Palu Bound, Philippines Respond

We Do Remember!

11 October 2018

Arrival in Balikpapan prior to heading Palu

After keeping its house in order right after the category 5 typhoon, The Philippines has finally send out Humanitarian Mission to earthquake and tsunami-stricken City of Palu in Central Sulawese as Philippine Air Force (PAF) C-130 brought US$200,000 of relief goods to the island on October 10, 2018. 

Another US$200,000 in cash was likewise donated to Indonesia to help them in their relief efforts. The C-130 plane is scheduled to ferry relief supplies between Balikpapan, Makassar and Palu.

Defense Secretary Delfin Lorenzana said it took the Philippines a while to prepare for the goods because of earlier disasters that hit the country which ravaged several provinces in Northern Luzon last month.

According to the Secretary, the C-130 and the humanitarian crew will be staying in Sulawese for quite some time to help in the ferrying of goods. Another C-130 is scheduled to leave on Oct. 15 to complement the first one that left Wednesday.

Bohol Airport Phase II Funding Signed

9 October 2018


The government has secured a supplemental loan amounting to 4.37 billion yen or about 2.1 billion from Japan for Phase II of the New Bohol Airport project.

The loan agreement was signed on Monday by Finance Secretary Carlos Dominguez 3rd and Yoshio Wada, chief representative of the Japan International Cooperation Agency (JICA).

In a speech, Dominguez said the loan would cover the extension of the runway to 2,500 meters from 2,000 meters, which will enable the airport to accommodate large commercial aircraft.

It will also cover the expansion of the passenger terminal building to 13,300 square meters from 8,500 square meters, which “anticipates problems of congestion that may arise as tourism traffic in the area will rise quickly in the near future.

“I thank the Government of Japan for extending funding support for the second phase of the New Bohol Airport project. This project will have a substantial impact on the economic performance of [the]central Philippines,” the Finance chief said.

The supplemental loan carries an interest rate of 10 basis points, which is 0.1 percent per annum for non-consulting services and 1 basis point, which is 0.01 percent per annum, for consulting services.

It has a maturity of 40 years inclusive of a 12-year grace period.

Japan also provided funding support of about 5.18 billion or $237 million for the first phase of the New Bohol Airport, which began construction in 2015 and is dubbed the country’s first international “eco-airport.”

With much of the work on the original project nearing completion, Dominguez said he expected the ceremonial opening of the airport to happen “sometime in November.”

Defying The Odds

Me and the Kapitan: 
How PAL’s Jimmy Bautista earned Lucio Tan’s trust

6 October 2018

By Ces Drilon

Running a national carrier isn’t the easiest thing in the world, but running it under a visionary like Lucio Tan had made for an eventful 26 years for Jimmy Bautista. In the midst of PAL’s new achievements, its president and COO sits down with Ces Drilon to talk about the rudiments of building an empire, his relationship with the 7th richest man in the country, and that unfortunate distinction of being the oldest airline president in Asia.

He has steered the country’s flag carrier through turbulent skies. Name a crisis and Philippine Airlines President and COO Jaime Bautista has piloted through it, from staggering debts, loan defaults, soaring fuel prices to crippling strikes by pilots and stewardesses.

Early this year, Philippine Airlines was awarded 4 stars by Skytrax, the international air transport rating organization. The coveted rating comes after many years of ups and downs for the once-ailing flag carrier. Bautista has seen it all and is on the pilot’s seat for the second time around, after PAL owner, Chinese-Filipino billionaire Lucio Tan, took back management control in 2014.

Jimmy, as Jaime Bautista is known in the airline industry, and Kapitan, as Tan is fondly called by his employees, go back a long way. Just emerging from his teens and fresh from taking the board exam for certified public accountants, Jimmy landed a job in the prestigious accounting firm SyCip, Gorres and Velayo, the most sought after employer for accounting graduates. But three years into his job, Bautista was recruited to join the Lucio Tan group. Thus began the rise of the young accountant, his fortunes tied to the legendary businessman, whose trust he began to gain through years of dedicated and loyal service. Tan’s Fortune Tobacco was by then the Philippines’ largest cigarette manufacturer. Tan rose from even more humble beginnings, as a janitor in a cigarette warehouse—but that is another story.

