Tough task ahead

A number of people have been asking me how Supreme Court Chief Justice Renato Corona’s impeachment affects business.

Of course, business people feel differently about the impeachment, but with the Senate having voted to impeach the Chief Justice, one thing is for sure: this issue has been settled once and for all.

Business in general thrives on stability, not only of the cost of raw materials and labor, but also the environment in which it operates. Stability in the judicial system is also one thing that they observe carefully, lest the rules change midstream.

The next question of course that is being asked is who will likely be the next Chief Justice.

We seem to forget that the Chief Justice is only one person in the Supreme Court and he does not control the High Tribunal. A pro-Aquino Chief Justice will still not give the President majority of the votes in the SC, although let me say at this point that some of his appointees have minds of their own. Therefore, whoever is named Chief Justice will not be able to change the way the SC thinks as a body, whether he or she be an Aquino crony or not.

A number of names are being floated – Solicitor General Francis Jardeleza, Senator Franklin Drilon, Justice Secretary Leila de Lima who the President seems to want to remain in the justice department. Whoever is appointed has a tough task ahead of him or her. The Supreme Court as a body has been adversely affected by the Corona impeachment. The new Chief Justice has to bring back the trust of the people in the judicial system, or anarchy will prevail.

On GMA and MVP

Just got it from a source that GMA Network and the group of Manuel V. Pangilinan, chairman of TV5, are nearing a deal that will involve MVP’s group acquiring around 75 percent of GMA for P51 billion.

The last time we talked with GMA chairman and chief executive officer lawyer Felipe Gozon, he said that if he receives an offer for P100 billion, he would accept it right away, although he said that at P100 billion, “may tawad pa.”

Jimmy Duavit and Joel Jimenez, whose families like Gozon own equal stakes in GMA comprising majority of the share, were surprised about the P100 billion price tag which Gozon pegged. Who wouldn’t say yes to P100 billion?

Given the price at which GMA shares are trading and the book value, P51 billion seems to be a good price. There are however “immeasurables” that could bring the price slightly up, such as the fact that acquiring GMA would immediately catapult TV5 to number one or two, depending on which survey firm you believe, as well as how much MVP wants a second network.

Global traffic situation

The International Air Transport Association (IATA) recently announced global traffic results for April which showed that total passenger demand rose 6.1 percent while freight demand was 4.2 percent down compared to the same month last year.

But IATA noted that despite continuing economic weakness in some parts of the world, demand for air travel continues to grow. The 6.1 percent overall growth recorded for April is above the 20-year trend. Strong demand for air travel with limited capacity expansion pushed load factors to 79.3 percent which is a record high for an April load factor.

It added that the 4.2 percent contraction in air freight markets compared to April 2011 is somewhat misleading. Air freight markets slumped sharply in the first half of 2011 and bottomed out towards the end of the year. Various distortions and month-to-month volatility have marked the industry performance since the beginning of 2012. However, April cargo levels stood at about two percent higher than in November 2011. About 80 percent of this improvement has been captured by Middle Eastern airlines. Air freight for the Asia-Pacific, European and North American carriers has continued to show weakness.

International air travel rose 7.4 percent in April compared to the year-ago period, outstripping a capacity expansion of 4.3 percent. April load factors stood at 79.1 percent, up 2.3 percentage points from April 2011.

Asia-Pacific carriers experienced strong growth of 9.3 percent against a capacity expansion of 4.6 percent. Load factors stood at 78.1 percent. The strong performance is exaggerated by the comparison to April 2011 when Asia-Pacific markets were particularly weak in the aftermath of the Japanese earthquake and tsunami. Removing the impact of the event, the region’s growth is estimated to be about six percent.

Air freight markets, while weak, are now showing some signs of expansion after bottoming out toward the end of 2011.

Asia-Pacific carriers saw a 7.3 percent decline in demand in April, well ahead of capacity cuts of 4.1 percent.

According to IATA, the growth in passenger markets is encouraging, but it comes against an environment of continuing high oil prices and growing economic uncertainty. So translating the stronger demand into profits will be difficult.

This is the situation our very own Cebu Pacific, which is planning to expand its international reach by flying to destinations which are more than five hours away such as the Middle East and the United States, will likely face if it pushes through with its plans.

Philippine Airlines (PAL), now partly owned by the San Miguel Corp. (SMC) group, also faces a tough task ahead although sources say that SMC and concurrent PAL president and chief executive Ramon Ang is confident that he can turn things around for the country’s premier flag carrier. One of the things going for PAL is the fact that the SMC group owns Petron Corp. and jet fuel accounts for a huge portion of operating cost. Mr. Ang is said to be reviewing everything about PAL, including the quality of food served.

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