Speaking before the Makati Business Club and the US-ASEAN Business Council, Mrs. Arroyo said the government would be more successful in liberalizing the nation’s air policy if it had control of an airline flag carrier, just like Malaysia and Thailand.
The President has noted that Malaysian Air Lines and Thai Airways incurred short-term losses from an "open skies" policy but have since gained a larger share of the region’s tourism market.
"I have in fact been exploring the idea of doing a PNB on Philippine Airlines," the Chief Executive said, referring to the government’s decision to reassume management control of Philippine National Bank.
Both PAL and PNB are under the management control of beer and tobacco magnate Lucio Tan.
The President stressed, however, she would not pursue the PAL proposal until after a government committee led by Finance Secretary Jose Isidro Camacho completes PNB’s rehabilitation.
Mrs. Arroyo said she made the announcement because she wants to get public feedback on the proposal to reacquire the majority block it sold in 1992 to a consortium led by businessman Antonio Cojuangco Jr.
The Cojuangco group later sold its 67 percent stake to Tan who took control of PAL in 1995 and implemented a major refleeting program in 1997, just before the outbreak of the Asian financial crisis. The airline’s debt problem was compounded in 1998 by labor problems.
The following year, PAL underwent a rehabilitation program and was able to secure new equity infusions amounting to some $200 million from three new investors – Top Wealth Enterprises of Hong Kong, Maxell Holdings and Richmark Holdings.
As of May, Tan controlled 53.79 percent while the new investors owned 35.15 percent of the airline. The government retains a minority holding of 4.26 percent. The remaining 6.8 percent is owned by small investors, including PAL employees.
PAL vice president for corporate communications Rolando Estabillo said PAL’s board of directors has taken up the government’s planned reacquisition but Tan, who is out of the country, has not made any comment.
"There is no basis to comment on just one sentence. We cannot really make heads or tails of this," Estabillo said, noting that only Tan and his group could decide on a still vague proposal.
But acting Press Secretary Silvestre Afable explained that the reacquisition proposal would be similar to the debt-for-equity program that the government is considering for PNB.
Afable explained that the Philippine Deposit Insurance Corp. and the Bangko Sentral ng Pilipinas have both extended some P25 billion in loans to PNB over the past three years.
"This would be converted into equity for the government which in effect would increase the share of the government in PNB and decrease the private holdings," he said.
Afable also dismissed speculations that the planned reacquisition would contradict the Arroyo administration’s avowed policy of keeping the government out of business.
"As a general policy... government is not really tooled for enterprise. It is tooled for governance and public service, not for profit-making enterprises.
"But (the President) is looking at this as an exception because if you try to run PAL under an ‘open skies’ policy, it will keep losing revenues and it will not be a profitable business," he added.
Afable explained that an "open skies" policy is needed to increase airline seat capacity that remains a main infrastructure in boosting tourist arrivals to the country.