Philippine Airlines, which recently took in the San Miguel Corp as a new investor, is seen investing as much as $1 billion for a fleet modernization program that will make the storied flag carrier more competitive.
Ramon S. Ang, president of SMC who signed a deal last week to acquire 49 percent each of PAL Holdings and Air Philippines Corp., said the conglomerate welcomed “the opportunity to participate in the refleeting and modernization plans of the two airlines.”
In a text message, Ang said the fleet modernization would cost at least $500 million to as much as $1 billion.
The $500-million minimum requirement is what SMC is infusing into several holding firms that will result in its equity investment in PAL and AirPhil, where the conglomerate is expected to exercise management control even if the majority stake would remain with the group of taipan Lucio Tan.
In a statement jointly issued by the Lucio Tan group and SMC, the two groups said the new partnership would “allow the two airlines to strengthen operations and stay competitive with the implementation of PAL and AirPhil’s fleet modernization program.”
Industry sources explained that because SMC’s entry into PAL and AirPhil would involve the issuance of new shares, new money would flow into the carriers. For capital spending beyond $500 million, the source said the airlines could fund this through debt rather than equity so as not to disrupt the existing capital structure.
http://business.inquirer.net/52951/pal-airphil-set-refleeting-programs
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