Philippine Airlines has finally exited from Chapter 11, with debts erased and new capital infused. But will these be enough to keep it flying with clearly too many pilots in its cockpit?
Asia’s oldest airline, Philippine Airlines, has certainly been through a lot of economic turbulence within the Philippines and in Asia, along with numerous changes in political headwinds on the local front. It even survived management takeovers — from being a state-run carrier in the 1960s and 1970s to private hands in the 1990s — as well as labor strikes, lawsuits, near financial collapse and even a brief closure in 1998.
In late December, PAL exited from Chapter 11 bankruptcy, which wiped out some $2 billion in debts. Its restructuring plan includes the reduction of its fleet and a commitment from majority owner and CEO Lucio Tan to infuse $505 million in new capital.
But will this be enough to keep the carrier flying though?
On the eve of the Lunar New Year, considered an auspicious day among Filipino-Chinese families like those of Tan, PAL’s board of directors decided to let go of its president and chief operating officer, 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 the son-in-law of Tan.
The Wrong Signal
“This officer in appointment sends the wrong signal to creditors especially since PAL just exited from Chapter 11 bankruptcy,” said financial analyst Astro del Castillo. “It will only add more questions about PAL moving forward, on what direction it will take.”
He predicted investors would likely play it safe instead of putting more money in PAL, which is currently suspended from trading shares as the carriers’ finances fell into a tailspin with the Covid-19 pandemic wreaking havoc on global travel.
PAL’s communications staff declined to respond to Skift’s inquiries why Ng was only appointed officer-in-chief, even as its press release lauded his track record.
“An Airbus A320 commander, Captain Ng is the first pilot to assume the presidency of PAL since the early 1960s. He brings to the job a wealth of experience in the airline industry,” the press release said.
“He started flying in 2008 as a Second Officer and rose up the ranks until he was promoted to senior vice president in 2019, in charge of the airline’s internationally-respected pilots and cabin crew, as well as operational airport and engineering teams.”
Ng will be sitting in the carrier’s main cockpit for at least six months. “Captain Stanley will be (the officer-in-charge) while PAL is looking for a very qualified chief operating officer. His appointment was made so Gilbert (Santa Maria) can leave as soon as possible.”
Whoever ends up being hired as the carrier’s chief pilot will have to go up against a formidable owner and family members, along with a coterie of associates constantly undermining Tan and his lieutenant’s decisions.
Various sources, including former PAL executives, point to instances where decisions already made would be overturned just because some family member or consultant whispered a different opinion, pushing the tycoon to change tack. Those familiar with PAL’s operations said this was probably what happened with Santa Maria, whose departure was already rumored as early as last December.
Appointed president in July 2019, Santa Maria had to find ways to stem the carrier’s bleeding finances. But PAL sources told Skift his management style did not sit well with employees and Tan’s associates.
The pandemic worsened PAL’s shaky finances, forcing Santa Maria to retrench 2,300 employees — 30 percent of its workforce — in early February 2021. PAL also had to reduce domestic and international flights. But the carrier was able to trim 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 Chief Operating Officer
Del Castillo said Santa Maria tried to professionalize the airline but acknowledged he may have ruffled a few feathers in the process. “When you try to implement changes, you are likely to step on some people’s toes,” del Castillo said.
The analyst expressed hope that whoever ends up replacing Santa Maria will be just as good. “(Santa Maria) was aggressive in fighting for the industry, not just for PAL, especially during this pandemic,” del Castillo said.
A former PAL executive recommends the carrier’s next president to immediately appoint key officials to help him frame its direction and policies. “He will need a strong (chief financial officer), head of commercial group, and head of planning and strategy,” the former executive said, adding that Santa Maria appointed a young head of the commercial group with no airline experience. His head of planning also had no airline experience, just like him.
“The new president will need a cohesive board of directors who will give guidance and direction,” said a source familiar with the matter who wished to remain anonymous.
Photo credit: Philippine Airlines has experienced numerous recent economic struggles Steven Agre / Wikimedia Commons