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20
Feb

PAL open to taking in foreign partner

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By Miguel R. Camus | Philippine Daily Inquirer

The group of taipan Lucio Tan may sell a minority stake in flag carrier Philippine Airlines to a foreign strategic partner as early as this year, a company official confirmed last week.

The move would mark a major change in the ownership structure of the 76-year-old airline, just three years after Tan again assumed full control of PAL after buying out San Miguel Corp. president Ramon S. Ang.

Jaime Bautista, president of PAL operator PAL Holdings Inc., told reporters late Friday that negotiations with a strategic partner were still ongoing and details at this stage could not be discussed since these were covered by a confidentiality clause.

A source with knowledge on the matter told the Inquirer that a deal could be closed within the year, and it was likely to be a foreign airline. This would provide financial resources and, more importantly, a global network that would help PAL reach its goal of becoming a “five-star” carrier by 2020, the source said.

Bautista confirmed that while the timing was uncertain, it would be possible that a deal would be closed within 2017.

“It takes time for a strategic investor to finalize its decision. You have to agree on valuation, you have to agree on management, the administration of the airline,” Bautista said Friday, as PAL launched its new onboard safety video.

Bautista said they were willing to sell “up to a percentage allowed by law.” For airlines, the limit for a foreign investor was capped at 40 percent.

It was also unclear whether the new investor would enter PAL itself or PAL Holdings, a listed company with a market value of about P128 billion.

A partner comes at a time when PAL is planning new strategies for growth, much of which would involve expanding its reach beyond the Philippines and Asia. The carrier ended last year with about 80 planes, with its long-haul fleet mainly comprised of Airbus A330-300s and Boeing 777-300ERs.

By 2018, it would begin receiving the first of six state-of-the-art Airbus A350-900s it ordered last year. That would allow it to mount nonstop flights to New York in the United States and more destinations in Europe.

“Demand will continue to grow,” Bautista said.

He noted that PAL is targeting to carry 15 million passengers this year, against about 13.5 million in 2016.

Challenges this year included increased competition, rising fuel prices and congestion at Manila’s Ninoy Aquino International Airport. For domestic and regional routes, PAL mainly competes with budget airline Cebu Pacific Air, which carried 19 million passengers in 2016.

Bautista said PAL Holdings was also considering a follow-on share sale after it secures a strategic partner “if we need more funds.”

The airline operator hopes to complete an P8 billion share swap transaction with related Tan companies within the first quarter of 2017, he said. The ownership structure streamlining was a key step ahead of the sale to a new investor, Bautista said.