When Bautista joined Tan, the latter was at the cusp of aggressively expanding his holdings from cigarette manufacturing and banking to spirits and agriculture. “They were looking for somebody who can help evaluate projects. Mr Tan set up this department called corporate planning and development in Fortune Tobacco. It was its Vice President Roberto Baksal, who introduced me to Mr. Lucio Tan, but I was reporting directly to him.” Bautista belonged to a tight-knit group of advisers including Tan’s brothers, whose work was highly confidential.

For many years, Bautista was a virtual nomad, moving from company to company, setting them up and moving on to the next, helping the Kapitan in his insatiable quest to acquire companies and establish a business empire. It was not until 11 years later, in the acquisition of PAL, where he began as Vice President for Finance, that he was to find a home. He believes luck played a big role in his rise to the top, “I joined the Lucio Tan group at the right time and that was the time it was growing. Joining PAL was not in my dreams. I never thought of working in an airline company,” he says candidly.

Building an Empire: The pioneering 80s

Bautista’s first project was the acquisition of an electronics company, which manufactured television sets, radios and cassette recorders way back when the Philippines was exporting consumer electronics to China. After setting up the accounting and finance systems that allowed the company to run smoothly, Bautista would move on to the next target. “I got involved in a lot of companies in the Lucio Tan Group and PAL was one of them. I was involved in the acquisition of Tanduay from the Elizaldes in 1988. I was also involved in putting up new ventures.” Asked what the astute businessman saw in him, Bautista says, “I don’t really know. I think he noticed that I finished projects on time, that we were successful in project acquisitions, that we were successful in financing new projects—and because of that, I was given more assignments. I was even involved in the acquisition of PNB in 2002.”

By the mid-80s, Jimmy was beginning to spend more time with the Kapitan. “We were in Fortune Tobacco when we wanted to modernize the facilities. He wanted to operate new cigarette-packing machines, tobacco processing machines and we were telling him that there might be an overcapacity if we bought new equipment.”

But the Kapitan was all for modernity. “We modernized the cigarette company. In the end, we were able to recover the cost of the equipment in a few years because the new equipment was very efficient. The percentage of wastage was minimal. Just for saving on wastage, we were able to pay for the cost of the equipment. So it turned out that he was right.” That experience revealed Mr. Tan to Bautista as a real visionary. “So those years after following him, the business became very successful,” he says.

PAL in the 90s

In 1992, the administration of President Corazon Aquino put PAL up for sale. Asia’s first airline was saddled with gargantuan losses, with government assuming more than half a billion dollars of its debt. Under the Marcos regime, PAL partly operated as First Lady Imelda Marcos’ private fleet of planes.

The bidding was won by PR Holdings Inc., a consortium headed by Antonio ‘Tony Boy’ Cojuangco—then Chairman of PLDT. “I think the group paid a down payment to the government after they won and they were given a few months to pay the balance, which they didn’t have—so they invited Mr. Tan to finance it,” Bautista recalls. In the end, Tan was asked to be an investor in PAL and he agreed, despite his team’s reservations. “My position then was not to invest in PAL, since we didn’t know the business. Mr. Tan was very good in manufacturing, but we didn’t have much experience in the service business.” Despite the fact that they would be the inheritors of several problems from the government, the visionary saw it as a challenge. Again, Tan decided against the advice of his team—much to the company’s gain.

Bautista remembers what Mr. Tan told his think tank in going against their advice: “This is one way I can return the favor to the country which gives me good fortune,” Bautista says, echoing his boss’s words. “He said the country needs an airline that should be efficient.” Tan managed his companies very efficiently and thought he could also do it for PAL. He took the challenge. Adds Bautista, “The sizable investment (P5.1 B) was Manila’s best-kept secret for almost a year.”

It was Tan’s desire to be kept away from the glare of public scrutiny. “We know that if you have invested in an airline you will be in the limelight, people will talk about you and there is so much scrutiny. That was his initial decision, to be quiet about it. But I think he said he wanted PR Holdings to manage it as long as he was consulted and informed about major decisions. Maybe there was some information that wasn’t sent to him. He decided it’s better to go out in the open and control the company.”

