Andrzej Jeziorski/SINGAPORE
The US Eximbank, a major creditor of Philippine Airlines (PAL), has initiated moves to repossess the airline's four Boeing 747-400s on which it holds liens.
The move puts PAL in danger of collapse unless the government backs down on its earlier promises of non-intervention and bails the airline out, say industry analysts. "If Philippines President Josef Estrada does not step in, they can't survive," says one analyst. PAL, which has debts of about $2.2 billion, has 18 other aircraft, 15 of them held on liens by creditors.
The Eximbank withdrew its support for PAL's revised rehabilitation plan at the start of the month, having earlier conditionally accepted the scheme originally submitted to the Securities and Exchange Commission (SEC). The withdrawal came mainly as a result of a belated plan to reappoint PAL majority shareholder and chairman Lucio Tan as the airline's chief executive, four months after he resigned from the post to appease creditors.
Tan, who owns about 70% of the airline, reappointed himself as chief executive soon after agreeing to provide half the $200 million cash injection the SEC has demanded the airline secure by 4 June.
In a letter to the SEC, Eximbank adds that PAL's rehabilitation plan in its current form lacks transparency, fairness and predictability and is unlikely to lead to profitable operations. The bank says it is preparing to petition the US Bankruptcy Court to reconsider its recognition of the PAL/SEC proceedings.
Philippines finance secretary Edgardo Espiritu says the government may intervene to prevent the seizure of the aircraft, but concedes that it might not be able to do much. The SEC says it will not allow the aircraft to be seized on Philippine soil, but its jurisdiction does not extend beyond its borders.
The airline continues to seek foreign investors to supply the rest of the money, but there are increasing signs that government financial institutions are ready to raise some cash. The government has also begun talks with Kuwaiti and US groups to raise the rest of the funds. Lufthansa is understood to be discussing buying the airline's maintenance and engineering facilities.
Source: Flight International
