PAL getting P17B for expansion

Flag carrier Philippine Airlines (PAL), now controlled by San Miguel Corp., is set to get P17 billion in fresh funds from its controlling shareholders in line with plans to expand operations and return to profitability.

PAL Holdings, the airline’s parent firm, told the local bourse this week that its board had approved a hike in its authorized capital to 23 billion shares at P1 each, from 20 billion shares. The increase was approved in a board meeting on Tuesday.

In the same meeting, the holding firm approved Trustmark Holdings Corp.’s subscription to P17 billion worth of PAL Holdings shares at P1 each, “a portion of which will be issued out of the current unissued capital stock and the balance out of the increase in the authorized capital stock of the corporation.”

PAL Holdings will use the money to acquire 85 billion shares of PAL for 20 centavos each, bringing the price to P17 billion.

Following the announcement, trading of PAL shares were suspended for an hour.

About 49 percent of Trustmark Holdings is owned by San Miguel Equity Investments Inc., a wholly owned unit of diversifying conglomerate SMC. Trustmark and affiliate Zuma Holdings own PAL Holdings and sister airline AirPhil Express.

SMC president Ramon S. Ang earlier said PAL would embark on a $1-billion expansion program that would involve the acquisition of as much as a hundred new planes. The company wants to mount new flights to the United States and revive operations to Europe.

From enjoying a virtual monopoly in the 1990s, PAL has since settled to being the second-largest airline in the country, trailing behind budget carrier Cebu Pacific.

PAL’s latest financial report showed that it lost $33.5 million in October to December last year, a turbulent time for the airline as it dealt with labor problems that remains unresolved to this day.

As a result, PAL Holdings incurred a net loss of P3.6 billion in the nine-month period ending December 2011, from a profit of P3.2 billion in the previous year.