PAL rehab plan depended on operation of Terminal 2 — Yasay

Former Securities and Exchange Commission (SEC) Chairman Perfecto Yasay has revealed that the rehabilitation program of Philippine Airlines was approved by the government and its foreign creditors because of the government’s commitment allowing the company to use the Ninoy Aquino International Airport (NAIA) Terminal 2 for its domestic and international operations.

In a public hearing conducted by the House good government committee last Tuesday, Yasay said without this commitment of the government, the SEC as well as PAL’s foreign creditors would not have approved the airline’s rehabilitation program drawn up in 1999.

Yasay revealed the information to the committee in view of current efforts to compel PAL to transfer its international operations to the soon-to-be-opened NAIA Terminal 3. PAL has opposed the transfer, saying it would be unprofitable and jeopardize its 10-year rehabilitation program.

The committee chaired by Rep. Ruy Elias Lopez is investigating the alleged anomalies surrounding the NAIA Terminal 3 contract entered into between the government and the Philippine International Air Terminals Co., Inc. (PIATCO).

The investigation was prompted by separate resolutions filed by Reps. Sherwin Gatchalian, Raul Gonzalez and Eduardo Veloso. They charged that besides being illegal, the contract is greatly disadvantageous to the government and the people and favored PIATCO, to the detriment of other local firms doing business at the NAIA.

In his testimony, Yasay said PAL’s foreign creditors, which at the time the rehabilitation plan was being drawn up represented 92 percent of the company’s total obligations, at first objected to the recovery scheme presented by PAL. Yasay was SEC chairman when PAL’s rehab plan was presented to the regulatory body.

"They (creditors) objected to the plan because when they looked at the company’s books, they saw that PAL could not be rehabilitated. PAL’s debt was just too much considering its (high) cost of operations," he said.

Yasay said the SEC, which was hearing the case, was about to deny the rehabilitation program until PAL and its interim receiver submitted an amended plain in which PAL would bring together its domestic and international operations under one hub.

He said the government and the foreign creditors believed that PAL would be profitable only if its domestic and international operations are brought together under one hub. He said at that time, the Terminal 2 was just about to be completed.

"The approval of the rehabilitation plan was predicated on PAL using Terminal 2 for both its international and domestic operations," Yasay pointed out.

He said at that time, they were not aware of the contract between the government and PIATCO although it was signed as early as 1997.

"Had the SEC, the foreign creditors and PAL been informed ahead of time that there was such a contract, which called for moving international airline operations to the Terminal 3, then maybe our decision would have changed," he said.

"But the problem is that the contract and its amendment were kept secret. No one knew about it except those who signed them and who were directly involved in the preparation and execution," Yasay stressed.