LT Buys Out Minority Investors of Philippine Airlines

MANILA (Reuters) – Philippine Airlines (PAL) owner Lucio Tan plans to buy out minority shareholders in parent PAL Holdings Inc at a discount to the listed firm’s current market price, a senior airline official said on Friday.

The voluntary tender offer comes hard on the heels of business tycoon Tan’s $1 billion (621.85 million pounds) deal to acquire San Miguel Corp’s 49 percent stake in PAL Holdings. With a free float of 10.22 percent and a market value of $3 billion, PAL Holdings controls around 90 percent of Asia’s oldest airline.

The tender offer price, which will be announced next week, will be lower than current levels, PAL General Manager Jaime Bautista told Reuters by telephone.

“We are already in control but if the minority is willing to sell, we will commit to buy them out at the same economic terms that was agreed with San Miguel,” Bautista said, adding the tender offer will be completed next month.

The valuation used to acquire San Miguel’s shares is lower than the present market price, Bautista said. Following a brief trading suspension early on Friday, shares in the thinly traded stock rose as much as 3.3 percent to 5.60 pesos ($0.1247) apiece, in a largely flat market.

In a stock exchange filing, PAL Holdings said it has received a notice of voluntary tender offer from two Tan-led companies.

Last month, the Tan group purchased San Miguel’s 49 percent stake in Trustmark Holdings Corp, which owns 89.78 percent of PAL Holdings.

The flag carrier is considering delaying delivery of Airbus planes it has on order as it reviews operations after the Tan group resumed management control.

(Reporting by Neil Jerome Morales; Editing by Michael Perry and Kenneth Maxwell, Reuters)

Lucio Tan Regains Control of Philippine Airlines


MANILA–The Philippines’ second richest man will regain full control of Philippine Airlines (PAL) by buying back a 49-percent stake from San Miguel, the firms said Tuesday, in a deal reportedly worth US$1 billion.

Lucio Tan is to take back the stake he sold to San Miguel two years ago, according to disclosure statements filed with the stock exchange that did not disclose the price.

“The two biggest stockholders of Philippine Airlines … signed a joint agreement whereby (San Miguel Corp.) expressed willingness to sell its 49 percent stake to the group of Dr. Lucio Tan,” a San Miguel statement said.

PAL Holdings, the airline’s holding company, issued a similar statement.

Spokeswomen of the two companies declined to give the amount of the planned deal.

San Miguel paid US$500 million when it bought the stake from the LT Group, a holding firm controlled by Tan who is listed by Forbes magazine as the second richest man in the Philippines with a net worth of US$6.1 billion.

The 2012 deal saw San Miguel take management control of the flag-carrier even though Tan remained in control of the majority 51 percent shareholding.

San Miguel then invested more to help pay for a major modernization of PAL’s fleet, which included a 2012 order for 54 Airbus with a list price of US$7 billion. Since then, the airline has also been removed from European and U.S. aviation safety blacklists.

San Miguel President Ramon Ang, listed by Forbes as the 32nd richest man in the Philippines, has overseen the diversification of the firm from its base in the beer, food and beverage industries into infrastructure, power and airlines.

However San Miguel’s investment in PAL soured as two of the nation’s most powerful men decided they did not want to share control, according to Alex Tiu, a stock market analyst with AB Capital Securities.

“What insiders are saying is that this is more of a pride issue. It was either going to be full control to Ramon Ang or full control to the Lucio Tan group,” Tiu told AFP.

Media reports that Tan paid San Miguel US$1 billion for the stake sounded credible, Tiu added.

But Tan, who also has interests in tobacco, banking and beer-making, may also profit from full control of PAL, according to Tiu.

The airline returned to profit this year under San Miguel’s stewardship.

PAL Holdings posted a net income of 1.49 billion pesos (US$34 million) in the second quarter of this year from a loss of 1.08 billion pesos in the same period last year, the company’s records showed.

