PAL rethinks Boeing purchase

CAAP in Limbo

By Recto L. Mercene

FLAG carrier Philippine Airlines (PAL) is reported to be shelving its planned purchase of about six units of the long-range Boeing 777-300ER because the Philippines remains in Category 2 status since its downgrading by the Federal Aviation Administration (FAA) in the last quarter of 2007.

The Faa will not allow any Philippine air carrier to mount new destinations in the United States unless Category 1 status has been reaquired through sweeping reforms in the local aviation industry.

Although the former Air Transportation Office has been abolished and replaced by the Civil Aviation Authority of the Philippines (Caap), its director general, Ruben F. Ciron, is finding that getting back to Category 1 is a long and difficult process.

Ciron, who took over the Caap in June 2008, has discovered that the reported “autonomy” granted by the Caap for him to put in place sweeping reforms is not easily enforceable.

For one, the Caap remains under the Department of Transportation and Communications (DOTC), which means reforms must have the approval of Secretary Leandro Mendoza.

Pressing more technical men into service means going through the requirements imposed by the Civil Service Commission (CSC), and having his funds scrutinized by the Budget Department.

The Caap has trouble recruiting highly technical men because of the low salary structure. But when the Caap submitted a salary scale that appears to overtake the levels of those from the DOTC, the latter’s executives balked, demanding to know what technical know-how these men have that they don’t.

When Ciron suspended an assistant for committing eight counts of alleged illegal transactions, the executive refused to submit himself to an accounting before his peers and brought the case before the Pasay City Regional Trial Court (RTC).

The Pasay RTC junked the case, although the Caap said that may not be the end of it.

Caap in limbo; PAL cautious

These difficulties are preventing the Caap from focusing on its main objectives of addressing the problems that the FAA wants solved before the authority is allowed to regain its Category 1 status.

So long as the Caap remains in limbo, PAL has to reconsider its expansion plans, according to sources in the aviation industry.

On December 6, 2006, PAL signed an agreement with Boeing for two Boeing 777-300ER aircraft, with a purchase agreement for two more aircraft. A separate agreement to lease two additional 777-300ERs from General Electric Capital Aviation Services was signed as well.

Delivery of the four 777-300ERs will commence in 2009. In May 2007, PAL exercised its rights to purchase an additional two 777-300ERs for delivery in 2011.

However, Jaime Bautista, PAL president, is reported to be wary about ending up with airplanes that have no routes to fly, as they are not prepared to enter Europe at this stage when American doors are closed for them to expand.

The effect of the downgrading is that PAL and other Philippine air carriers would not be able to apply for new routes in the United States until the Category 1 rank is reinstalled.

Bautista said that having two new planes is manageable, as they can find routes easily for them, but the third one will be more difficult at this stage of their finances.

The airline intends to fly the triple seven to Canada, Japan and Australia for the time being and will transfer the A340 to Los Angeles by November.

Same caution everywhere

An aviation source said that most international airlines in the world are either

deferring or canceling (then buying a cheaper aircraft type) their orders because of the global financial crisis.

The Boeing 777 is a long-range, wide-body twin-engine airliner, now considered the world’s largest twinjet and commonly referred to as the “Triple Seven.”

The aircraft can carry between 283 and 368 passengers in a three-class configuration and has a range from 5,235 to 9, 380 nautical miles. It is designed to bridge the capacity difference between the B767 and the B747.