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Lucio Tan sells rest of PAL to SMC

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Lucio Tan. FILE PHOTO

Diversified conglomerate San Miguel Corp. has sealed a deal to acquire the entire holdings of tycoon Lucio Tan in flag carrier Philippine Airlines (PAL), the Inquirer learned on Friday.

According to a source from the Lucio Tan camp, the transaction involves the acquisition by San Miguel of 51 percent of the airline currently owned by the tobacco and beer magnate.

The deal is valued at $500 million and, once executed, would give San Miguel president Ramon Ang complete control over the board of the country’s largest airline.

In April 2012, San Miguel also paid $500 million for a 49-percent stake in PAL Holdings Inc., which controls the airline. Under that transaction, the conglomerate infused $500 million in equity into PAL and was also handed management control over it.

With the leverage provided by the additional equity, the airline has since embarked on an aggressive expansion of its route network and launched a $7-billion refleeting program involving the purchase of at least 54 long- and short-haul Airbus aircraft.

Ang did not reply to queries about the transaction.

He had earlier initiated programs to revitalize the airline, which had struggled financially since the mid-1990s due to a confluence of adverse factors, not the least of which was the advent of the low-cost carrier airline model that its rival, Cebu Pacific Airways, successfully adopted.

PAL was also affected by high operating costs carried over from its days as a government-owned enterprise, as well as soaring fuel costs—its single largest expense item, accounting for approximately half of its operating expenses.

The flag carrier was also affected by the decision of United States aviation regulators to downgrade the Philippines’ aviation industry to Category 2 status, thus preventing the airline from replacing on US mainland routes its older aircraft with new and more fuel-efficient jets.

Amid these challenges, Ang has worked on turning the airline around by acquiring newer aircraft that consume less fuel to replace its aging fleet, as well as flying to new destinations in the Asia-Pacific and Middle East.

PAL also recently paid $10 million for a 49-percent stake in a startup Cambodian airline.

Ang is confident that these changes—along with the hoped-for upgrade by US and European regulators of the country’s aviation status—would help the airline return to profitability next year.

“We will make money in 2014,” he said earlier.

First posted 9:25 pm | Friday, June 7th, 2013


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    magiging Pal Pilsen na daw pangalan nya



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