Biz Buzz: Reopening the skies | Inquirer Business

Biz Buzz: Reopening the skies

/ 12:09 AM July 30, 2014

While the partnership between the Lucio Tan group and San Miguel Corp. in Philippine Airlines (PAL) is crumbling, this is also seen giving another big business group a second crack at buying into the flag carrier.

Amid reports that Kapitan is working double-time to raise the money needed to buy back SMC’s 49-percent stake in PAL, we heard that the group of businessman Manuel V. Pangilinan (a.k.a. MVP) is now being considered to add financial muscle to this initiative to regain control of PAL. “We have been approached again by the Kapitan group regarding PAL,” said one source close to MVP.

Another source said MVP and Kapitan actually go a long way back in terms of business relationship, with the Kapitan coming to MVP’s aid years ago during those difficult times when other Metro Pacific businesses were under siege. Meanwhile, MVP was also interested in PAL at the same time that SMC started talking with the group in 2012 but the deal then apparently broke down because one intermediary, a family member at that, was allegedly trying to squeeze out a hefty commission, one source from Kapitan’s group claimed.


Given the volatile buyout discussions on PAL, it all seems to depend on whether Kapitan can raise the funds needed to buy back SMC’s equity and pay back all advances, estimated at around $1 billion. SMC seems open to letting go of PAL—if and when Kapitan can reimburse its costs, and Kapitan’s group seems confident this can be done.


But as earlier reported, SMC is also keen on consolidating control over PAL, in the event Kapitan is unable to buy out its stake. Especially now that the flag carrier is in a better financial position, despite all the bad news hounding the aviation industry globally, it is still seen by business tycoons as an attractive proposition. Doris C. Dumlao

PAL turnaround

Amid the uncertainty on who will pilot its future, PAL is seen surprising critics with a return to profitability in the second quarter, for the first time in many years, that is.

Biz Buzz learned that PAL—the flagship subsidiary of PAL Holdings–posted a net profit of $34 million or close to P1.5 billion for the period April to June, in line with an earlier prediction from the carrier’s president Ramon S. Ang that PAL would turn around the results of operations this year, a company insider said. PAL is projected to end 2014 with a net profit of $30 million or P1.34 billion.

The return to profitability was partly attributed to the largest-ever refleeting program undertaken by PAL in its history. A total of 64 brand-new Airbus A330 and A321s had been ordered since SMC took over management of PAL in 2012, of which 19 had arrived and been deployed. PAL also took delivery of an additional two Boeing 777s last year, allowing PAL to implement optimal servicing of its existing international and domestic routes as well as open up new ones in Europe and the Middle East.

PAL is also seen reaping the rewards of the Philippine upgrade to Category 1 status with the US Federal Aviation Authority, allowing PAL to start deploying its 777s to service the US routes as well as apply for new destinations like New York and San Diego. PAL has also obtained rights to expand existing destinations such as Japan, with the addition of Haneda. In Australia, destinations have also been expanded to cover not only Sydney and Melbourne but also Brisbane and Darwin.


As part of fleet management, and with the arrival of the new aircraft, PAL is now in the process of disposing its old and uncompetitive aircraft, allowing the company to save on maintenance, repairs and retention costs substantially, as well as have a much better customer product. This is seen making PAL’s fleet among the youngest in the industry at an average 3.5 years old.

The PAL source added that while fleet management, route optimization and development, and cost control measures have been the key focus of management, substantial effort has been made in terms of strengthening PAL’s management and operations team, upgrading existing information and technology systems, improving customer service, undertaking marketing and promotional activities. In summary, the source said, all these were geared “to make PAL a first-quality, topnotch flag carrier.” Doris C. Dumlao

Wack Wack, then and now

Wack Wack Golf and Country Club director and former two-term president Philip Ella Juico called the other day in reaction to a Biz Buzz report that “an unsigned statement continued to raise questions” about how the club’s funds were managed during his presidency from July 2012 to June 30, 2014.

“There they go again bravely hiding behind anonymity and not taking responsibility for their inaccurate and oftentimes libelous statements,” Juico said. “I am amused by these cheap shots. It’s so pathetic that they can’t even engage us in a healthy and open (public if they wish) discussion of club finances.”

Juico said that when he and his group assumed office in 2010, the then chair of the finance committee, Eddie Gobing (then part of the Juico group) reported to the board during its July 29 meeting that “total cash available as of end of July was P7.8 million vis-avis the total cash outflow of P13.1 million, leaving the club a negative cash-on-hand balance of P5.3 million.”

Gobing, a stockbroker, was reelected to the board, this time with the Benjamin Abalos camp during the Club’s last elections in June.

Juico pointed out that, as of June 30, his last day in office as president of the club, Wack Wack had money market placements of close to P50 million, or a turnaround of nearly P55 million.

The former agrarian reform secretary emphasized that in the board’s meeting last July 17, he moved that a special audit of the period January 2014 to June 30, 2014, be done so that “we will all know what the outgoing board turned over to the incoming board and what the incoming board received.”

“As I said, para cuentas claras,” he added. “Let’s take a photo of what we gave you and what you received.”

The board passed the resolution and auditing firm KPMG will do the special audit.

To further emphasize his points, Juico said his incoming group in 2010 was startled at the deficit that he and his team inherited, considering that club administrations from 2001 to 2009 raised a total of P265 million by selling associate memberships to solve the perennial cash deficits.

“I’m coming out openly to forcefully belie the allegations of fund mismanagement because it was our team that rescued the club, which was already under water,” he said, adding that when he came in, Wack Wack was losing P1.5 million a month; its in-house restaurant operations generating an audited food cost of 102.6 percent, which translated into a loss of P18 million, and had reached the point of non-viability and sustainability.

“Our heads are now above water and that’s what they’re inheriting,” he said. “Some of the present board members were also board members during the period 2001-09 when P265 million was raised from associate memberships, which unfortunately resulted in the cannibalization of the proprietary shares.”

Reflecting on the club’s present financial position, Juico added, “some people say, reviewing the past is important because the past either creates huge constraints or attractive opportunities. There were serious constraints we inherited and we overcame them despite counter efforts of misguided elements to muddle the situation. We handed over a financially robust and highly liquid club and thus turned over new opportunities to our successors.”

So there. The question now is: Will the present Wack Wack administration let Juico have the last word on this issue? We’ll know soon enough. Daxim L. Lucas

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TAGS: Biz Buzz, Business, column, lucio tan group, partnership, Philip Ella Juico, Philippine Airlines, San Miguel Corp., Wack Wack Golf and Country Club

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