MANILA, Philippines - There are ongoing talks between the management of local carrier Philippine Airlines (PAL) and potential investors.
This was confirmed on Jan. 13 by PAL Holdings, the listed firm that owns 85% of PAL.
However, these talks are purely "exploratory," stressed PAL Holdings in a disclosure to the stock exchange.
"Upon inquiry from the President of Philippine Airlines, Mr. Jaime Bautista, the latter neither confirmed nor denied any serious discussion with Mr. Ramon Ang on the purchase of 40% of Philippine Airlines, saying that any alleged talk with any party are all exploratory in nature," PAL Holdings' corporate secretary Ma. Cecilia L. Pesayco wrote in the disclosure.
The listed firm issued the disclosure after a columnist of The Philippine Star wrote that Ang, president of conglomerate San Miguel Corp, is PAL's "knight in shining armor" who is "dead set in getting into the airline business."
The same online piece added that PAL chairman taipan Lucio C. Tan has allegedly "decided to unload a substantial number of shares from the country's flag carrier with the right buyer and divest his holdings at a premium price."
Speculation has been rife that the 70-year-old airline is on the selling block after it encountered massive losses of US$312-million from 2008 to 2010 largely due to previous spikes in fuel prices, which account for bulk of its operating expenses.
It has also been unable to deploy its new aircrafts to profitable routes, such as the US and Europe, due to the inclusion of the Philippines in the safety blacklists of these destinations' respective aviation bodies.
To cope, PAL rolled out cost-cutting measures that involved outsourcing non-core operations, reducing benefits and adjusting retirement age.
These resulted in almost year-long battles with its labor unions.
The cost-cutting measures remain on hold as PAL continues to assert itself in separate labor cases with the ground crew and flight attendants unions.
Over the past weeks, PAL had been at the receiving end of unfavorable decisions from Malacañang and the Labor Department over the respective strike threats of the ground and cabin crew members.
(See interactive timeline of PAL's labor woes)
About 12 years ago, taipan Lucio Tan was also reported to be mulling the sale of the airline, which he acquired in the early 1990's.
At the time, the Asian financial crisis has also resulted in financial losses, triggering efforts to terminate pilots and flight crews who then staged a strike.
After then president Joseph Estrada intevened in the labor row, PAL's restructuring proceeded and employees were re-hired with lower wages by spin-off firms, which turned out to be Tan-owned firms, too.
As part of its financial restructuring, the government also allowed PAL to consolidate its local and international flights in Centennial Terminal at the Ninoy Aquino International Airport in Manila. The terminal, also referred to as NAIA 2, was originally meant to be the domestic terminal facility at the country's main gateway.
In 2007, PAL successfully got out of financial rehabilitation and proceeded with the planned refleeting.
However, it has been unable to deploy its new aircrafts to profitable routes, such as the US and Europe, due to the inclusion of the Philippines in the safety blacklists of these destinations' respective aviation bodies.
Talk has also been rife that the health of Tan has been deteriorating. This has raised issues about succession.
Tan, who has several heirs and has had disputes with his most trusted brother and business partner, was considered to have cashed in on Fortune Tobacco, the undisputable leader in country's cigarette market for decades.
In February, Fortune inked a joint venture agreement with multinational cigarette maker Philip Morris for an undisclosed amount.
Besides PAL and Fortune Tobacco, Tan also owns considerable stakes in beermaker Asia Brewery, commercial banks Philippine National Bank and Allied Bank, among others.
Tan is the second richest in the country, next to mall magnate Henry Sy, and one of the three Filipinos whose wealth has breached the billion-dollar mark, based on estimates of Forbes.
His wealth stands at $1.2 billion in July 2010, according to Forbes. A big chunk of his fortune comes from Hong Kong-based Eton Properties, which has been pursuing affordable residential and sprawling township projects in the Philippines.
Interestingly, his son and namesake, Lucio Tan Jr., has been trying to move away from the shadows of the 77-year-old patriarch.
Tan Jr. has bought into MRC Allied, an inactive mining stock listed in the local stock exchange. MRC Allied has been tapping the capital markets -- instead of his dad's billions -- to raise funds for prospective projects in mining and power.
Meantime, San Miguel, the rumored "knight" of troubled PAL, has been feverishly diversifying away from its stable food and drinks business.
Its foray into power, energy, mining, telecommunications, banking, and infrastructure over the past years has been fast and furious.
It is also eyeing infrastructure projects under the Public-Private Partnership scheme of the Aquino government, including airports, ports, and roads.
It is currently in talks to acquire a stake in North Harbour Centre Port Terminal Inc. in Manila, which could complement an airline's logistics business.
In the aviation sector, San Miguel has been vocal about its interest in building a second terminal facility at the Diosdado Macapagal International Airport in Clark, which the Aquino government is considering to become the country's premier gateway soon.
How far San Miguel's "exploratory" talks with PAL go will keep Manila's rumor mills busy.