Philippine Airlines (PAL) chairman Lucio Tan is threatening to take the Government to the country's Supreme Court in his battle to retain majority control of the flag carrier.
The Philippine tobacco tycoon controls PAL by virtue of his 51% stake in PR Holdings, which in turn owns 67% of the airline. Three state-run financial institutions collectively hold a further 20% of PR Holdings, while the Government directly owns the remaining third of PAL's stock.
Philippine President Fidel Ramos, who is opposed to Tan running the airline, wants the Government to retake control. Its three minority shareholders in PR Holdings are seeking to convert their stock into PAL direct equity. This would give the Government a 46% controlling stake and reduce Tan's interest to 33%.
The row has been referred to the country's Securities and Exchange Commission (SEC) for a decision on dissolving PR Holdings. Tan disputes the SEC's jurisdiction, arguing that it is controlled by the Government's finance ministry and is therefore unlikely to be impartial.
"The Secretary of Finance has already taken a stated position that he wants a dissolution," says, PAL president and chief executive, Jose Antonio Garcia. "If we do not get a fair hearing, then we will go to the Supreme Court," he adds.
In the meantime, PAL has had to defer its re-capitalisation plan as the result of a SEC constraining order. The airline had wanted to increase its equity to pesos 15 billion ($577 million) to fund an expansion and modernisation programme. Government shareholders were opposed to raising additional capital.
"The expansion plan is on hold," says PAL vice-president, Manolo Aquino, although it has kept projects which can be funded from "internal operations".
The airline has taken delivery of a third Boeing 747-400 and two ex-Pan American World Airways Airbus A300B4s, leased from Airbus Industrie. A further two will be delivered later in May, increasing PAL's A300 fleet to 12. The first of four A340-200s leased to Cathay Pacific Airways will be handed over in November 1996.
Plans to acquire a fourth 747-400 failed because of lack of finance. PAL's long-term plan to replace its ten Fokker 50s with regional jets hinges on the injection of additional capital (Flight International, 5-11 April, P13).
Source: Flight International
