PAL Chairman Lucio Tan and PAL President Jimmy Bautista
Culture Spotlight

Me and the Kapitan: How PAL’s Jimmy Bautista earned Lucio Tan’s trust

Running a national carrier isn’t the easiest thing in the world, but running it under a visionary like Lucio Tan had made for an eventful 26 years for Jimmy Bautista. In the midst of PAL’s new achievements, its president and COO sits down with Ces Drilon to talk about the rudiments of building an empire, his relationship with the 7th richest man in the country, and that unfortunate distinction of being the oldest airline president in Asia.    
Ces Oreña-Drilon | Oct 05 2018

He has steered the country’s flag carrier through turbulent skies. Name a crisis and Philippine Airlines President and COO Jaime Bautista has piloted through it, from staggering debts, loan defaults, soaring fuel prices to crippling strikes by pilots and stewardesses. Early this year, Philippine Airlines was awarded 4 stars by Skytrax, the international air transport rating organization. The coveted rating comes after many years of ups and downs for the once-ailing flag carrier. Bautista has seen it all and is on the pilot’s seat for the second time around, after PAL owner, Chinese-Filipino billionaire Lucio Tan, took back management control in 2014.

PAL Chairman Lucio Tan and Jimmy Bautista receive four-star award from Skytrax, an international air transport rating organization.


Jimmy, as Jaime Bautista is known in the airline industry, and Kapitan, as Tan is fondly called by his employees, go back a long way. Just emerging from his teens and fresh from taking the board exam for certified public accountants, Jimmy landed a job in the prestigious accounting firm SyCip, Gorres and Velayo, the most sought after employer for accounting graduates. But three years into his job, Bautista was recruited to join the Lucio Tan group. Thus began the rise of the young accountant, his fortunes tied to the legendary businessman, whose trust he began to gain through years of dedicated and loyal service. Tan’s Fortune Tobacco was by then the Philippines’ largest cigarette manufacturer. Tan rose from even more humble beginnings, as a janitor in a cigarette warehouse—but that is another story.

When Bautista joined Tan, the latter was at the cusp of aggressively expanding his holdings from cigarette manufacturing and banking to spirits and agriculture. “They were looking for somebody who can help evaluate projects. Mr Tan set up this department called corporate planning and development in Fortune Tobacco. It was its Vice President Roberto Baksal, who introduced me to Mr. Lucio Tan, but I was reporting directly to him.” Bautista belonged to a tight-knit group of advisers including Tan’s brothers, whose work was highly confidential.

For many years, Bautista was a virtual nomad, moving from company to company, setting them up and moving on to the next, helping the Kapitan in his insatiable quest to acquire companies and establish a business empire. It was not until 11 years later, in the acquisition of PAL, where he began as Vice President for Finance, that he was to find a home. He believes luck played a big role in his rise to the top, “I joined the Lucio Tan group at the right time and that was the time it was growing. Joining PAL was not in my dreams. I never thought of working in an airline company,” he says candidly.

 

Building an Empire: The pioneering 80s
Bautista’s first project was the acquisition of an electronics company, which manufactured television sets, radios and cassette recorders way back when the Philippines was exporting consumer electronics to China. After setting up the accounting and finance systems that allowed the company to run smoothly, Bautista would move on to the next target. “I got involved in a lot of companies in the Lucio Tan Group and PAL was one of them. I was involved in the acquisition of Tanduay from the Elizaldes in 1988. I was also involved in putting up new ventures.” Asked what the astute businessman saw in him, Bautista says, “I don’t really know. I think he noticed that I finished projects on time, that we were successful in project acquisitions, that we were successful in financing new projects—and because of that, I was given more assignments. I was even involved in the acquisition of PNB in 2002.”

By the mid-80s, Jimmy was beginning to spend more time with the Kapitan. “We were in Fortune Tobacco when we wanted to modernize the facilities. He wanted to operate new cigarette-packing machines, tobacco processing machines and we were telling him that there might be an overcapacity if we bought new equipment.”

But the Kapitan was all for modernity. “We modernized the cigarette company. In the end, we were able to recover the cost of the equipment in a few years because the new equipment was very efficient. The percentage of wastage was minimal. Just for saving on wastage, we were able to pay for the cost of the equipment. So it turned out that he was right.” That experience revealed Mr. Tan to Bautista as a real visionary. “So those years after following him, the business became very successful,” he says.

