road to recovery, the road has been spiked by the carrier's major shareholder.
Controversial beer and tobacco mogul Lucio Tan is one of the wealthiest men in the Philippines. He already owns about 70% of the Philippines national carrier, and is offering to provide the $200 million cash infusion it desperately needs to lift the threat of liquidation hanging over it since mid-1998. The deal is that whoever provides this money will get a 90% share. Tan is at the head of a queue of one to take up this offer, which would give him almost absolute control of PAL's stock.
This in itself is enough to raise eyebrows among the airline's 9,000-plus creditors, who would have preferred to see another airline invest the cash, though it seems that none are willing to take the risk. But now Tan seems to be turning what could have been a happy ending - that the airline had found its long-sought source of funding - into something close to a farce.
Tan resigned as chief executive in January under pressure from creditors demanding management changes, although he kept the chairman's post. Now, in offering to save the airline, he has reappointed himself as chief executive and removed a respected chief operating officer, Jaime Bautista, among others. According to the airline's biggest creditors, he is demanding the renegotiation of the current rehabilitation plan for the airline - against the creditors' wishes - as well as the withdrawal of fifth freedom rights for foreign airlines, and other conditions.
There is speculation that Tan's increasing influence may push out the team of ex-Cathay Pacific executives brought in to advise on the rehabilitation process. Since their appointment in January, the advisors have enjoyed strong support from the creditors - though not, it is understood, from Tan.
Tan's actions are extraordinary. In his belief that he is the only person qualified to be at the helm as PAL navigates these exceptionally dire straits, he has placed himself directly at odds with people who have the right to seize most of the airline's fleet. PAL has been under the protection of the Philippine Securities and Exchange Commission since last June, but the SEC's jurisdiction ends at the border. In January, it seemed as if the airline had fended off the creditors' threats to repossess 19 of PAL's 22 aircraft. Now that threat is back with a vengeance.
Unless Tan has some ace up his sleeve, he risks undermining the rescue efforts of PAL's management and advisors in his desire to undertake the recovery his own way. In doing so, he is in danger of steering PAL from the intensive care unit straight to the morgue.
Source: Flight International
