Philippine Airlines rehab good for tourism

Next week will be crucial for the future of Philippine Airlines. Even as Lucio Tan shook hands with Ramon Ang on a deal that will transfer management control to San Miguel, I just found out that there are heavy pressures from within the taipan’s camp to scuttle the deal.

The anti-Ramon Ang pressure is coming from a son-in-law of Tan who runs MacroAsia with very strong support from Washington SyCip who is chairman of the same firm that provides outsourced services to the airline. This is the second time Mr. SyCip is trying to prevent Mr. Ang from making a major acquisition. The first time was Meralco.

The venerable Mr. SyCip apparently doesn’t think very highly of Mr. Ang to frustrate the acquisitive head of San Miguel the second time. As in the case of Meralco, Mr. SyCip wants PAL to fall into the hands of Manuel V. Pangilinan.

I chanced into MVP at the Baguio Country Club last Tuesday and he confirmed pressures for him to step into PAL. MVP sounds like he wants it, but at the same time has the same misgivings that Mr. Ang told me about the huge capex that must be invested in the airline to make it viable. That huge capex is also why Lucio Tan is willing to let go of control.

MVP also said it may be weird for him to be in PAL and have the Gokongweis who own Cebu Pacific as his partners in PLDT. On the other hand, the Gokongweis may not mind an eventual consolidation of the country’s two leading airlines, but this may give rise to a more serious monopoly problem than the PLDT-Sun merger.

The problem with PAL, MVP told me, is very basic: Can a legacy airline survive a future that belongs to low cost carriers? MVP agreed with the observation of Mr. Ang that those ageing 747s will have to be replaced very soon to make the airline competitive. Then there is also the problem with Category 2 which prevents PAL from changing those 747s that consume about 30 percent more fuel compared to new generation 777s in its US flights.

Tourism and airline experts I consulted blame the government for this problem. A problem left behind by Ate Glue, P-Noy and Mar Roxas appear to be nowhere near solving it soon. The last time I asked Mar about it, he minimized the importance of getting an upgrade soon because he said, our main tourism markets are in Asia anyway.

This was disputed by experts who said that the downgrade is also affecting our ability to get more flights out of South Korea and Japan, two of our top tourism markets. They figured that Mar is probably just preparing the public to continue accepting government’s failure to get the US and Europe to upgrade our safety and regulatory rating.

Getting the upgrade, they told me, is not rocket science. Indonesia was in a worse situation some years ago but was able to fix their problem by hiring the right consultants and using political diplomacy as well. The Philippine Ambassador in Washington should be helping DOTC by providing political representation on Washington to help us fix our problem. That downgrade, I was told is both a technical and a political problem.

Experts conceded that the former president had no political capital in Washington to use on the matter. But P-Noy should use some of the goodwill he has with the Obama administration to get them to help us. Maybe the US government can give us a grant to pay for more technical consultants badly needed to satisfy the various deficiencies the US FAA have noted. PAL is currently paying for one such consultant.

In short, the experts told me, this category 2 problem requires more attention that amounts to a full court press that should include political lobbying in Washington. Getting the upgrade will also allow all of our airlines to fly to new destinations in the US. Flying to New York is very important, I was told, as this is a rich market with a fairly significant Filipino-American community that is now being exploited by other Asian airlines like Cathay Pacific.

A change in PAL management and ownership is also crucial to the airline’s survival, the experts tell me. The current management lacks the right kind of expertise for marketing and managing the airline in these very trying times, the experts say. The airline also needs international partners or alliance and it cannot continue trying to do it alone. A healthy and well managed PAL will be a big boost to our tourism efforts and that means many jobs created in our tourism areas in the countryside.

But what the airline badly needs now are deep pockets and it seems Lucio Tan who claims he has poured in $2 billion in the airline, isn’t eager to throw in more cash. The deal with Ramon Ang involves an initial contribution of half a billion dollars to the airline principally to re-fleet. The money will go directly to the airline rather than the listed holding company and will dilute Mr. Tan to the point that San Miguel will have 40 percent in the airline’s equity.

If Lucio Tan changes his mind, something that may just happen thanks to his son-in-law and Mr. SyCip, there may be no other takers in the horizon. The airline could be in danger of folding up. Only MVP and Ramon Ang have completed due diligence and are ready to step in at a moment’s notice if they like the terms. Both consider an investment in PAL as something risky but interesting.

Let us see what happens next week.

Corregidor

Lui Cubelo e-mailed her reaction to last Monday’s column.

My husband and I also went to Corregidor in December 2009 and saw the garbage floating near the wharf… likewise, all the persons involved in conducting the Sun Cruises tour could do was apologize for it. They claim the garbage came from Manila Bay, Cavite and other nearby environs. Nakakahiya sa mga balikbayans and foreign tourists.

So, after more than a year since we were there, they haven’t done anything about it but offer excuses! And our tourism people spend millions to attract tourists? They could not provide tourists with a simple clean toilet?

Oh by the way... we also rode one of those ferries (just to experience it too, since the ferries were patterned, or so I read, in Australia (where we came from) and would just want to see how it was. We were disappointed too with the dirty and basag na lavatory (plus not enough water, meron tabo at balde) in the ferry that we rode from Guadalupe to Intramuros.

Thanks for your time.

Response

My good friend Doris Magsaysay Ho of Magsaysay Lines quickly responded to observations we made about SunCruises.

Dear Boo.

Thank you so much for writing on Corregidor and the positive experience you and your balikbayan family had, particularly at the Light and Sound Show and with the tour guide.

We appreciate your highlighting how the terminal facilities and toilets need to be improved. We have been working with the Cultural Center on finding a permanent location for a passenger terminal that is worthy of both domestic and foreign tourists – something long overdue. Indeed, the private sector plays a key role to help the image of our country.

Definitely agree. Have already given instructions. Thanks for your advise. We are moving to another location where you were taken. Hopefully soon. Take care. Doris

Religions

Artemio Tipon sent this one.

During these serious and troubled times, people of all faiths should remember these four great religious truths:

1. Muslims do not recognize Jews as God’s Chosen People.

2. Jews do not recognize Jesus as the Messiah.

3. Protestant’s do not recognize the Pope as the leader of the Christian world.

4. Baptists do not recognize each other at the liquor store.

Boo Chanco’s e-mail address is [email protected]. He is also on Twitter @boochanco