PAL hopes to get out of rehab early next year

Newly-designated Philippine Airlines (PAL) president Jaime J. Bautista is aiming to take the country’s flag carrier out of rehabilitation by early next year.

In his first interview after his assumption of the PAL presidency last Aug. 27, Bautista said that all of PAL’s creditors, except one, has already signed the rehabilitation program of PAL.

From a debt load of P100 billion in 1998, Bautista said, PAL has been able to successfully pay off some of its debt and is current in all interest payments.

Thus, PAL’s debt, Bautista said, is now at a manageable P70 billion.

Majority of PAL foreign creditors are European banks and financial institutions, while American banks come next as well as suppliers and other creditors.

Almost all of the Philippine creditors, Bautista disclosed, have been paid off.

PAL is also now a much leaner institution with 7,300 workers, down from the 14,000 employees it had back in 1998.

PAL’s fleet is also down to 24 aircraft from 30 in 1998.

PAL, in fact, Bautista said, had intended to get out of rehabilitation this year, but the Sept. 11 terrorist bombing of the New York World Trade Center and the SARS crisis had delayed PAL’s plans.

"Once PAL is out of rehabilitation the country’s flag carrier will be able to undertake a long-term plan for its future, including a refleeting program," Bautista said.

According to Bautista, while PAL is still under rehabilitation, it faces a lot of constraints, first and foremost of which is being able to borrow again to expand its operation and securing its creditors’ approval for any refleeting plans and route changes.

PAL, back in June 1998, ran into trouble following a nasty strike by its pilots which grounded most of PAL’s airplanes, thus adversely affecting PAL’s revenue.

A series of other strikes by flight attendants and the PAL union almost broke PAL’s back, forcing it to actually stop operation for two weeks in 1998.

PAL eventually had to ask its creditors for a financial debt restructuring and filed a petition for rehabilitation with the Securities and Exchange Commission (SEC) in June 1998.

However, PAL’s first rehabilitation plan was rejected by most of its creditors because of the provision of only a $50 million additional capital infusion by PAL’s major stockholder Lucio Tan.

Tan eventually agreed to infuse $200 million and most of PAL’s creditor banks have approved the second rehabilitation plan except for one holdout whom Bautista refused to identify.

Bautista is optimistic though that the holdout creditor will eventually approve the rehabilitation plan.

Bautista has also set some initiatives for PAL which include upgrading the customer service of PAL from the time a customer buys his ticket up to the time he retrieves his baggage at his end-destination.