Cover Story
New ‘broom’ to refleet PAL, Air Phil
May 1st 2012
An extensive refleeting programme will be among the priorities of Philippine Airlines’ new investors, San Miguel Corporation (SMC). Read More »
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| 'The combined resources and management expertise of San Miguel and the Lucio Tan Group will help PAL face the many challenges of the airline industry' |
| Jaimie Bautista President Philippine Airlines |
While few details have been officially released of the $500 million deal between PAL owner, Lucio Tan, and SMC, it is understood the company best known for its brewery and food operations, will acquire between 40% and 49% of PAL and its subsidiary, Air Philippines, also known as Air Phil. It will back a re-fleeting programme costing up to $1 billion to boost PAL’s declining competitiveness by replacing older aircraft with new, fuel efficient jets. A new chief executive will join PAL.
The current PAL president, Jaime Bautista, told Orient Aviation: “I will work closely with the new CEO during the transition period. The combined resources and management expertise of San Miguel and the Lucio Tan Group will help PAL face the many challenges of the airline industry”.
Bautista has been in charge of PAL since 2004 and was Orient Aviation’s Person of the Year in 2007.
Reports that Tan was looking for a new shareholder for the airline had been circulating since last year and were finally confirmed last month. Under the deal, San Miguel will receive shares from Trustmark Holdings and Zuma Holdings, the holding companies of PAL and Air Phil.
A brief joint statement from San Miguel and Trustmark said: “The new investment will allow the two airlines to strengthen operations and stay competitive with the implementation of PAL and Air Phil’s fleet modernization programme.”
SMC president, Ramon Ang, later told local media the fleet upgrade would cost at least $500 million and possibly as much as $1 billion.
The fresh financing is welcome news for PAL, which is emerging from a tough year. It recently reported a net loss of $33.5 million in the three months ending December 31, reversing a profit of $15.1 million during the same period a year earlier.
While the losses were mainly blamed on higher fuel costs the airline also had been experiencing serious union problems. It was forced to cancel hundreds of flights last September after wildcat strikes by staff protesting against the outsourcing of 2,600 catering, airport services and call center reservation jobs.
It took more than a month for operations to return to normal and significant market share was lost to Cebu Pacific.
Additional budget competition also arrived earlier this year when Malaysia’s AirAsia launched a new LCC operation in the Philippines.
Local aviation industry observers said SMC’s entry into the airline scene was no surprise. The brewer has been aggressively diversifying its business for a decade. Its acquisitions have included Petron, the country’s largest oil refiner, petrol retail stations in Malaysia and a third of Manila Electric, the Philippines’ largest power distributor. It has also embarked on infrastructure projects in the Philippines, including the building of toll highways, rail systems and an airport.
SMC chief finance officer, Ferdinand K. Constantino, said the PAL investment was “in preparation for the projected heavy influx of tourists into the Philippines in the coming years”.
