Flag carrier Philippine Airlines is in negotiations to acquire as much as a 50-percent equity in the national airline of the Cayman Islands in what could be the long-awaited solution to the downgraded aviation safety status that has hounded local carriers since 2008.
PAL president Ramon Ang on Tuesday confirmed that both parties were in the process of working out a deal that could see both airlines coming to a mutually beneficial arrangement.
“Yes, we are currently in talks with Cayman Airways and the Cayman Islands government for a number of investment opportunities,” he said in a text message to the Philippine Daily Inquirer.
His statement comes after the government of Cayman Islands disclosed the deal, some details of which were published late Tuesday in the Caymanian Compass publication.
According to the publication, the Cayman Islands government was evaluating a proposal put forward by PAL—and one of its significant stakeholders, San Miguel Corp.—for a 50-percent stake in the small airline.
The scheme will call for Cayman Airways to issue new preferred shares that San Miguel will subscribe to. The fresh capital to be generated from the equity infusion will be used by the Cayman carrier to acquire new aircraft, which will then be rented out to PAL under a so-called “wet lease” agreement.
Under a wet lease deal, the aircraft are registered and domiciled in the Cayman Islands and flown, operated and maintained completely by Cayman Airways.
Cayman Airways’ Category 1 status with the US Federal Aviation Administration will allow the airline to mount additional flights between the Philippines and the US mainland.
The Cayman airline operates only four Boeing 737s and two De Havilland Twin Otter turboprops.
PAL, on the other hand, is prohibited from increasing its number of flights to the US mainland or replacing planes currently used for the route since the Philippines is under category 2 status with the FAA due to weaknesses in the local aviation regulator.
A statement released Tuesday by the Cayman Islands’ Ministry of Finance, Tourism and Development said its government was also in talks with San Miguel for the conglomerate to upgrade the infrastructure on the resort island chain, including modernizing one of its biggest airports.
“Cayman Airways is currently in discussions with Philippine Airlines to ascertain if there are ways for the two airlines to work together,” the statement said. “The exploration of this potential collaboration is covering a variety of areas, but includes reviewing the ability to code share, to provide aircraft operations and includes other strategic areas.”
“San Miguel Corp. is a multibillion-dollar company and has expressed great interest in investing in the Cayman Islands,” the statement added.
“We welcome this exploration of potential investment and trust that they will ultimately choose to invest in these islands. With their controlling ownership of PAL, there also appears to be some potential opportunities for Cayman Airways and the Cayman aviation sector, in general, to benefit from an investment by San Miguel Corp.”