PAL is also expected to benefit from the Philippines’ recovering economy, the government’s new tourism thrust and the airline’s removal from the safety blacklists, Tiu said.

Source: AFP,

San Miguel Chief Sees Decision on Philippine Airlines in 2 Weeks


Aug 22 (Reuters) – San Miguel Corp said it would make a decision in the next two weeks on whether it will sell its stake in Philippine Airlines’ parent PAL Holdings Inc to business tycoon and partner Lucio Tan or buy Tan out.


Tan has said he wants to buy out San Miguel, and an exit would allow the country’s biggest conglomerate to focus more on its food interests.


San Miguel owns 49 percent of a holding company that controls around 90 percent of PAL, which has a market value of $3.2 billion. Although Tan owns 51 percent of the holding company, management control of the airline rests with San Miguel.

“In two weeks, something will happen for sure…in two weeks, we will know the outcome,” San Miguel President and Chief Operating Officer Ramon Ang told Reuters late on Thursday.

“If ever we exit, we have many existing businesses. If ever, I will concentrate more on our food business,” he said.

Local media reports have said the Tan group is unhappy with some of San Miguel’s management decisions for the airline, including the cost of an early retirement package. Representatives for both companies have declined to comment on the reports.

This year the United States’ aviation regulator upgraded the Philippines’ civil aviation status to allow its airlines to operate new direct flights to the U.S., while the European Union last year lifted a ban on Philippine Airlines, saying its safety standards had improved.

PAL Holdings, which is looking to retake market share lost to archrival Cebu Air Inc, swung to a net profit of 1.46 billion pesos ($33 million) in the April-June quarter from a 1.06 billion peso net loss a year ago.

Ang said the company has posted profits in the past four months and the trend will likely continue. (Reporting by Neil Jerome Morales; Editing by Edwina Gibbs)

Philippine Airlines Cancels Airbus Orders Anew


MANILA, Philippines – National flag carrier Philippine Airlines Inc. (PAL), jointly owned by taipan Lucio Tan and diversified conglomerate San Miguel Corp. (SMC), has further tweaked its order of Airbus aircraft under its massive fleet renewal program.

Based on a report submitted to the Philippine Stock Exchange (PSE), PAL has decided not to exercise an option to acquire eight of the 20 A321 NEO (new engine option) that it has agreed to purchase last year.

In April 2012, SMC’s wholly-owned subsidiary San Miguel Equity Investments Inc. (SMEII) acquired a 49-percent equity interest in Trustmark Holdings Corp. for $500 million. Trustmark owns 97.71 percent of PAL Holdings which in turn owns 84.67 percent of PAL through PR Holdings Inc.

PAL embarked on a fleet renewal program aimed at acquiring 100 brand new aircraft. It entered into two purchase agreements with aircraft maker Airbus.

PAL entered into its first Purchase Agreement with Airbus for firm order of 44 A320 aircraft with options for 20 A321 NEO aircraft for delivery in fiscal years 2014 to 2020.

It also signed a second purchase agreement for a firm order of 10 A330-300 and options for another 10 for delivery in fiscal years 2014 to 2016.

However, PAL and Airbus agreed to an amendment last March wherein the number of order of A330-300 aircraft would be reduced to 15 instead of 20.

PAL dropped an option to acquire eight A321 NEO aircraft in the first purchase agreement but agreed to acquire eight A321 NEO. The airline has until 2017 to exercise its right to purchase four A321 NEO aircraft.

As of end-June, PAL has received a total of 17 aircraft from Airbus including 10 A330 and seven A321.

The fleet of the PAL Group including PAL Express stood at 85 as of end-June. The fleet is composed of six Boeing 777-300ER,  four Boeing 747-400, 10 A340-300, 18, A330-300, seven A321-231, 28 A320-200, three A319, five Bombardier DHC 8-400, and four Bombardier DHC 8-300.

