The seven-month standoff over control of Philippine Airlines between chairman Lucio Tan and the government is still delicately poised, but a compromise may yet settle the dispute.
The future of the struggling Philippine flag carrier has been in limbo since March, when the government shareholders invoked a 1992 resolution and petitioned the Securities and Exchange Commission to convert the stakes in PAL's holding company into shares in the airline itself. The move would re-nationalise the flag carrier by converting Tan's slim majority in PR Holdings into a minority stake in the airline (see Airline Business, May).
With the SEC still blocking Tan's attempts to recapitalise the carrier, the government turned up the pressure when it persuaded the Commission to bar Tan from voting at the annual shareholders meeting in September.
In response, Tan has moved to dismiss the original petition on the grounds that the SEC is subject to government influence and thus lacks impartiality. He cites the example of Philippines president Ramos pressuring four out of five SEC commissioners to resign in August because they were allegedly obstructing reforms.
Tan has also upped the stakes by pulling in a consortium of Thai and Malaysian investors prepared to pay $150 million for 600 million new shares that would leave them with 38 per cent of PAL. Chatri Sophonpanich, chairman of Bangkok Bank, south-east Asia's largest, is believed to be behind the bid. The carrier could do with the cash, after a net loss of $64 million in 1994/5 and a forecast loss of $77 million this year.
But only an SEC ruling in favour of Tan will open the way for the prospective investors and recent moves by the tobacco magnate suggest he is now looking to heal the rift with government. Although he is threatening to appeal to the Supreme Court if the SEC's decision goes against him, Tan has also asked PAL vice-chairman and governor of the central bank Gabriel Singson to sound out the government shareholders about a possible settlement.
One concession could be to meet Ramos' recent demand that the number of government seats on PAL's 15-member board is increased from the current five. His remarks followed PAL's threat to drop 42 unprofitable domestic routes because the Civil Aeronautics Board has delayed ruling on its request for a 45 per cent domestic fare hike; the CAB has not required competing new entrants to serve such 'missionary' routes; and PAL still has to pay 36 US cents per litre into a price stabilisation fund for domestic fuel.
But the government has warned the carrier that the unilateral route cancellations are illegal and could empower the government to revoke PAL's licence.
Source: Airline Business
