Dodges Receivership
18 March 2021
Philippine Airlines, the country’s flag carrier, is holding up, thanks to $60 million in fresh financing from its chairman, taipan Lucio “Kapitan” Tan, belt-tightening measures accepted by employees, and proceeds from the sale of a prized property in Boracay.
All these efforts made it possible for the four-star flag carrier to successfully reach its 80th year despite this debilitating once-in-a-lifetime crisis.
And so it happened – as the first rays of sun appeared on Monday, PAL made it to another year, a feat unexpected by many; some predicted the airline’s crash landing as early as March last year because of massive financial losses, aggravated by the severe impact of COVID-19.
But Kapitan stepped in with a cash infusion of $130 million last year. More recently, he provided another $60 million in financing for the separation pay of employees PAL had to let go.
PAL’s recent wave of separation comprises roughly 1,400 workers, according to data from the Department of Labor and Employment.
It’s not clear where Kapitan got the money, but for sure the Forbes-listed billionaire, for a time the country’s richest man, has deep pockets.
But the bigger credit, I believe, goes to PAL’s employees who agreed to as much as 50 percent in pay cuts since last year. PAL’s people are certainly no dollar billionaires and most of them, being foot soldiers had nothing to do with why PAL was already in a precarious situation even before COVID-19 struck.
And yet some volunteered to leave; others had no choice but to go, in full acceptance of the situation.
In all, PAL had to let go of 2,300 people, of which 1,100 employees volunteered to leave, a big sacrifice for every single one of them, especially in this brutally uncertain time.
For the company, that’s a lot of savings in manpower cost, about $134 million, I learned.
There were other measures as well. Cost reduction initiatives, renegotiations of lease agreements, and sale of some assets.
Last year, PAL sold a prized property in my favorite spot in all of Boracay, the secluded, stunning and pristine Puka Beach, for a hefty $74 million. The property is now owned by a wealthy Filipino-Chinese gaming businessman who has plans to expand in the world-famous island resort.
‘This great lady will stay aloft’
With all these measures, PAL successfully reached its 80th birthday on Monday.
Its president and COO, Gilbert Santa Maria, assured the public of the company’s commitment to serving the country as its flag carrier while working toward full recovery.
“PAL is alive, we’re still here, and we’re here to stay. This great lady – Philippine Airlines – will stay aloft while she is in our care,” he said.
There will be more big steps in the coming weeks to enable PAL to survive the challenges of the times.
For one, and as I wrote in a previous column, PAL is preparing for a Chapter 11 filing. A court-approved reorganization, although taking longer than expected, is a crucial step toward full recovery.
Its new board director Leo Alejandrino, a retired investment banker, wrote in his blog recently: “PAL has put together the various elements for its recovery: A new management, a more transparent and accountable board, a recovery plan that has been vetted by experts, a slimmed down workforce, an agreement with the vast majority of its creditors, and new money from shareholders and private banks. The last piece in the puzzle is counterpart funding from the government on terms that are as secure and profitable as those offered by private lenders. PAL is hopeful the GFIs will provide the same support and urgency extended to Cebu Pacific.”
New investors
With PAL getting financing from private banks soon, I wouldn’t be surprised if new investors come in as well.
But moving forward, it needs to ensure that the positive management and boardroom changes being implemented now would be sustained.
For one, it really should continue professionalizing and its board should be able to govern independently – free from vested interests of shareholders and power squabbles. That is what lenders, and perhaps, new investors would want to see.
Repatriation and vaccine flights
Despite the challenges, the flag carrier has focused on repatriation and cargo transport efforts while rebuilding its network of commercial flights in key international and domestic routes.
PAL has carried home 310,000 overseas Filipinos since March last year. Foreign nationals also flew back to their home countries via PAL.
At present, the airline is airlifting shipments of anti-COVID vaccines to various areas in the country.
Management by divine intervention
In his message during the anniversary celebration, PAL’s Santa Maria cited divine intervention and divine inspiration as blessings that have led to the airline’s continued survival.
In closing, he read the Knights Templar Motto: “Not for us, My Lord, not for us, but to your Name give the glory.”
The sun was an orange crimson light of hope when it rose on Monday, marking a new day for PAL. The journey looks uncertain but with enough luck, hard work, and yes, divine help, the beleaguered airline may yet again fly high up there to where the skies are blue and where the sun shines unceasingly bright.
