A younger PAL

In many ways, marketing an airline is similar to a beauty contest: age—or more specifically, the lack of it—can be a strong selling point.

This is especially true nowadays for Philippine Airlines which recently took the painful, but important decision, to write off its aging flagship, the Boeing 747-400.

The airline has four of these ‘Queen of the Skies’ aircraft acquired during its refleeting effort in the early 1990s.

But PAL recently decided to write off these 747s as part of a batch of 20 old aircraft that had become too expensive to operate and maintain. The hit to the airline’s bottomline was a one-time hit of $261 million or about P11.7 billion at current exchange rates.

(Biz Buzz learned that, were it not for this write-off, PAL would have actually reported a small profit for the first nine months of their current fiscal year.)

The gas-guzzling four-engined giants are set to be replaced on PAL’s US routes by fuel-sipping Boeing 777s, which need only two engines to make the 13-hour trans-Pacific hops.

PAL chief Ramon Ang said that the airline’s six Boeing 777s would be “enough, for now” to replace the old quad jets, but did not rule out more acquisitions in the future, especially when they launch their flights to the US East Coast.

And how would PAL dispose of its aging and fully depreciated 747s (which have, understandably, very few takers on the used plane market)? “Already sold,” revealed Ang, who described the 2013 fiscal period as a “clean-up year.” Wow.

After the refleeting program, PAL’s average fleet age would fall from around 15 years to a mere 3.5 years—one of the youngest fleets in Asia.

Well, just like in the beauty industry, everyone knows that staying young is an expensive —but often, necessary—investment. Daxim L. Lucas

DOTC favors Ayala

It might have taken some time but the Transportation Department seems to have decided (again) that the Trinoma shopping mall in Quezon City would be the final location for a common station linking the LRT-1 and MRT-3 overhead railways.

The Ayala group’s shopping center won over Henry Sy’s SM North Edsa just across the street mainly on cost considerations, Transportation Undersecretary Rene Limcaoco said Tuesday.

The department was bent on locating the common station in Trinoma despite an earlier plan to do this in SM, which turned out to be costlier by P1 billion.

But there was some confusion last month when the department again said both locations were being considered.

This irked some private sector investors as the location of the common station was viewed as a key component to a major public-private partnership deal, the P65-billion Light Rail Transit Line 1 extension to Bacoor, Cavite.

This PPP auction was scheduled for May 28.

With Limcaoco’s statement yesterday, all seems well again —except that there remain some lawmakers wary of this arrangement and of course, the touchy subject on what the “Trinoma station” would be called given that SM bought the naming rights a few years back for P200 million. But that, as they say, is another story. Miguel R. Camus

MVP in Merlion City

Businessman Manuel V. Pangilinan, the Filipino chief executive of Hong Kong-based First Pacific Co. Ltd., recently made short but crucial trips to Singapore. Industry sources said the businessman had visited the city-state at least twice recently.

“Something big is brewing,” said an industry source close to MVP. It’s possible that the new investment could be an expansion of the group’s footprint in the power sector, the source said, adding that MVP and his team had been “in a flurry of meetings with banks as well.”  Some from MVP’s team even had to forgo their Lenten holiday breaks to work on these new project(s).

To recall, the First Pacific group and Manila Electric Co. have invested in a power plant in Singapore. With most of its assets invested in the Philippines, the First Pacific group and its local investee companies —like many other big conglomerates—are actively searching for regional expansion opportunities especially with the creation of Asean Association of Southeast Asian Communities) Economic Community by 2015. Doris C. Dumlao

Oversubscribed

Following the strong curtain-raiser of DoubleDragon Properties in the local initial public offering (IPO) market, persons familiar with the P3.16-billion stock debut of Century Pacific Food Inc. (CNPF) have reported brisk demand from institutional investors ahead of the opening of the books to the retail market.

As of press time Tuesday, the offering was oversubscribed by three times the base offer based on demand from qualified institutional buyers a.k.a. QIBs, industry sources said. The IPO will run from April 23 to 29 while listing on the PSE will take place on May 6.

At a final IPO price of P13.75 per share, the company was valued at a price-to-earnings 2014 ratio of around 20 times, lower than where most comparable peers are trading to date. This valuation assumes that for this year, CNPF’s profits will rise to P1.2 billion-P1.5 billion from last year’s pro-forma bottom-line of P744 million.

“The issuer is clearly leaving money on the table, and a lot of money at that,” said First Metro Investment Corp. chief Jojo Dispo.

CNPF is pitching to investors on the basis of its market-leading brands, diverse product portfolio (fish, meats and dairy) as well as good management track record and product innovation. Doris C. Dumlao

Off the ball?

The saying that one is “on the ball” when you’re on top of the situation—that you’re knowledgeable about and in control of everything that’s going on.

But as far as some industry stakeholders are concerned, that phrase can’t be applied to the Department of Transportation and Communications (DOTC). These businessmen point to the fact that Secretary Joseph Emilio Abaya—and “some of his people,” they snort —are often in the line of fire because of booboos attributed to his department.

And the list is piling up. This includes the undelivered car plates and stickers at the Land Transportation Office (LTO), allegations of shenanigans in the purchase of new coaches for the Metro Rail Transit (MRT), and expansion of the Mactan-Cebu International Airport (MCIA).

One transport sector executive says that all of these controversies could have been avoided if only the DOTC chief and those in his inner circle were “on the ball.”

With those issues unresolved, he says that the public’s interest remains on hold while stakeholders, instead of being gung-ho about opportunities, take a wary attitude, particularly with projects under the Public-Private Partnership program.

Not surprisingly, some of Sec. Abaya’s most vocal critics hail from the camp of the Filinvest-Changi consortium which narrowly lost the bidding for the MCIA project.

Sen. Sergio Osmeña III had even taken the matter to the Supreme Court, raising the issue of conflict of interest and the reports about the financial stability and track record of winning bidder, GMR-Megawide consortium.

As far as the senator is concerned, the committee was “off the ball,” which is why the ball is now in a different court.  Daxim L. Lucas

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