POSTSCRIPT / May 11, 1999 / Tuesday


Philippine STAR Columnist

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Tan’s new $200M infusion won’t rescue PAL, unless…

POOR Lucio Tan has to dig deeper into his pocket and produce $200 million more to keep at bay creditors of Philippine Airlines circling above the distressed flag carrier.

That’s a lot of money in one throw, but even that rescue infusion is no guarantee that the airline could be nursed back to the black. The situation that PAL has gotten into over the years is no longer just a matter of money, although money is admittedly the most crucial element for recovery.

It has become clear that the government, after the hurried privatization that only made some government officials richer, must be brought into the rehabilitation scheme as an active partner.

After all, the government – or, to be more precise, some government officials, did a remarkable job at crippling the airline.

* * *

WE assume that President Estrada does not want PAL to collapse. We further grant that this attitude is not based on a desire to protect a friend, but to protect the national interest.

In the process, the President will also be protecting his political interests. The underlying line is that PAL must not crash while Mr. Estrada is on the pilot seat of this government.

The President has said enough not only to PAL workers but also to the rest of the world that he is determined not to allow the airline to close. The next obvious move will be to ensure that the word be made flesh.

To firm up government’s commitment, the President can pursue the idea broached in many meetings for government financial institutions to help out PAL. There’s nothing like money, big bucks, to cement commitments.

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ONE route explained by Finance Secretary Edgardo Espiritu is for some GFIs to exercise their preemptive rights.

In the case of the Land Bank and the Development Bank of the Philippines – which have a 10-percent exposure in PAL’s $2.24-billion debt — this will mean an additional $40 million for the airline.

The US Export-Import Bank, which had been reported as threatening to reject the revised rehabilitation plan, has only a 16-percent exposure. It will have no choice but to go along with the majority of the creditors who had expressed agreement with the plan.

Talking of percentages, Tan holds 75 percent of equity and under normal conditions should have a big say in how the airline should be managed. But he has indicated that he is willing to step aside if that is what the President wishes — just to put in place a workable rehabilitation plan.

* * *

WITH government, through the GFIs, back in PAL, it should be easier to motivate the administration into seeing to it that the government’s investments bear fruit.

Having put money where Mr. Estrada’s mouth is, Malacañang should lose no time making sure that PAL makes money. The administration should review the sweetheart deals that the Ramos administration had struck with some foreign airlines.

In the name of Open Skies, many competitors of PAL had been given rights by the Civil Aeronautics Board under the past administration to fly to and through Manila and grab business in PAL home ground.

In 1994-1995 alone, these grants of traffic rights to foreign airlines had resulted in losses to PAL running to P585 million. This damage was compounded by the Asian economic crisis to something like P1.2 billion, according to industry estimates.

The uneven playing (flying) field is a dampener also on other Filipino airlines that dream of flying the international skies.

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TAN’s $200-million infusion will keep the airline flying only for 10 months, considering that it now loses some P25 million a day. If nothing else is done during that period except to pour in more money, the airline will be back to counting not profits but its remaining days.

The Securities and Exchange Commission, which is studying PAL’s rehabilitation program, must recommend to Malacañang giving local airlines back the market that the past administration had given to competing foreign airlines.

The Ramos administration gave away “fifth” and “sixth” freedom rights to foreign airlines without ample protection to the Philippine flag carrier.

(Fifth freedom is the right of an airline from country A to carry revenue traffic between A and country B [the Philippines] and other countries. Sixth freedom is a combination of Third and Fourth freedoms which is the use by the airline of A of these two freedoms to carry revenue traffic between B and C [the Philippines and another country] through A.)

* * *

FROM 1993 to 1997, the CAB signed bilateral agreements that granted excessive traffic rights to foreign airlines competing with PAL in disregard of market size, actual growth prospects and a duty to promote a healthy aviation industry in the country.

In fact, some CAB officials who were unusually generous to foreign airlines had been reprimanded by Congress. At least two CAB officials were charged with criminal offenses in relation to some irregular bilateral agreements.

To catch up on the favored airlines, PAL invested on a $4-billion refleeting program that would have made the airline internationally competitive by 1999. As the regional economic crunch hit PAL in the midst of this transition, its adverse effects were felt more severely.

While PAL was forced to cut back, foreign airlines operating under the “Santa Claus” agreements given them by the CAB expanded operations to finish off PAL already reeling under the crisis.

* * *

WE’RE still cleaning up the vomit triggered by the Ulirang Ina award given to former first lady Imelda R. Marcos.

Who sponsored these awards? How can the sponsors have stomached the stench released by their model mother award to Imelda?

Out of the millions of mothers among our 77 million population, the sponsors could not locate anybody better qualified than the distaff side of the conjugal dictatorship? What blinded the sponsors or the judges or the selection committee members?

The outrageous award ceremony – held at Malacañang to boot – reminds us of those dime-a-dozen awards for alleged outstanding officials which are given, as we know, for a fee. But we’re not asking if or how much Imelda paid for that award.

President Estrada’s political sense must have told him not to grace the award ceremony with his presence and share in the ignominy of the award. Even the first lady Loi Ejercito was conveniently not available.

That should have been an eye-opener for Imelda and her brood who took the occasion as a chance to set foot again as one family in the Palace of their halcyon days.

* * *

ANOTHER kind of award should be given posthaste to that unnamed pilot who delivered some well-placed bombs on the Chinese embassy in the Yugoslavian capital.

Filipinos abhor violence, but many of them could not help remarking that the stealth bombing of the Chinese embassy in Belgrade should be a rude reminder to China, which has been intruding into territories of its neighbors in the South China Sea.

The unfortunate aspect of the mistaken bombing was the killing of innocent Chinese in the premises.

An interesting fotnote is that an embassy is considered an extension of the territory of the country that owns it. The person or even the vehicle of an ambassador is also considered an extension of his country’s territory.

That explains why local authorities cannot arrest a foreign ambassador or even cite him for illegal parking. An ambassador driving his car who runs over a child cannot be charged criminally. Local laws do not apply to these persons enjoying diplomatic immunity.

* * *

IN the Belgrade incident, the United States had theoretically attacked China when its plane bombed the embassy.

In retaliation, irate Chinese are raring to storm the American embassy in Beijing. Under international covenants, however, the host government is duty-bound to provide protection to embassies even when there is a souring of relations.

The irony in China is that the Chinese government is required to protect the American embassy under siege.

When Manila policemen are assigned to secure the US embassy on Roxas Blvd. against violent demonstrators, the police are not being “tuta.”  They are just performing a duty imposed on them, on us, by international covenants.

The not-so-funny thing is that if some Philippine island in the south were attacked by a neighbor, we have no guarantee that the US will automatically spring to action to repel the aggressor under the RP-US Mutual Defense Pact. Oh, well….

* * *

(First published in the Philippine STAR of May 11, 1999)

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