PAL chides business group

 Philippine Airlines branded as irresponsible, careless and unfounded the claim of a business group that PAL’s major stockholder petitioned the government to restrict the grant of flight frequencies to foreign carriers as a condition for the infusion of $200 million additional equity into the airline.

No such petition exists, the flag carrier stressed, as it disputed a recent statement issued by the Management Association of the Philippines (MAP). The document was signed by MAP president Juan B. Santos and national issues committee chair Victoria P. Garchitorena.

“Such statement is sweeping and baseless, and does not speak well for an organization reputedly composed of responsible captains of industry,” said PAL. “The least it could have done was to verify information apparently fed to it by a dubious lobby group before accepting it as gospel truth.”

The national airline brushed aside MAP’s main allegation that it was not competitive and that it required government protection to boost its business prospects vis-à-vis foreign competitors.

In fact, PAL’s track record as a competitive airline since entering rehabilitation a year ago shows the following results:

· A net income of P44.2 million in the fiscal year ended March 31, 2000, exceeding the target set in PAL’s rehab plan, which projected a loss of P651 million. While it was a modest amount compared to the profits of other top corporations, the P44.2-million bottomline represented a remarkable turnaround after six straight years of massive losses.

· A strong operational performance. PAL’s on-time departure reliability rate last fiscal year was 89%, ranking it second in a survey of 12 major Asia-Pacific airlines conducted by the Asian Wall Street Journal.

· A high level of service quality, rated “four stars” out of the maximum five by research firm Inflight Research Services, as published in Inflight Asia magazine.

· A network of commercial alliances with some of the world’s leading carriers, including code-share agreements with Lufthansa, Malaysia Airlines, Emirates, Kuwait Airways, Gulf Air and Egypt Air.

· A marked increase in efficiency. Revenue per employee, a key gauge of productivity, increased from P2.78 million in 1997-98, when PAL had a bigger fleet and more employees, to P3.35 million in 1999-2000, when it had fewer planes and staff.

· An exemplary safety record, anchored on a young, well-maintained fleet and intensive crew training.

· PAL pays its creditors on time and is current on all its repayments under the rehab plan.

PAL chided MAP for its simplistic and shallow understanding of aviation policies. The airline said that the available seat capacity in any air market is governed by bilateral agreement between the countries concerned. PAL simply follows what the Philippine government agrees to in such treaties.

PAL said it had never once demanded capacity controls on foreign carriers, as alleged by MAP. All it had done, based on its right as a player in the market, was point out violations of the bilateral air accord committed by foreign carriers.


It is thus unfortunate that when the government acts to redress these infractions, organizations like the MAP and its allies, the Freedom to Fly Coalition, former aviation officials Victor Limlingan and Atty. Tito Tesoro, are quick to label this “protectionism,” PAL noted.

Such naïve and simple-minded logic was evident during last year’s aviation dispute with Taiwan. The issue was, and still remains, the wholesale violation of the bilateral agreement by Taiwanese carriers, PAL said.

“This is a legitimate dispute between two countries, and the Philippine government acted to uphold our laws and national dignity. It has nothing to do with protectionism,” it added.

PAL stressed that the last two administrations, under President Fidel Ramos and now President Joseph Estrada, have affirmed the national aviation policy of progressive liberalization.

This policy has resulted in a total entitlement of 11.8 million seats per year (one way) becoming available to Philippine and foreign carriers today, according to records of the Civil Aeronautics Board.

However, only 3.65 million or 62% of these seats are being utilized every year by the 40 foreign carriers that have the right to serve the Philippine market. About 2.25 million seats or 38% of their entitlements are thus being left unused by foreign airlines, depriving the country of added visitor inflows.

In contrast, PAL, by itself, operates 2.02 million seats per year, equivalent to 35% of its available capacity rights. With its rehabilitation program producing operational and financial successes, the flag carrier is looking to expand seat offerings and fully use its entitlements over the next few years.

Thus, with only 2.2 million tourist arrivals currently, the formula being espoused by some sectors that there must be two airline seats for every tourist is being adequately met already.

It will be recalled that commercial aviation is already on its fifth year of liberalization. Executive Order No. 219, the law liberalizing civil aviation that became effective in January 1995, is being fully implemented even without the implementing rules and regulations.

In essence, therefore, the government does not adhere to a protectionist air policy, said PAL.