Lucio Tan urges AsPac airline firms to pull together to overcome crisis

MACTAN, Cebu – Airline companies in the Asia-Pacific region should consolidate efforts to recover from recent downturns that have had an adverse impact on the industry, said Dr. Lucio C. Tan, chairman and chief executive officer of Philippine Airlines (PAL).

At the 46th Assembly of Presidents of the Association of Asia Pacific Airlines (AAPA), Tan pushed for greater cooperation among airline companies in the region, saying these efforts should be in anticipation of an eventual rebound.

"The issues confronting our industry today are critical and pressing. Issues like security threats, declining traffic, high insurance premiums, rising fuel costs, among others, call for individual strengths to be aligned towards regional stability," said Tan.

Tan, whose company owns 90 percent of the country’s flag carrier, said airlines in the region should combine efforts to restore air traffic that was substantially reduced, especially after the Sept. 11 incident.

"We need to direct our efforts toward one goal and that is to survive. Competition must be replaced by cooperation," Tan said.

The AAPA is meeting to discuss measures that airlines in the region can implement to reverse the grim future of plunging traffic, depressed yields, an insurance nightmare and slow strangulation by panic-borne security procedures.

As this developed, PAL chief financial officer Andrew Huang said that despite the seemingly worsening economic crisis, heightened terrorism and the specter of an assault by the US coalition on Iraq, PAL is still optimistic it is on its way to making a complete recovery in the next few years.

Huang said that PAL, after close to going under in 1997, has been gradually moving towards profitability through a back-to-basics strategy where operating plants centered on core customer segments (focusing on strengthening routes flown by overseas Filipino workers and visiting friends and relatives), rationalization of operations and reduction of overhead expenses.

PAL closed down temporarily in 1998 after it has hit by labor unrest and strikes which aggravated its precarious financial position, yielding to an estimated revenue loss of $2.5 million and cash flow drain of $1.5 million per day with the strike of about 600 pilots.

Prior to that, the Asia-Pacific market was threatened by the Asian financial crisis in 1997 which saw currencies in the region devalued at unprecedented levels. A year before that, PAL launched a multi-billion dollar re-fleeting and modernization program, expecting an economic boom in the region.

Huang said that PAL is on track with the restructuring of its $2.4 billion debt with several suppliers and lending agencies such as export credit agencies.

"We have whittled down our debt to $1.8 billion, we have been paying about $230 million of our principal debts annually and also, because of our recovery program, we have restored the ability to service our financial obligations on an on-going basis," he said.

This year, PAL president Avelino Zapanta said the company is still maintaining its projection of a P1-billion net income. Its first half income was P946 million.

"Nothing has changed," said Zapanta, explaining that the current situation is being eased by Filipino overseas workers who are helping improve PAL’s margins.

Zapanta said that even the travel ban advisory by Japan is only temporary.

"Together with the Department of Tourism, we have been talking to the Japnese authorities to go easy on the travel ban," said Zapanta.

Currently, PAL has suspended its Cebu-Osaka flights, but maintians its Cebu-Narita flights.