Martial rule feared to affect PAL plans

Flag carrier Philippine Airlines is working to avert a possible snag in its intention to take in a foreign airline investor and partner this year after President Duterte declared martial law in Mindanao last week.

PAL president Jaime Bautista told reporters that apart from uncertainly in its operations (as some passengers have canceled or rebooked their Mindanao flights), the declaration of martial law was also feared to spook would-be investors.

“It can be an issue now,” Bautista told reporters during PAL’s annual meeting last week.

“If you are an investor, you will think twice. We will have to explain this to them.”

PAL is in the midst of negotiations with interested investors, and Bautista earlier said a deal could be closed within 2017. He said the prospective deal would would involve a less than 40- percent stake in PAL’s listed operator, PAL Holdings, which is controlled by tycoon Lucio Tan.

Bautista declined to name the interested parties, saying these were covered by a confidentiality agreement.

In March, he said due diligence activities that typically precede this type of transaction were already completed. What remained were other important details, such as the sale price.

Bautista said there were multiple buyers, but he had been consistent in his preference for a big airline partner, which would contribute equity, management expertise and help open up new routes for PAL.

The talks are happening as PAL faces a tougher business environment in 2017.

From higher fuel costs, overcapacity in some international routes and intensifying competition, the carrier said the current year would be more challenging.

Nevertheless, Bautista said the company would continue plans laid out earlier, including the acquisition of newer and more fuel-efficient aircraft.

This year alone, it plans to take delivery of seven new aircraft, including two Boeing 777-300ERs by December and five Bombardier Q400s, also toward the end of the year. PAL plans to deploy the B777s in its London and North America routes while the new Bombardier planes will be used for inter-island domestic operations.

Moreover, PAL will unveil next month eight reconfigured Airbus A330 planes. Once configured with all-economy seats, the planes would have less capacity in favor of more profitable business-class and premium economy seats.