Bautista Returns as PAL President, Aircraft Deliveries Deferred

Less than two months after regaining control of Philippine Airlines, Lucio Tan has silenced critics that doubted his ability to take over the airline once again. Most recently, Tan announced that Jaime Bautista would be returning as the President of Philippine Airlines. 

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It was earlier believed that Joseph Chua would replace Ramon Ang as President of PAL. However, Chua has instead taken the role as Vice Chairman of Philippine Airlines, while Lucio Tan retains his position as Chairman. 

Tan offered $1 billion to re-acquire the 49 percent stake in Philippine Airlines that he had sold to San Miguel Corporation two years earlier using a number of multi-million dollar loans that have been secured by several creditor-banks.

The composition of the new Philippine Airlines Board cements Tan's control over the airline. In addition to Tan and Chua, Florentino Herrera III, Marianne Raymundo, Carmen K. Tan, Manuel M. Lazaro, Heinrich T. Khoo, and Johnip G. Cua have been appointed to the board. They are joined by Lucio Tan Jr, Michael Tan, Washington SyCip, Antonino Alindogan, Gregorio Yu, Estelito Mendoza, and Alberto Lina. The new board members have replaced representatives of San Miguel Corporation, completing Tan's management take over of Philippine Airlines. 

Meanwhile, Bautista confirmed that the airline was in talks with Airbus regarding the deferral of upcoming aircraft deliveries. The deferrals would only affect aircraft slated to be delivered in 2015 and beyond. Bautista says that the current aircraft orders must be reviewed as the carrier currently has a surplus of short to medium-haul aircraft with no destinations to serve.

However, Philippine Airlines will accept delivery of the remaining orders scheduled for delivery in 2014 including three Airbus A321 aircraft and three Airbus A330 aircraft. Although the A330 aircraft are bound for the Middle East, Bautista says that there are no destinations presently allocated for the incoming A321 aircraft. He added that the airline is presently being hounded by overcapacity in the Middle East. 

Philippine Airlines was originally scheduled to accept delivery of ten A321 aircraft in 2015, followed by an additional ten in 2016 under the original purchase order that was signed in 2012. In addition to the aircraft deferrals, a decision on additional long haul aircraft will be deferred until further notice as the Tan Group gradually assumes full control once again. 

Although Tan announced that Philippine Airlines will continue with its expansion to New York next year, the national flag carrier will be deferring plans to open any new routes in Europe. Aviation industry analysts have long suggested that opening multiple routes from Manila to European cities such as Paris, Frankfurt, and Amsterdam was a risky proposition, and could be better served on a code-share basis through partners such as Etihad. Moreover, the airline should concentrate on building its profitable routes to North America. 

The recent announcements represent a shift in direction for Philippine Airlines, which has been ambitiously expanding under the leadership of Ang and San Miguel Corporation. As expected, Tan management is applying the brakes on expansion and taking a more conservative approach, concentrating on strengthening existing profitable routes, rather than entering new risky markets.