PAL, AirPhil set refleeting programs

San Miguel chief says project can cost up to $1B


10:29 PM April 9th, 2012



Philippine Airlines, which recently took in the San Miguel Corp as a new investor, is seen investing as much as $1 billion for a fleet modernization program that will make the storied flag carrier more competitive.

Ramon S. Ang, president of SMC who signed a deal last week to acquire 49 percent each of PAL Holdings and Air Philippines Corp., said the conglomerate welcomed “the opportunity to participate in the refleeting and modernization plans of the two airlines.”

In a text message, Ang said the fleet modernization would cost at least $500 million to as much as $1 billion.

The $500-million minimum requirement is what SMC is infusing into several holding firms that will result in its equity investment in PAL and AirPhil, where the conglomerate is expected to exercise management control even if the majority stake would remain with the group of taipan Lucio Tan.

In a statement jointly issued by the Lucio Tan group and SMC, the two groups said the new partnership would “allow the two airlines to strengthen operations and stay competitive with the implementation of PAL and AirPhil’s fleet modernization program.”

Industry sources explained that because SMC’s entry into PAL and AirPhil would involve the issuance of new shares, new money would flow into the carriers. For capital spending beyond $500 million, the source said the airlines could fund this through debt rather than equity so as not to disrupt the existing capital structure.

Based on the latest regulatory filing of PAL Holdings, the flag carrier has the following capital expenditure commitment for the medium term:

  • PAL has a supplemental agreement with Boeing signed in 2007 relating to its exercise of purchase rights for two Boeing 777-300ER aircraft for delivery in fiscal year 2012.
  • PAL and Boeing agreed in June 2009 to reschedule the deliveries of four Boeing 777-300ER aircraft from their original delivery schedules of fiscal year 2010, 2011 and 2012 to fiscal years 2013 and 2014.
  • PAL signed in June last year operating lease agreements for the lease of two Airbus A320-200 aircraft for delivery in March and May 2012. A Letter of Intent was likewise signed in July 2011 for the lease of additional two Airbus A320-200 for delivery in October and November 2012.

Under the deal signed last week, SMC will buy into PAL and AirPhil through several layers of holding companies. This will lead to SMC’s acquisition of 49 percent of PAL’s publicly listed parent firm PAL Holdings that, in turn, will give it an effective control of at least 40 percent of PAL while SMC will also get 49 percent of AirPhil.

PAL Holdings disclosed that its majority shareholder Trustmark Holdings Corp. had entered into investment agreements with a unit of SMC resulting in the issuance of shares to the San Miguel group, where the latter will take a minority stake in PAL Holdings. “The investment through Trustmark will be flowed down to Philippine Airlines, which is expected to strengthen and enhance the operations of the airline,” the disclosure said.

The investment will be made by SMC through a wholly owned unit, San Miguel Equity Investments Inc. (SMEII). Under the agreement, Trustmark and Zuma Holdings and Management Corp. (Zuma)—the holding companies of PAL and AirPhilwill issue new shares to SMEII.

PAL Holdings’ consolidated total comprehensive loss for the nine months of its fiscal year ending Dec. 31, 2011, amounted to P3.6 billion, down 212 percent from a year ago as passenger and cargo revenues declined 13 percent.

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  • ferds

    PAL will be great again if there are no leftist workers out there

  • kilabot

    there you go. that’s where the coco levy fund ends up. sorry, coco farmers.

  • to0

    Nasaan na ang investment ng SSS, GSIS, PNB, at the DBP. Billions of pesos of members contribution was plowed into this airline during the refleeting of PAL from DC-8 to B 747. It was unfair for Lucio Tan to instigate the Pilots in 1998 to go on Strike just to bankrupt the Airline and then reinfuse a measly amount just to take complete control of the National Airline. “Talo ang mga taga SSS at GSIS sa scum na ito.

  • Love God

    Look at the success of Singapore Airlines, Cathay Pacific and Emirates Airlines..

    It is all due to their best customer service. Best in-flight service.

    If PAL wants to survive and to succeed, carefully adopt the policies of these airlines. 

    Train the entire staff to be polite and provide best service.

    Offer good salary, perks and working conditions to your airline staff advise them to shun union activities.

    Union do no good but to kill a company.

  • 3stuges

    I am not entirely sure if the service will improve at all. I used to fly PAL, internationally as well as local flights, howver the lack of the basic customer service, epscially those working as flight attendants, lack the basic customer service skills …. worse part, they make you feel like you owe them something .. No matter how much improvement with new fleets or planes, if a company lacks the basic services, it’s going downhill  ..

    • jimmy48

       sana stop na ang strike,,,give pal a breath…save the golden goose that lay a golden eggs……

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