PAL in the 90s
In 1992, the administration of President Corazon Aquino put PAL up for sale. Asia’s first airline was saddled with gargantuan losses, with government assuming more than half a billion dollars of its debt. Under the Marcos regime, PAL partly operated as First Lady Imelda Marcos’ private fleet of planes.

The bidding was won by PR Holdings Inc., a consortium headed by Antonio ‘Tony Boy’ Cojuangco—then Chairman of PLDT. “I think the group paid a down payment to the government after they won and they were given a few months to pay the balance, which they didn’t have—so they invited Mr. Tan to finance it,” Bautista recalls. In the end, Tan was asked to be an investor in PAL and he agreed, despite his team’s reservations. “My position then was not to invest in PAL, since we didn’t know the business. Mr. Tan was very good in manufacturing, but we didn’t have much experience in the service business.” Despite the fact that they would be the inheritors of several problems from the government, the visionary saw it as a challenge. Again, Tan decided against the advice of his team—much to the company’s gain.

Bautista remembers what Mr. Tan told his think tank in going against their advice:  “This is one way I can return the favor to the country which gives me good fortune,” Bautista says, echoing his boss’s words. “He said the country needs an airline that should be efficient.” Tan managed his companies very efficiently and thought he could also do it for PAL. He took the challenge. Adds Bautista, “The sizable investment (P5.1 B) was Manila’s best-kept secret for almost a year.”

It was Tan’s desire to be kept away from the glare of public scrutiny. “We know that if you have invested in an airline you will be in the limelight, people will talk about you and there is so much scrutiny. That was his initial decision, to be quiet about it. But I think he said he wanted PR Holdings to manage it as long as he was consulted and informed about major decisions. Maybe there was some information that wasn’t sent to him. He decided it’s better to go out in the open and control the company.”

And so the secret was revealed the following year, 1993—to the shock of the Cory administration, and to the dismay of Tan’s co-investors in the consortium, who also invested in the Cojuangco-led PR Holdings. The new owner inherited not just an aging but a mismatched fleet from the government-run airline. “We have B747-200s with different types of engines, different configurations and avionics so the cost of operations was very high,” says Bautista. “The ideal is operating one type of airplane—for example B747s—the engine should be the same, as well as the configuration and the avionics, so that your maintenance cost will be lower also. In the case of disruption, you can easily change one airplane with another.” To solve these concerns, PAL decided on a re-fleeting program.

With Jean Francois Laval, EVP Airbus, and Christophe Molus, Rolls Royce SVP, Airbus Division and Site Director

It was also at this time that Bautista buckled down to work as Vice President for Finance. “When we took over, we started modernizing not only the airplanes but also the systems,” he says. “For example, we had an accounting department with almost 900 people, because everything was manual. We started putting up computerized accounting systems, treasury systems to see to it to that cash is properly monitored, invested and accounted for.”

Because PAL was a government corporation, some employees were recommended by politicians. “Maraming complimentary tickets, during that time,” Bautista says,  “We were operating three classes of service: 1st class, business class and economy, the first class passengers are mostly non-revenue passengers, the business class passengers are passengers upgraded from economy.” He can now laugh at the memory.

A turnaround eluded PAL for a long time, it lost money every year until the early 2000s. Throughout all the trials, Tan remained optimistic. “He never lost hope. In fact there was a time I personally recommended to him not to put in more money.” Even as Tan and his team took over in 1993, and tried to modernize the enterprise, a pilot strike crippled operations in 1993 and the company had to default on their loans.

For nearly a month, PAL had a complete shutdown of operations. It was the deepest crisis the airline would fall into. The new administration under Joseph Estrada brought in Cathay Pacific Airways to the rescue and talk was rife of a takeover.

At that time, Bautista was actually working with the Cathay Pacific group. “They did a due diligence audit of PAL. Unfortunately we did not agree on the terms. We filed for what you call a petition for restructuring and rehabilitation. I was the chief finance officer so I led a team that prepared the rehabilitation plan of PAL.” Bautista worked with creditors to restructure the debts. “It was one of my most challenging days in PAL,” he says, “to face our creditors.”

One of the requirements of the creditors was for Tan to put in another $200M in equity. Bautista advised Tan to allow other parties to invest, and to welcome these parties as partners. Tan put in the $200M and the rehab plan was approved by creditors. As part of the plan, Bautista resigned as CFO, but remained with PAL as Executive Assistant to Tan.

