Road funding

Philippine Airlines fresh out of bankruptcy falls back into turmoil

Skift grip

Philippine Airlines has finally emerged from Chapter 11, with debts erased and new capital infused. But will that be enough to make it fly with clearly too many pilots in its cockpit?

Maria Stella F. Arnaldo

Asia’s oldest airline, Philippine airlines, has certainly been through a lot of economic turmoil in the Philippines and Asia, as well as a lot of changing political headwinds on the local front. It has even survived management takeovers – from being a common carrier in the 1960s and 1970s to private hands in the 1990s – as well as labor strikes, lawsuits, a quasi- financial collapse and even a brief closure in 1998.

In late December, PAL emerged from Chapter 11 bankruptcy, which wiped out some $2 billion in debt. Its restructuring plan includes downsizing its fleet and a commitment from majority owner and CEO Lucio Tan to infuse $505 million in new capital.

But will that be enough to keep the carrier flying?

On the eve of the Lunar New Year, considered an auspicious day in Filipino-Chinese families like Tan’s, PAL’s board decided to part ways with its chairman and chief executive, Gilbert Santa Maria. In his place, they appointed a pilot, Captain Stanley K. Ng, as acting president and officer in charge. Ng, who joined the carrier in 2003 as a member of its ground staff, is Tan’s son-in-law.

The wrong signal

“This appointee sends the wrong signal to creditors, especially since PAL has just emerged from Chapter 11 bankruptcy,” said financial analyst Astro del Castillo. “It will only add more questions about the future of PAL, where it will go.”

He predicted that investors would probably play it safe instead of putting more money into PAL, which is currently suspended from stock trading as carriers’ finances plummeted with the Covid-19 pandemic wreaking havoc on travel around the world.

PAL’s communications staff refused to respond to Skift’s claims that Ng had only been named chief officer, even though his press release praised his track record.

“Commander of Airbus A320, Captain Ng is the first pilot to assume the chairmanship of PAL since the early 1960s. He brings to this position a wealth of experience in the airline industry,” the press release read.

“He started flying in 2008 as a non-commissioned officer and worked his way up until he was promoted to senior vice president in 2019, in charge of the company’s world-class pilots and cabin crew. airline, as well as operational airport and engineering teams.”

Ng will sit in the carrier’s main cockpit for at least six months. “Captain Stanley will be (officer in charge) while PAL is looking for a highly qualified COO. His appointment was made so that Gilbert (Santa Maria) could leave as soon as possible.

whispering winds

Whoever ends up being hired as the carrier’s chief pilot will have to contend with a formidable owner and family members, as well as a coterie of associates constantly undermining the decisions of Tan and his lieutenant.

Various sources, including former PAL executives, point to instances where decisions already made would be reversed simply because a family member or consultant whispered a different opinion, prompting the mogul to change course. Those familiar with PAL’s operations said that was probably what happened with Santa Maria, whose departure had already been announced as early as last December.

Appointed chairman in July 2019, Santa Maria had to find ways to stem the carrier’s bleeding finances. But PAL sources told Skift that his management style did not suit Tan’s employees and associates.

The pandemic has worsened PAL’s fragile finances, forcing Santa Maria to lay off 2,300 employees – 30% of its workforce – in early February 2021. PAL also had to reduce domestic and international flights. But the carrier was able to cut its losses to $325 million in the first half of 2021 from $411.8 million the year before, just as it filed for Chapter 11 bankruptcy in New York last September.

Wanted: New CEO

Del Castillo said Santa Maria tried to professionalize the airline, but acknowledged he may have ruffled some feathers in the process. “When you’re trying to implement change, you might step on some people’s toes,” del Castillo said.

The analyst expressed hope that whoever eventually replaces Santa Maria will be just as good. “(Santa Maria) has been aggressive in fighting for the industry, not just for PAL, especially during this pandemic,” del Castillo said.

A former PAL executive recommends that the carrier’s next president immediately appoint key officials to help shape its direction and policies. “He will need a strong (chief financial officer), business group leader and head of planning and strategy,” the former executive said, adding that Santa Maria had appointed a young leader. of the commercial group with no air experience. His planning manager also had no airline experience, just like him.

“The new president will need a cohesive board that will provide guidance and direction.”