PAL is set to retire 20 aging aircraft including four Boeing 747-400 aircraft as part of efforts to transform the company into “Asia’s airline of choice” and one of Asia’s youngest fleet at 3.5 years.

PAL is set to launch direct flights to New York, Florida, Chicago and other major cities after expanding its flights to Los Angeles, San Francisco, Hawaii, and Guam as the country’s aviation safety rating was upgraded back to Category 1 last April.

It is also set to launch more direct flights to Europe including Paris, Rome, Amsterdam, among others after successfully mounting direct flights to London last November after the airline was allowed by the European Union to enter European airspace.

PAL revenues jumped 47.4 percent to P27.3 billion from April to June this year compared to P18.52 billion in the same period last year as passenger revenues surged 51 percent while cargo revenues grew 33 percent.

The airline’s expenses increased 31 percent to P25.52 billion from P19.47 billion largely on account of higher expenses related to flying operations, aircraft and traffic servicing, passenger service, reservation and sales, general and administrative expenses.

Talks are ongoing for a move to buyback SMC’s 49-percent stake in PAL by the Tan Group.

After taking back full control of PAL possibly within the month, the Tan Group is likely to take in Abu Dhabi-based Etihad Airways as partner for a 40-percent stake in the national flag carrier.

Source:  (The Philippine Star) 

Etihad: Not Interested With Philippine Airlines

Simply one of the best airlines in the world.

Rome, Italy: Etihad Airways is not in discussion to take an equity stake in Philippine Airlines (PAL), Etihad’s top executive said in Rome on Friday.

James Hogan, president and chief executive, was asked at a press conference announcing Etihad’s €560 million (Dh2.7 billion) tie-up with Alitalia whether the airline is set to take stakes in Philippine Airlines and Malaysia Airlines.

Philippine Airlines is seeking an equity investor as it tries to turn the airline around. Parent company PAL Holdings reported a net loss of $205.15 million in the nine months to December 2013, according to reports.

“We’re not having any talks with Philippine Airlines,” Hogan later told reporters on the side of the press conference.

Etihad previously issued a statement denying it was looking at a stake in Malaysia Airlines and on Friday, Hogan said “We never spoke to Malaysia.”

Malaysia Airlines, whose brand and stock has been ravaged by the missing MH370 and shooting down of MH17 disasters, is now set to be de-listed and privatised by the Malaysian government, according to reports.

“[If] it integrates with our network, has minimal overlap and we believe we can see synergies we’ll considerate,” Hogan said.

Alliance Programme

He added, “Will we look at another one [equity stake] this year, I doubt it.”

Etihad is, however, expanding its frequent flyer programme. The airline is acquiring 75 per cent of Alitalia’s programme as part of the €560 million investment. Hogan also said Etihad is set to bring in two non airline companies into the equity alliance programme.

Hogan declined to name the two new companies but said it is about moving the “a frequent flyer programme to a lifestyle programme.”

Etihad previously bought portions of Jet Airways’ and Air Berlin’s frequent flyer programmes. Etihad owns significant stakes on both airlines

This reporter travelled to Rome courtesy of Etihad Airways.

Source:  Alexander Cornwell, Staff Reporter,

Philippine Airlines Returned To Profit


MANILA – Philippine Airlines (PAL) has turned in a profit starting April, according to its chief executive.

“Ngayon pa lang positive na. [For the months of] April and May, maganda na ang takbo,” flag carrier president Ramon S. Ang said, but stopped short of providing details.

Next year, PAL will even have a better year with the delivery of new aircraft, he said.

“Full-year next year, makikita niyo na yung mas malaking improvement kasi darating na ‘yung mga bagong eroplano,” Ang told reporters on the sidelines of San Miguel Corp’s (SMC) annual stockholders meeting on Tuesday.

He had said the airline is likely to return to profitability this year as it retires some of its old aircraft.

