Philippine Airlines’ President Jaime Bautista confirmed that the Philippine flag carrier is in advanced talks with a foreign investor, looking for an investment of up to 40% in the airline, the maximum allowed in the Philippines. A successful deal could be good news for the airline – and it’s passengers!
Philippine Airlines (PAL) was the first Asian airline in 1946 to fly trans-oceanic and has seen its ups and downs ever since. San Miguel Corporation, a large Filipino conglomerate, took over for a few years and started to rebuild the airline and brought it back to profitability. PAL’s previous owner, Lucious Tan had a change of heart in 2014 and bought back San Miguel’s shares for full ownership of the company.
The new management pared back the growth plans and cancelled or delayed plane orders. At the same time, they announced plans to bring back the glory days and turn PAL into a 5-star airline by 2020 to compete with Singapore Airlines and Cathay Pacific! Tan had indicated at the time of the buyback that they were planning to bring in an additional investor to pay back loans and provide capital for the ambitious plans.
It appears that these plans are now coming to fruition and a deal could be signed in the first half of 2017. According to the Nikkei Asian Review, PAL is willing to give up as much as 40% of the company (the maximum foreign investment allowed in the Philippines), but the investor might take less. Bautista said that the deal was in an advanced stage and only the nitty-gritty needed to be worked out.
The investor couldn’t come at a better time: Profits fell last year January-September by 57.5% – despite record growth for Asian airlines and record profits by airlines in the US. To make progress from its current 3-star rating, PAL announced the renovation of their Airbus A330 fleets with new business and premium economy cabins as well as the addition of new Boeing B777 planes (read here). And new routes to Europe with new Airbus A350 planes are on the board for next year. PAL also announced two years ago that they are aspiring to become part of one of the big airline alliances.
The local grapevine in Manila had news that PAL President Bautista met with Delta last year to discuss an interline agreement and possible partnership – as Delta has been reducing their intra-Asia routes and made an investment in China Eastern, maybe they are the foreign investor? I will keep you posted as this develops!
PAL would benefit from a strong investor to make sure the airline has the means and management expertise to execute the plans! I’m keeping my fingers crossed for an investor with a proven track record in the industry and will be cheering for the Filipino flag carrier!
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