Brent Hannon/MANILA
Philippine Airlines (PAL) will reduce its fleet to 13 aircraft and become a strictly domestic airline unless it can find an investor willing to take a 40% stake. If it finds an backer, it would keep 22 aircraft and fly overseas routes, says PAL senior vice-president of finance Jaime Bautista.
The PAL executive confirms that Northwest Airlines and Cathay Pacific are the leading contenders for the shareholding, although neither has made a formal offer. A 40% stake is reckoned to be worth up to $130 million.
Lucio Tan, who holds a 57% share of PAL, is keen to transfer its management to another carrier. "He wants the airline to be managed by airline people, so whoever the strategic partner is will manage the airline," says Bautista. Tan will not sell his shares, says Bautista; the third-party investor would make a direct equity infusion into PAL.
The backer could control a majority of the 15 seats on PAL's board of directors. "It depends on how much money they will invest," points out Bautista.
PAL suffered a net loss of $130 million from June, when its troubles began with a pilots's strike which lasted to the end of September. Bautista projects an additional loss of $40 million in October. The airline was grounded from 23 September to 7 October.
PAL has returned four A340-200s and four A300B4s to Airbus, and seven of 10 Fokker 50s to Dutch leasing firm Aircraft Financing and Trading, and is trying to return its last three Fokkers. The airline has two contingency plans, says Bautista. If an investor takes a 40% share, PAL would reduce its fleet from the former level of 54 aircraft to 22t: four Boeing 747-400s, two A340-300s. seven Airbus A330s and three A320s and six Boeing 737-300s. The four 747s are claimed by US Exim bank, which seized one of the aircraft in Hong Kong and another in Los Angeles. Two are in the Philippines.
If an investor is not secured, PAL will fly only domestic routes, and reduce its fleet to 13, including six 737s, three A320s and four A330s. In the absence of an investor, PAL has agreed to return all but those 13 aircraft to creditors on 21 November, when its Philippines Securities and Exchange Commission protection expires.
PAL will launch on 29 October a triangular flight to San Francisco and Los Angeles, and an 11 November flight to Tokyo. It will fly an A340 to the USA, and an A330 to Tokyo.
Source: Flight International