PAL Holdings Inc, the parent firm of the carrier, narrowed its loss by a quarter to P931.28 million in the first three months of the year from P1.26 billion a year ago on higher international passenger traffic.

PAL plans to fly to New York, Chicago or Florida by October this year. The airline stopped operating in New York because of the Asian financial crisis in 1997.

The San Miguel Group is running both PAL and PAL Express, after Lucio Tan sold a 49 percent stake in both carriers to the diversifying food-and-beverage conglomerate.


Source: Krista Angela Montealegre,

PAL Holdings: USD 18M Operating Loss In 1Q, 2014


(Image Source: Lester Tangco)

PAL Holdings revenue up 18% – financial highlights for three months ended 31-Mar-2014:

Revenue: PHP21,655 million (USD482.7 million), +18.3% year-on-year;

Passenger: PHP17,890 million (USD398.7 million), +19.2%;

Cargo: PHP1608 million (USD35.8 million), +28.5%;

Costs: PHP22,457 million (USD500.5 million), +16.6%;

Fuel: PHP9405 million (USD209.6 million), +24.8%;

Operating profit (loss): (PHP801.6 million) (USD17.9 million), compared to a loss of PHP942.8 million (USD21.0 million) in p-c-p;

Net profit (loss): (PHP915.2 million) (USD20.4 million), compared to a loss of PHP1234 million (USD27.5 million) in p-c-p;

Total assets: PHP114,864 million (USD2560 million);

Cash and cash equivalents: PHP10,033 million (USD223.6 million);

Total liabilities: PHP113,056 million (USD2520 million).

Philippine Airlines Considering New York By Q4 2014


MANILA – After nearly 20 years, the country’s flag carrier — Philippine Airlines (PAL) — is expected to resume its New York flights in October 2014 as the airliner hopes to return to profitability this year.

PAL president and chief operating officer (COO) Ramon S. Ang stated on Monday night that the said aviation company expects to fly to New York, using its Boeing 777-300 ERs, in fourth quarter after the United States’ Federal Aviation Administration (FAA) lifted the Philippines’ aviation status to Category 1 last month.

“We are looking at Manila-Vancouver-New York or Manila-Tokyo-New York or Chicago or Florida,” Ang said. The airline stopped operating flights in big apple NY due to the Asian financial crisis in 1997.

PAL currently operates a total of 26 weekly flights to the U.S., with destinations to Los Angeles, San Francisco, Honolulu and Guam. According to Ang, PAL will turn in a profit this year as it retires some of its old Boeing 747 and other Airbus aircraft.

The airline expects to save as much as $120 million annually in fuel and maintenance costs using the B777 on the U.S. routes back and forth without the need to refueling the jet.

“If you noticed we reported a loss of $250 million that is the write-off of the old aircraft, but from now on we are confident that Philippine Airlines will be back to profitability right away. Moving forward now, I believe we will be profitable,” Ang said.

PAL Holdings Inc reported a comprehensive loss of P4.13 billion ending March 2013, an improvement of six percent from the previous fiscal year’s total comprehensive loss of P4.38 billion. Revenues amounted to P74.03 billion, down by 0.04 percent from the previous year’s P74.05 billion.

The San Miguel Group is running both PAL and PAL Express, after Lucio Tan sold a 49 percent stake in both carriers to the diversifying food-and-beverage conglomerate giant.

Source: Remar Dungca

Philippine Airlines Freezes Hiring, Cebu Pacific Hires 700

(Image Source: Dennis Lau)
(Image Source: Dennis Lau)

MANILA, Philippines – Cebu Pacific plans to hire about 700 more personnel through 2014 while Philippine Airlines implements a freeze-hiring policy and continues to restructure this year, both airline managements reported to the Securities and Exchange Commission ahead of their annual meetings.

“(Cebu Pacific) anticipates having approximately 3,995 employees by the end of 2014” as against the 3,297 it already had as of end-2013, the budget airline said.

