PAL holding firm consolidates airline control

- BY MARIA KRISTINA C. CONTI/BusinessWorld To do away with "many layers" of control in Philippine Airlines, Inc. (PAL), listed PAL Holdings, Inc. has acquired the PAL shares of six holding companies and four individuals, finally consolidating ownership of the flag carrier. PAL Holdings, formerly Baguio Gold Holdings Corp., now directly controls 82.37% of the flag carrier, representing 8.9 trillion, said Jaime J. Bautista, president of both PAL and PAL Holdings. Mr. Bautista told reporters Friday this is a simplification of the Tan-controlled companies’ layered structures. "This will allow us to be more attractive in terms of financing either by loans of equity," he said. PAL is exploring financing options for its modernization programs, he added. PAL Holdings has been planning to consolidate its majority stake in PAL since last year. Prior to the acquisition of shares, it indirectly owned 84.67% of PAL. In a meeting Thursday, the board of PAL Holdings approved the purchase of 81.57% of PAL shares owned by the following firms: Pol Holdings, Inc., Cube Factor Holdings, Inc., Ascot Holdings, Inc., Sierra Holdings and Equities, Inc., Network Holding and Equities, Inc., and Maxell Holding Corp. All six holding companies are controlled by Mr. Tan. PAL Holdings also acquired an 82.3% stake in another Tan firm, PR Holdings, by buying out Pol, Ascot, Cube, Network, and Sierra. In a disclosure released Thursday evening, the company said it will acquire the shares by dacion en pago, a special mode of payment where the six holding companies use the shares to pay back PAL Holdings part of their outstanding P23.12 trillion debts. The acquisition of 8.8 trillion shares, based on PAL and PR Holdings’ book values, costs P12.11 trillion. PAL and PR Holdings are not listed in the stock exchange. The remaining P10.999 trillion that the six holding companies owe PAL Holdings will be converted into additional paid-in capital in the holding companies, according to the disclosure. Meanwhile, PAL Holdings secured a waiver from four individuals, namely: Lucio C. Tan, Mariano Tanenglian, Harry Tan, and Joseph Chua, who collectively own 86 million PAL shares. This allowed the company to acquire an additional 0.8% stake. PAL Holdings’ five billion shares are 100% listed, but Mr. Tan through various channels controls 97% of the company, said Mr. Bautista. Friday, PAL Holdings’ share price jumped to P7.40 from P5.70 the previous day. Mr. Bautista said there will be no changes in PAL’s policies or management programs, and stressed that these share acquisitions would only do away with the PAL ownership’s "many layers." "This will make the company more bankable in terms of financing whether through commercial financing or through export credit agencies," he said. Irving I. Ackerman, president I. Ackerman and Co., said that in some cases, the layering system hides the real identity of the owner of a company, making matters complicated when it comes to responsibility. Friday, BusinessWorld reported that PAL had secured a commercial loan from European financiers Calyon Credit Agricole CIB and Germany’s KfW-IBEX Bank for the purchase of two new Airbus planes. Mr. Bautista did not disclose the loan amount and terms, but confirmed each plane has a sticker price of $55 million-$60 million. Mr. Bautista said PAL plans to acquire nine more Airbus jets and 11 Boeing jets within the next three years. PAL’s income has seen an upsurge lately, eight years into its restructuring program. Last March 31, PAL reported a net income of $140.3 million for its financial year, the largest profit in its 66-year history. According to the IATA, the airline carried more than nine million passengers on its international and domestic flights last year. PAL eyes flights to southern Chinese city Philippine Airlines (PAL) is in talks with the southern Chinese city of Chonquing for direct flights to become the first local carrier to penetrate the big industrial area. PAL president Jaime Baustista told reporters Friday the listed Lucio Tan-led company has signed a memorandum of understanding with Chongquing mayor Wang Hongju, who was in Manila. "If we could set up an office, and arrange all other matters, we think we will be flying fly two to three times a week [to Chonquing] later this year, he added. Direct flights to Chongquing from Manila could take three-and-a-half to four hours, which would be roughly the same as PAL’s Beijing flights. PAL flies to four Chinese cities, namely Beijing, Shanghai, Xiamen, and Guangzhou. Perched on the hills above the point where the Yangtze and Jialing rivers met, Chonquing (also known as Chung-ching or Chunking) is a city of 12 million whose economy is based on steel, smelting, the manufacture of motorcycles and automotive spare parts, and especially river transportation. The city is also the largest and most populous of the People’s Republic of China’s four provincial-level municipalities. All China air companies have their destination offices in the city’s Jiangbei airport, which can handle 1,000 passengers per hour. Chongqing has connections by air with 27 cities in China and around the world. Every week, there are two flights scheduled for Bangkok, Thailand, two flights for Nagoya, Japan, three flights for Macau, and five flights for Hong Kong. Jiangbei airport is also one of the few airports in China that operates flights to Tibet, according to a Chinese website.