Philippine Air May Close

Philippine Airlines, reeling from labor chaos and the economic crisis that’s engulfed other Asian carriers, is threatening to permanently shut down next week unless it reaches a pact with its unions.

The Philippine government is trying to broker a settlement, and President Joseph Estrada told reporters in Manila on Friday that he “remained hopeful” that an agreement could be reached between the unions and Lucio Tan, the airline’s majority owner.

“I will try my best to settle this problem,” Estrada said. “I am keeping my fingers crossed.”

If the effort fails, Tan plans to close the 57-year-old airline, one of Asia’s oldest. Citing “the insurmountable burden of continued losses,” Tan said the carrier will stop flying Wednesday, leaving many areas of the Philippines--a sprawling archipelago of 7,000 islands--without air service.

On Friday, the airline’s Internet site carried only one page: a statement of its plans to close and phone numbers for passengers needing more information.

Some of the other major airlines that serve the Philippines said they weren’t yet making plans to rush more flights into the country.

“We are watching the situation very closely, but we have no plans to add flights now,” said Gus Whitcomb, a spokesman in Los Angeles for Cathay Pacific, which has 36 flights a week between its home airport in Hong Kong and the Philippines.

Cathay will not accept tickets issued by Philippine Airlines, Whitcomb said.

Japan Air Lines, which has 10 weekly flights between Tokyo and the Philippines, already had planned to raise its service to 12 flights beginning Oct. 1, but no additional flights are yet scheduled, said spokeswoman Irene Jackson in New York. JAL “generally speaking will not accept Philippine Airlines tickets,” she said.

Philippine Airlines is the worst-case example, but all of Asia’s airlines are being ravaged by the region’s economic crisis. Once the fastest-growing sector in the global airline industry, the carriers are now scrambling to slash costs in the face of regional currency devaluations, slumping passenger traffic and costly expansions of their airplane fleets.

The airlines have been laying off employees, cutting back on the number of flights, restructuring routes, delaying aircraft purchases and promoting cheaper fares to survive massive financial losses.

In turn, the crisis has sparked major confrontations between the carriers and their workers. Philippine Airlines, which owes its creditors more than $2 billion, has been hit by a series of strikes, including a 22-day one by its pilots in June.

Most recently, Tan--a tobacco and brewing tycoon who took control of the airline in 1996--offered workers 20% ownership of the carrier and seats on its board in exchange for a 10-year suspension of labor contract bargaining. But the workers unions rejected the proposal.

“If you try to take away the soul of the union, we will have to uphold our principles,” said Abel Capili, a board member of the ground workers union. “We may have to accept the closure of PAL.”

But Roberto Anduiza, head of PAL’s flight attendants union, said they would be willing to make some sacrifices to prevent a closure, which he said would mean “an economic disaster of national proportions.”