NEWSFLASH

Makati City, Aug. 12, 2000 - The Philippines will save foreign exchange and generate millions of dollars in earnings from the joint venture between German firm Lufthansa Technik AG and MacroAsia, a subsidiary of the Tan Group of Companies, according to the Philippine Economic Zone Authority (PEZA).

The venture, PEZA pointed out, will also make the country competitive in aircraft maintenance, repair and overhaul considered a lucrative business in the aeronautics industry.

The joint venture, Lufthansa Technik Phils. (LTP), will provide maintenance, repair, overhaul and engineering services to domestic and international airlines, including Philippine Airlines (PAL).

PAL's transfer of its maintenance and engineering division to Lufthansa Technik has removed itself of a non-core business. Next to fuel, maintenance, engineering and aircraft servicing was the second highest growing expense account, incurring for PAL more than P150 million over budget for fiscal year 1999-2000.

PEZA said LTP's $200 million capital infusion is one of the largest foreign investments under the Estrada administration.

The aircraft maintenance venture, PEZA said, will be the largest in the region and is estimated to cost P5.265 billion and generate about $125 million worth of exports every year.

During its first year of operation alone, it will generate 1,360 jobs, corresponding to the present workforce of PAL's maintenance and engineering division. LTP has agreed to rehire the affected division's workforce, with at least 80 percent of the workforce already accepting the new job offers from the company, which also substantially gave higher pay.

"There will be no mass layoff or any form of economic dislocation. Everybody will have a job. No one will be left out," said a PAL executive earlier to allay concerns that the sale of the division would result in dislocation of workers.

PAL and other local carriers are expected to generate substantial savings and save precious foreign exchange with the establishment of the repair, maintenance and overhaul facilities in the Philippines, the PEZA added.

LTP will be PAL's exclusive maintenance provider for the next 10 years. PEZA estimated that the maintenance requirements of PAL and other local carriers reached at least $60 million annually.

"LTP foresees generating annual foreign exchange earnings of $527 million over the next five years as other international airlines will be contracting its services," PEZA said.

The technology of Lufthansa, a member of the Deutsche Lufthansa Group, the world's largest provider of aircraft maintenance, repair and overhaul services, and the knowhow of its workers will likewise be shared with the local venture, strengthening the Philippine aviation industry, it added.