 

Capturing the Filipino heart in the 2000s
For one brief period, in 2001, PAL made a profit. But the following year, the bird flu scare hit Asia. Again PAL registered a loss which extended until 2003.

In 2004, Bautista, on his 24th year with the Lucio Tan Group and his 11th with PAL, was placed in the pilot’s seat—during a board meeting called by Tan. Bautista was called on to steer the airline out of turbulence. For four straight years, PAL finally took off and became profitable.

It would suffer losses anew from 2008 to 2010 when the price of fuel skyrocketed, but it bounced back in 2011, right before the entry of businessman Ramon Ang’s San Miguel the following year. For Bautista, it was time to unfasten his seat belt and retire. But these retirement plans were to be short-lived. “Mr. Tan thought that he needed a partner. He was getting old,” Bautista says.  “So, he allowed San Miguel to invest $500M.”

After two years, it was Ramon Ang’s hope to buy out Tan, but they weren’t able to agree on the terms. In the end, Tan bought him out. Bautista was out of PAL at this time, returning only in 2014 when Tan acquired the majority shares. Bautista could not say no to Tan and reassumed the presidency of PAL despite his family’s reservations.

Bautista’s lucky streak brought PAL back to profitability from 2014-2016. As luck would have it, fuel price went down at that time. But it certainly took more than luck to sail through smooth skies. Bautista knew that cost had to be controlled and that the right revenue had to be generated—a plan that necessitated deferring the delivery of airplanes due to a lack of support in terms of airport infrastructure, maintenance and runways.

Signing ceremony with Bombardier.

The Sweet Touchdown to Retirement

At 61, retirement (his 3rd) sweetly beckons for Bautista. “In our group, it comes after 30 years of service, or at 60 years old, whichever comes first. So, I have retired twice. Because in 2010 I was 30 years with the group, I got my first retirement. Then in 2015 I got my 2nd retirement at age 55.”

Bautista is now on contract with PAL, renewable annually. It’s his cheerful disposition and even-temperedness that have served him well these last 25 years. “It’s 24/7 work, it’s a service. Even at home we have to work. And I got used to it.” At the time of this interview, because of the Xiamen Air mishap in August, PAL had to accommodate non-stop calls from media and passengers due to the closure of the NAIA runway. “Every day, you expect something wrong is going to happen. I try to be cheerful—if there are many problems and you feel very sorry, it does not contribute to the solution of the problem. If you have a positive outlook in life you can think of more solutions.”

Before Bautista can make his final touchdown, there’s still one more deal to seal for his Kapitan. Bautista is in talks with a potential strategic foreign investor in PAL. “The government, I think, will treat us better if there are foreign investors because investors mean a vote of confidence in the country,” Bautista contends.

 

Bautista’s Travel Bucket List

For a PAL million miler cardholder and an airline president, it’s ironic that travel is what Bautista wants to pursue in his retirement. And he has quite the bucket list. “I want to see the Aurora Borealis, go to Antarctica, Galapagos, Machu Pichu. It will be when I retire. If you are the president of an airline, you travel for only a few days. There have been times that I have been to the US for just a day to attend a meeting. In Europe, for example, you arrive in the evening, you have dinner, a meeting the next day and afterwards fly back to Manila. You know the position of being a president is very stressful, most of the airline presidents, they are young. In Asia, I am the oldest president of an airline.”

 The frenetic pace of the buyouts and takeovers of the 80s and 90s are now behind him. The Kapitan calls him on the phone now and then, and occasionally drops by his office at the PNB Complex along Roxas Boulevard.

For Bautista, his job is almost done, and all past maelstroms have been weathered. He has aided the Kapitan through changing climates across the years, and has helped him build both his legacy and his empire. Together, they’ve captured the heart of the Filipino, and are steering the company into a calm and graceful touchdown.

 Click on the image below for slideshow

Blessing of brand new Airbus A320 deliveries with Pres. Gloria Macapagal Arroyo, 2006 

Lucio Tan Group Christmas party, 2006 

Bautista and Tan, 2005 

At the thanksgiving celebration of Boeing 747-400 Division of Philippine Airlines 

 

Portraits by Artu Nepomuceno. 

The rest of the photographs courtesy of PAL.