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Japan’s ANA not leaving struggling PAL

/ 05:12 AM March 05, 2020

Japan’s ANA Holdings Inc. is standing by billionaire Lucio Tan’s Philippines Airlines (PAL) as the flag carrier announced a sweeping business restructu­ring program last week in the wake of record financial losses in 2019.

ANA Holdings, owner of airline giant All Nippon Airways, acquired a 9.5-percent stake in parent company PAL Holdings Inc. in a landmark investment deal in February last year.

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ANA Holdings viewed PAL as a long-term investment and was not concerned about the declining value of its stake in publicly listed PAL Holdings, an ANA spokesperson said in an email to the Inquirer.

“The investment in PAL Holdings is based on ANA Hol­dings’ partnership strategy,” the spokesperson added. “A short-term decline in share prices will not change our relationship with PAL Holdings.”

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PAL Holdings, which was valued as much as P200 billion when the ANA investment was announced last year, closed trading on Tuesday with a market value of almost P80 billion.

ANA Holdings bought its shares at a then steep discount of P4.48 per share versus Wednesday’s closing price of P6.80, unchanged from the previous session.

ANA Holdings, which also has a minority stake in Vietnam Airlines, declined to say whe­ther it would increase its investment in PAL Holdings, saying it does not comment on future financial conditions.

The Japanese airline group also acknowledged the heavy toll the new coronavirus outbreak was having on the aviation sector. “The COVID-19 outbreak has impacted the entire aviation industry operationally and financially,” the spokesperson said.

The outbreak worsened conditions for PAL by shutting off valuable markets in China and weakening overall demand for air travel.

But PAL’s financial woes already started years ago, even ending 2019 with a record loss of $208 million or P10.6 billion—it’s third consecutive year in the red.

On Friday, PAL announced 300 job cuts affecting its ground-based administrative and management personnel.

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In a letter to employees last week, PAL president Gilbert Santa Maria said the carrier was also carrying “unsustainable” amounts of long-term debt. PAL’s obligations surged as it acquired new planes, including six long-range Airbus A350-900s for transpacific operations.

According to Santa Maria, PAL’s turnaround plan inclu­ded increasing yields, optimi­zing its route network, tapping revenue streams from cargo, loyalty programs and charted flights, and increasing overall efficiency through “digital transformation.”

PAL would also aggressively manage costs, the PAL chief said.

Last month, PAL sharehol­ders approved a plan to increase its capital by 130 percent to P30 billion to strengthen its balance sheet.

With demand for international travel weakening due to the rising number of COVID-19 cases, PAL is also shifting focus to more domestic flights.

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TAGS: All Nippon Airways, ANA Holdings Inc., PAL Holdings Inc., Philippines Airlines (PAL)
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