PAL, gov’t strike deal on P6B in fees, beat Duterte deadline

Update

A row between the Duterte administration and flag carrier Philippine Airlines (PAL) over supposedly unpaid fees was resolved on Friday, meeting a 10-day deadline set by the President.

In a joint statement with the Department of Transportation (DOTr), PAL announced that the government accepted its offer to pay P6 billion worth of navigational fees, and other charges. The whole amount was expected to be paid within the year, a government spokesperson said.

The payment of the fees was widely expected given the level of attention given to it by Mr. Duterte.

Announcing PAL’s debts last week, Mr. Duterte threatened to close down the Ninoy Aquino International Airport  Terminal 2—which PAL has been exclusively using since 1999—if the airline did not pay in 10 days.

The DOTr had separately threatened legal action against PAL.

The government, through the Civil Aviation Authority of the Philippines (Caap) and Manila International Airport Authority (MIAA), delivered demand letters to PAL on Sept. 28, 2017.

Last week, the government demanded payment of close to P7.3 billion. Broken down, it was P6.96 billion to Caap and P322 million to MIAA.

A source with knowledge of the matter explained it eventually became P6 billion because this was the amount that could be reconciled with proper documentation by PAL, Caap and MIAA. The amount was also smaller since PAL had made previous payments to the government.

This was the second offer PAL had made to the Duterte administration. The airline was made aware of its mounting bills, which included takeoff and landing fees, in August 2016.

Another individual with knowledge of the matter said PAL initially offered to pay P4 billion against the P6.5 billion that CAAP had computed when the Duterte administration took over.

PAL is considered the region’s oldest airline. Before its privatization in the 1990s, it was enjoying benefits and relief from payments, including those that Mr. Duterte demanded from it.

In its joint statement with the DOTr on Friday, PAL committed to keep all transactions updated and current with Caap and MIAA.

“One of the overriding reasons why PAL agreed to settle is to manifest its trust and confidence in President Duterte’s administration,” PAL said in its statement.

Those close to PAL’s owner, taipan Lucio Tan, said the airline was also one of his most treasured assets in a business empire that spans banking, liquor, tobacco and real estate. /kga