Paul Lewis/WASHINGTON DC
Philippine Airlines (PAL) is again involved in a desperate search for fresh financing, as Northwest Airlines shows little interest in coming to the rescue of the stricken national carrier after Cathay Pacific Airways pulled out of investment talks.
Cathay has officially confirmed that it has abandoned talks on a possible investment in PAL after it became "-clear that certain critical issues could not be resolved". The Hong Kong carrier had been negotiating to inject $90-$100 million into PAL in return for a 40% equity stake and complete management control.
The talks are understood to have run into difficulty over Cathay's demands that, as a precondition, PAL shed a further 3,000 staff from its heavily depleted 8,500-strong workforce. According to Cathay sources, the talks were also undermined by a distrust of chairman Lucio Tan and various other problems within PAL.
In a last-ditch effort either to put pressure on Cathay to compromise or find an alternative suitor, Tan met Northwest chairman Gary Wilson in the USA. Airline sources describe the get-together as little more than a "courtesy meeting". Northwest has not carried out a full due diligence of PAL to the extent that Cathay has and its only proposal was a one-year trial involvement.
PAL is left facing a 7 December deadline to present a rehabilitation plan to the Philippine Securities and Exchange Commission. The airline owes more than $2.1 billion and, because of a series of industrial disputes, has already been forced to shut down once this year. Without an urgent injection of new capital, further cuts and suspension in services appear inevitable.
Source: Flight International