And so the secret was revealed the following year, 1993—to the shock of the Cory administration, and to the dismay of Tan’s co-investors in the consortium, who also invested in the Cojuangco-led PR Holdings. The new owner inherited not just an aging but a mismatched fleet from the government-run airline. “We have B747-200s with different types of engines, different configurations and avionics so the cost of operations was very high,” says Bautista. “The ideal is operating one type of airplane—for example B747s—the engine should be the same, as well as the configuration and the avionics, so that your maintenance cost will be lower also. In the case of disruption, you can easily change one airplane with another.” To solve these concerns, PAL decided on a re-fleeting program.

It was also at this time that Bautista buckled down to work as Vice President for Finance. “When we took over, we started modernizing not only the airplanes but also the systems,” he says. “For example, we had an accounting department with almost 900 people, because everything was manual. We started putting up computerized accounting systems, treasury systems to see to it to that cash is properly monitored, invested and accounted for.”

Because PAL was a government corporation, some employees were recommended by politicians. “Maraming complimentary tickets, during that time,” Bautista says, “We were operating three classes of service: 1st class, business class and economy, the first class passengers are mostly non-revenue passengers, the business class passengers are passengers upgraded from economy.” He can now laugh at the memory.

A turnaround eluded PAL for a long time, it lost money every year until the early 2000s. Throughout all the trials, Tan remained optimistic. “He never lost hope. In fact there was a time I personally recommended to him not to put in more money.” Even as Tan and his team took over in 1993, and tried to modernize the enterprise, a pilot strike crippled operations in 1993 and the company had to default on their loans.

For nearly a month, PAL had a complete shutdown of operations. It was the deepest crisis the airline would fall into. The new administration under Joseph Estrada brought in Cathay Pacific Airways to the rescue and talk was rife of a takeover.

At that time, Bautista was actually working with the Cathay Pacific group. “They did a due diligence audit of PAL. Unfortunately we did not agree on the terms. We filed for what you call a petition for restructuring and rehabilitation. I was the chief finance officer so I led a team that prepared the rehabilitation plan of PAL.” Bautista worked with creditors to restructure the debts. “It was one of my most challenging days in PAL,” he says, “to face our creditors.”

One of the requirements of the creditors was for Tan to put in another $200M in equity. Bautista advised Tan to allow other parties to invest, and to welcome these parties as partners. Tan put in the $200M and the rehab plan was approved by creditors. As part of the plan, Bautista resigned as CFO, but remained with PAL as Executive Assistant to Tan.

Capturing the Filipino heart in the 2000s

For one brief period, in 2001, PAL made a profit. But the following year, the bird flu scare hit Asia. Again PAL registered a loss which extended until 2003.

In 2004, Bautista, on his 24th year with the Lucio Tan Group and his 11th with PAL, was placed in the pilot’s seat—during a board meeting called by Tan. Bautista was called on to steer the airline out of turbulence. For four straight years, PAL finally took off and became profitable.

It would suffer losses anew from 2008 to 2010 when the price of fuel skyrocketed, but it bounced back in 2011, right before the entry of businessman Ramon Ang’s San Miguel the following year. For Bautista, it was time to unfasten his seat belt and retire. But these retirement plans were to be short-lived. “Mr. Tan thought that he needed a partner. He was getting old,” Bautista says. “So, he allowed San Miguel to invest $500M.”

After two years, it was Ramon Ang’s hope to buy out Tan, but they weren’t able to agree on the terms. In the end, Tan bought him out. Bautista was out of PAL at this time, returning only in 2014 when Tan acquired the majority shares. Bautista could not say no to Tan and reassumed the presidency of PAL despite his family’s reservations.

Bautista’s lucky streak brought PAL back to profitability from 2014-2016. As luck would have it, fuel price went down at that time. But it certainly took more than luck to sail through smooth skies. Bautista knew that cost had to be controlled and that the right revenue had to be generated—a plan that necessitated deferring the delivery of airplanes due to a lack of support in terms of airport infrastructure, maintenance and runways.

The Sweet Touchdown to Retirement

At 61, retirement (his 3rd) sweetly beckons for Bautista. “In our group, it comes after 30 years of service, or at 60 years old, whichever comes first. So, I have retired twice. Because in 2010 I was 30 years with the group, I got my first retirement. Then in 2015 I got my 2nd retirement at age 55.”