Cebu Pacific squeezed P512 million in profit last year, against the nearly P3.6 billion net income it enjoyed in 2012, after suffering over P2 billion in net foreign exchange losses.

The Gokongwei airline attributed the sharp drop in profitability to the peso depreciating against the US dollar-denominated debts the airline had incurred in connection with its aircraft acquisition.

PAL, meanwhile, reported in its 2013 annual report that it “does not have any plan of hiring additional employees within the ensuing 12 months” on account of the airline continuing to post mounting losses.

Despite declining fuel prices, the biggest operating expense, PAL Holdings was buffeted by over a P9-billion loss for the last nine months of 2013, on top of the P10.6 billion the airline holding company already lost in the last two fiscal years.

On the positive side, PAL managed to slash P1.1 billion, a 36 percent reduction, in general and administrative expenses last year with new president Ramon S. Ang cutting down on consultancy, legal and professional services.

Still, the savings had been swamped by the P5 billion in impairment loss that PAL has had to incur for the nine Bombardier DHCs and the four Boeing 747-400s that had either been grounded or identified for retirement this year.

Despite re-opening routes to London, Abu Dhabi, Riyadh, Damman, Brisbane and Guangzhou, PAL reported lower aircraft and traffic servicing expenses, mainly due to the airline’s operating fewer roundtrip flights, 17,372 for the nine-month period of 2013 compared to the 26,954 for the whole fiscal year before, due to the cutdown on non-profitable domestic and regional routes.

Despite rationalizing its routes, PAL recorded a passenger load factor of 69.93 percent as against Cebu Pacific’s 82 percent, and significantly still way below the worldwide industry load factor of 79.5 percent.

And notwithstanding the promise of a turnaround with a new management and a peace deal with its militant labor union, PAL’s key financial ratios have taken a turn for the worse as the bitter medicine of route and fleet restructuring took effect.

The debt-to-equity ratio, total liabilities divided by shareholders’ equity, has ballooned to 19.33 by end-2013 from 4.21 only in March 2013, a definitive indicator that the creditors instead of the Lucio Tan and San Miguel groups are financing the airline more and more.

PAL’s interest rate coverage ratio, a measure on how easily a company can pay interest on outstanding debt, has fallen to negative 8.8 from negative 1.73 within the same span of nine months.
Its solvency ratio, which measures cash flow to meet debt and other obligations and therefore the capacity to stay afloat, has turned from positive 0.05 to negative 0.12, also within the same three quarters.

To protect themselves, a syndicate of banks had taken as collateral a number of PAL planes, their engines and even future collections from passenger sales in the United States through designated credit card companies.

A number of real estate properties controlled by PAL chairman Lucio Tan had also been pledged.
The loans with syndicate banks, facilitated before the 2012 partnership with San Miguel, include such covenants as a specified debt-to-earnings ratio and “the maintenance of a certain ownership percentage by a specified stockholder.”

That latter provision is probably why the rumored complete exit from the airline by the taipan has until now failed to materialize.


PAL Holdings Reports USD128M Operating Loss in 9 Months to Dec-2013

Batch 62 225

PAL Holdings reports (16-Apr-2014) the following financial highlights for nine months ended 31-Dec-2013:

  • Revenue: PHP55,984 million (USD1302 million);
    • Passenger: PHP45,401 million (USD1056 million);
    • Cargo: PHP4708 million (USD109.5 million);
  • Costs: PHP61,496 million (USD1430 million);
    • Fuel: PHP24,257 million (USD564.0 million);
  • Operating profit (loss): (PHP5512 million) (USD128.2 million);
  • Net profit (loss): (PHP11,648 million) (USD270.8 million);
  • Total assets: PHP114,009 million (USD2651 million);
  • Cash and cash equivalents: PHP12,782 million (USD297.2 million);
  • Total liabilities: PHP111,117 million (USD2584 million). [more – original PR]

*Based on the average conversion rate at USD1 = PHP43.0073


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