(STAR) By Zinnia B. Dela Peña - Philippine Airlines (PAL) will come out of receivership in October, the national flag carrier declared yesterday, ahead of schedule and amid an improved financial position.

“The airline will come out of receivership much sooner than its original year-end target and continue to look seriously at financing options to further improve its capitalization,” PAL Holdings president Jaime Bautista said.

PAL Holdings, controlled by tobacco and liquor tycoon Lucio Tan, owns 84.7 percent of the airline, which entered receivership in June 1998 after suffering massive financial losses caused by external and internal problems.

Bautista said PAL’s “markedly improved” financial performance, highlighted by an eight-year streak of operational profits, meant the airline has fully recovered and is ready to exit from the receivership framework supervised by the Securities and Exchange Commission.

PAL’s net profit in the three months to June more than doubled to $34.5 million from $17.2 million in the same period last year, driven by higher revenue from its passenger and cargo businesses.

PAL chief finance officer Andrew Huang said in August the airline had paid a total of $1.87 billion of its debt over the past few years, and will pay the balance of $950 million over the next seven years.

Huang said PAL has no plans to seek a restructuring of its outstanding debt, which will be settled using internally generated funds.

PAL recently concluded financing deals with France’s Calyon Credit Agricole CIB and Germany’s KfW-IBEX Bank for its acquisition of two new Airbus A320 aircraft, its first loan deals with the aircraft-financing sector in a decade.

The airline is modernizing its fleet by acquiring 14 A320s, of which it has ordered nine and taken out options on five.

PAL Holdings is also planning to issue new shares to investors and borrow fresh capital to fund its ongoing refleeting program, estimated to cost $1.4 billion.

Bautista said the company has tapped Macquarie Securities Pte. Ltd. as financial advisor for its planned capital-raising activity.

“We’re still in the process of finalizing what options to take but it could be a combination of issuance of new shares, debt raising, and internal cash,” Bautista said at the sidelines of PAL Holdings’ annual stockholders’ meeting yesterday.

Of the total funds needed, $1 billion will be used to buy three Boeing 777-300s while the remaining $400 million will go to the purchase of seven Airbus 320s.

PAL has achieved consistent operating income since the start of the implementation of the amended rehabilitation plan in 1999 and consistent net income for the past three fiscal years, mainly due to the increase in the net yield per revenue passenger kilometer and the overall increase in the number of passengers carried.

In its last fiscal year that ended March 31, 2007, PAL posted a net profit of $140.3 million. PAL, Asia’s oldest airline, entered into Receivership after going to the brink of liquidation due to external and internal problems.

It was forced to shut down temporarily in September 1998 because of labor problems and a huge debt.

Creditors later approved a rehabilitation plan that streamlined its operations and called for $200 million in fresh equity, provided by chairman and majority shareholder Lucio Tan.

“With our exit from the receivership, we can now concentrate more on the operations of the company and our expansion and pursuing alliances.

We will have better chances of getting financing,” Bautista said. – With AFP, Michael Punongbayan

Chief News Editor: Sol Jose Vanzi

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