PAL settles P5.2-B CAAP obligations

MANILA, Philippines - Philippine Airlines (PAL) is in the process of paying its debt representing P5.2 billion in navigation and landing fees with the Civil Aviation Authority of the Philippines (CAAP).

The payment is part of the flag carrier’s promise to help the aviation sector regain its category 1 status. It is also a measure of the carrier’s strategy for expansion.

Last month, PAL president and CEO Ramon Ang committed the resources of PAL to help the government in its effort to regain Category 1 status for the country from the US FAA since this is crucial for the airline’s profitability and eventual expansion.

The funds will help the CAAP maintain fiscal stability, crucial to gaining the Commission on Audit’s (COA) nod to free them from the Salary Standardization Law, according to Abner Bondoc, CAAP’s chief Financial officer.

This would also allow the CAAP to increase the salaries of highly technical personnel which have been the object of poaching by foreign air carriers.

Among the significant safety concerns (SSC), noted by the International Civil Aviation Organization (ICAO), the Federal Aviation Administration (FAA), and echoed by the European Union (EU), is the CAAP’s lack of qualified personnel.

With more money in its coffer, Bondoc said PAL can be in a better position to convince more technical personnel, such as check pilots, safety inspectors, air traffic controllers, communications specialists, aircraft mechanics and others stay.

Since the country was downgraded to second tier status, PAL is prevented from expanding its current routes in the US, while the EU has banned all Philippine carriers over European skies.

Other Philippine carriers with plans to open new routes in the US are also banned, pending the return of the country to Category 1 status.

With an expanded fleet, PAL said it would resume flights to Europe and bolster U.S. services after selling a stake to San Miguel Corp. (SMC).

PAL incurred the navigational charges debt over the years, while the airline was still in government hands, believing that it is entitled to free use of the country’s Navaids, such as the very high frequency, instrument landing system (ILS), non-directional beacon (NDB) and others.

Since 1998, when PAL was privatized, the navigational fees have accumulated and it was only when Ang took over this year that the terms of payment had been discussed with the government.

“PAL and the CAAP are now into reconciling the accounts for final settlement of the debt,” Bondoc said.

Caap Director General Ramon S. Gutierrez said the country would probably get back to category 1 status by the third quarter of this year or at most by the end of 2012.