Bautista is now on contract with PAL, renewable annually. It’s his cheerful disposition and even-temperedness that have served him well these last 25 years. “It’s 24/7 work, it’s a service. Even at home we have to work. And I got used to it.” At the time of this interview, because of the Xiamen Air mishap in August, PAL had to accommodate non-stop calls from media and passengers due to the closure of the NAIA runway. “Every day, you expect something wrong is going to happen. I try to be cheerful—if there are many problems and you feel very sorry, it does not contribute to the solution of the problem. If you have a positive outlook in life you can think of more solutions.”

Before Bautista can make his final touchdown, there’s still one more deal to seal for his Kapitan. Bautista is in talks with a potential strategic foreign investor in PAL. “The government, I think, will treat us better if there are foreign investors because investors mean a vote of confidence in the country,” Bautista contends.

Bautista’s Travel Bucket List

For a PAL million miler cardholder and an airline president, it’s ironic that travel is what Bautista wants to pursue in his retirement. And he has quite the bucket list. “I want to see the Aurora Borealis, go to Antarctica, Galapagos, Machu Pichu. It will be when I retire. If you are the president of an airline, you travel for only a few days. There have been times that I have been to the US for just a day to attend a meeting. In Europe, for example, you arrive in the evening, you have dinner, a meeting the next day and afterwards fly back to Manila. You know the position of being a president is very stressful, most of the airline presidents, they are young. In Asia, I am the oldest president of an airline.”

The frenetic pace of the buyouts and takeovers of the 80s and 90s are now behind him. The Kapitan calls him on the phone now and then, and occasionally drops by his office at the PNB Complex along Roxas Boulevard.

For Bautista, his job is almost done, and all past maelstroms have been weathered. He has aided the Kapitan through changing climates across the years, and has helped him build both his legacy and his empire. Together, they’ve captured the heart of the Filipino, and are steering the company into a calm and graceful touchdown.

The article first appeared on ABS-CBN News on October 5, 2018

PAL To Fly Antique In December

5 October 2018

Philippine Airlines low cost subsidiary PAL Express will fly San Jose airport in Antique beginning December of this year thrice a week from Clark using Q400NG aircraft. Probing flight is tentatively set on Oct. 28.

The resumption of flight takes place after the Transport Ministry (DOTr) closure of the airport for necessary runway upgrade works. The agency has set aside P140 million for repair and upgrade of airport infrastructures to support commercial flights. P40 million of this fund has been set aside for runway overlay of the airport’s 1.2km runway for smoother landing and take-off.

The Civil Aviation Authority of the Philippines (CAAP) has already completed the set up of the terminal and airport security, provided technical and ground maintenance works, and assisted PAL in preparation for its administrative office.

The airport service
commercial flights from April 2003 until June 30, 2006 when Asian Spirit (now AirAsia Philippines) finally left the airport due to dwindling traffic.

Airport Manager Martin T. Terre said airport statistics showed an average of 80 passengers per flight. The passenger volume, however, dwindled to six at its last flight in 2006, mainly attributed to a much lower airfare offered by airlines serving Iloilo airport where multiple domestic airlines serves to and from Manila as compared to that from San Jose de Buenavista, Antique's capital.

Terre said the people preferred the lower airfare and multiple connections offered from Iloilo which is three hours away travel time than paying high fare for direct flight.

PAF To Receive 2 More C-130T in 2019

4 October 2018

The Philippine Air Force (PAF) is expecting delivery of two more C-130T aircraft in 2019 according to the Defence Ministry.

Defence Secretary Delfin Lorenza said yesterday two more C-130 cargo planes from the United States valued more than US$ 61 million is scheduled to arrive by second half of next year to further improve the operational readiness of the Philippine Air Force (PAF) which currently has a fleet of five cargo planes.

Lorenzana disclosed that one of the C-130s will be exclusively used for Intelligence, Surveillance, and Reconnaissance (ISR) missions.

The PAF already received the US$6.8 million (P340 million) Special Airborne Mission Installation and Response (SABIR) system kit for use on board one of the upcoming C-130T transport aircraft variant in July this year funded by the United States of America Southeast Asian Maritime Security Initiative (MSI), with a total price tag of US$15.1 million to include system installation and sustainment with the new platform together with the necessary crew training.

The Special Airborne Mission Installation and Response (SABIR) System, developed by the Airdyne Aerospace Inc, is a mounting system developed for the C-130.

It is mounted on the paratroop door on the C-130 Hercules with a roll-up door that includes a mount for sensors that retracts for takeoff and landing; a large bubble window and collapsible workstation for an observer/operator; and an equipment rack.

The system, which can be installed or uninstalled by 2 people, provides a 400 pound payload capacity and multi-mission payload pod using a standard BRU-12 interface. The maximum sensor length is eight feet.

The mount can take EO/IR sensor balls, small radars, SIGINT or electronic warfare equipment. When extended, it provides 360-degree coverage.

The SABIR system which is in use with the U.S. Special Operations Command (USSOCOM), Air National Guard (ANG), and Marine Corps (USMC) is also provided to PAF with a carry-on operator console for mission equipment mounted in the payload pod.

Airdyne disclosed that it is incorporating PAF SABIR with L-3 Wescam's MX-15 HDi electro-optical imager and a variant of Elta Systems' X-band (8 to 12.5 GHz) EL/M-2022 synthetic aperture radar.

The new SABIR system has been funded by the US Southeast Asian Maritime Security Initiative (MSI), with the USD15.1 million SABIR package to include system installation, integration and sustainment together with the necessary crew training, while the new C-130T acquisition are funded under a separate Foreign Military Sale (FMS) subsidy.

The SABIR sytem provides the Philippines with advanced ISR capability as it increases the Philippine military's "maritime domain awareness, airborne command-and-control, counter-terrorism, and humanitarian assistance and disaster relief (HADR) capabilities".

Lorenzana said that while SABIR system is a “bolt-on”, “bolt-off” avionics module, removal and re-installation of this module is expensive prompting the DND to bolt permanently the module to one of the upcoming hercules.

In 2016, the US gave the Philippines over $127 million in military aid through equipment acquisitions, training and support services.

CEB To Reinstate Sandakan From Zamboanga Hub

4 October 2018

Cebu Pacific subsidiary is re-instating its cancelled flights between Zamboanga and Sandakan beginning January 2019 ahead of PAL Express opening of the route beginning summer of next year.

“The launching of the Zamboanga-Sandakan route is already in the pipeline. We are just waiting for the completion of new customs, immigration, and quarantine facilites in Zamboanga airport,” said Alexander Lao, president and CEO of Cebgo.

Cebu Pacific will use and base one (1) ATR 72-600 aircraft in Zamboanga International Airport to cover these new route. The airline earlier announced 4x a week flight service to this route last year before having it cancelled due to operational requirements.

Also in the planning stage is the opening of another route to Brunei Darussalam and possibly another route to Balikpapan or Manado in Indonesia.

Cebgo currently flies from Zamboanga to Cebu, Cotabato, Cagayan de Oro and Tawi-Tawi.


27 September 2018

The Philippines and Australia has expanded its Air Services Agreement (ASA) by adding 700 more seats to Australia's major cities of Sydney, Melbourne, Brisbane and Perth from Manila during the two-day air consultation talks held on 25-26 September 2018 in Manila.

The existing ASA allows only 9,300 seating capacity per week. With the amendment capacity rises to 10,00 seats per week. Also agreed was the incremental increase of another 700 seats to 10,700 seats per week by the end of March 2019.

Unlimited capacity was also agreed to other airports in the Philippines and Australia with no restriction on capacity, frequency, and aircraft type.

The Philippines panel was represented by DOTr Aviation and Airports Undersecretary Manuel Antonio Tamayo, while Australia was represented by Executive Director Stephen Borthwick from Australia's Department of Infrastructure, Regional Development.

The new agreement will enable Cebu Pacific to add two more flights to Sydney and/or Melbourne and another two flights beginning 2019.

CEB Adds Macau From Cebu

27 September 2018

Low cost carrier Cebu Pacific (CEB) will add another international destination from Cebu to Macau starting December 7, 2018. The flight will be flown four times a week on 180-seater Airbus A320 aircraft.

5J364 CEB1850 – 2200MFM 320 x246
5J365 MFM2245 – 0145+1CEB 320 x246