A look at Archibald Po*

IN December 2009, I interviewed Archibald "Archie" Po, president of LionAir Inc., who had then just launched his newest business, a hotel in Boracay Island, as well as an air ambulance service in Asia. He has been in the aviation industry for more than three decades, and is one of the well-respected aviation experts and pilots in the Philippines.

Po has never been involved in any controversies before, and I don't believe he deliberately misrepresented those allegedly overpriced choppers sold to the PNP by Maptra, as brand new. The Po family is a very respectable clan whose father Joaquin, founded Popular Bookstore, which is still operated by his children today. I personally know a number of the siblings, and I've found them to be down-to-earth and very sincere people.

The case of the allegedly overpriced choppers, obviously involve unseen, and much bigger hands, and only the PNP officials involved in the purchase can shed light on it:

Former Asian Spirit owner diversifies into tourism, air ambulance

BORACAY ISLAND, Aklan—Archibald Po, former majority shareholder of Asian Spirit (now Zest Airways), is now going full blast in his investments in the tourism industry by opening another boutique hotel.

A pilot by profession, Po also recently set up an air ambulance service in Singapore, bringing in patients as far as Nepal and India to hospitals in the city-state.

In an interview, Po said his new resort, called Hotel Soffia, was built at a cost of P100 million under his property concern, Kifessia Realty Corp. “It’s always been a dream of mine to build a hotel on this island, which I passed so often during my flying days in the 1980s.”

Architect/interior designer/master plumber Chi-chi Victoriano, who also did the Amorita Hotel in Bohol, designed the boutique hotel. Because he is an environmentalist, Po explained that the hotel uses only natural lighting aside from its energy-saving light bulbs, solar heaters, and filters its waste in a leaching field which produces fertilizer, instead of emptying into the island’s sewerage system.

It employs 50 employees in three shifts for its round-the-clock operations, making it a “very lean” hotel, he added. Room rates of the hotel are “affordable”, ranging from P3,500 ++ (standard, twin/triple-share) to P5,000 ++ (superior, twin/triple-share).

Although nestled on a hill in barangay Yapak, the hotel, Po said, will attract Boracay tourists who want quiet and privacy, but still need quick access to the restaurant strip and main white beach. “You just relax here and swim in our infinity pool. Or have your cocktails while taking in the 340-degree view of the island. If you want to go to the beach or the party places, we’ll transport you there. It’s only seven minutes away.”

This is the second boutique hotel to his name after the 48-room Hotel Fleuris in Puerto Princesa, Palawan, built at a cost of P90 million. Said to be a “favorite” among diplomatic embassies, consular offices, Fleuris is now on its 11th year of operation, “but it still looks brand new,” said Po. At least 84 percent of Tripadvisor members who have stayed at Fleuris have dubbed it the “cleanest and friendliest” hotel in Puerto Princesa.

Po said he is considering to build another hotel in Basco, Batanes, and is currently evaluating other possible hotel sites in the country.

“I think the Philippines has no way to go except tourism. That is what will save our economy, not manufacturing, which is already the stronghold of China,” he stressed.

Meanwhile, Po recently bought a Hawker jet to beef up his fleet of air ambulances via Executive Jets Asia, a company in partnership with other Asian and American air transport experts.

Po said he invested some $4 million in the company, based in Selatar Airport (East Camp), Singapore, supplying the company’s four-plane fleet. The company also provides cost-effective executive jet transport services to the region’s high-powered businessmen.

“All the jets are convertible to air ambulances,” he explained, adding that the planes, mostly eight-seaters, are chartered by hospitals, insurance firms and individuals needing quick medical evacuations for critical medical conditions.

Po praised the Singapore government for its efficient bureaucracy, allowing businesses to operate with the most minimal permits and signatures required. “An air ambulance, for instance, has to mobilize quickly in less than 45 minutes,” he stressed.

He said he is eyeing to invest another $2 million to expand the operations and maintain four planes in Singapore. He is also eyeing to expand to other countries.

Po also operates LionAir Inc., a charter service with 20 helicopters and two LET aircraft. The company is also the licensed distributor and service center of the Torrance, California-based Robinson Helicopter Co. in the Philippines. A number of well-known politicians and high-profile businessmen in the country are owners of Robinson choppers. LionAir is also the favorite go-to charter service by politicians running in national elections.

In 1995 Po set up Asian Spirit with two other businessmen—Antonio Turralba Jr. and Noel Oñate—capitalizing it a cost of $3 million. In May 2007, he sold his shares in the airline to Antonio Ang, founder of CATS, the distributor of Mercedes-Benz locally. Ang, in turn, along with the airline’s minority shareholders, subsequently sold their shares to juice king Alfredo Yao in March 2008.

*This piece was originally published in December 2009 in the BusinessMirror.

Finally, a real vacation for a Boracay veteran

My friends and I stayed in a wonderfully quaint new establishment called Hotel Soffia, owned by former Asian Spirit majority owner and professional pilot Archie Po. Nestled on a hill in sitio Hagdan, barangay Yapak, past the chi-chi splendor of some of the most expensive resorts on Station 1, the boutique hotel with its whitewashed walls stands out against the cobalt blue sky. (Click BusinessMirror for the rest.)

Roaches attack Zest Air passengers...eeew!

LAST week I received an email w/c apparently has been making the rounds of several friends in the tourism business and email groups. I am publishing it to warn travelers about the hazards of riding on Zest Airways (formerly Asian Spirit), which in the past, I've written about because they flew w/o any insurance. I forwarded the same email to Butch Rodriguez, the carrier's VP for Commercial Affairs and official spokesman, but have not received any reaction to email writer Ms. Polintan's concerns.

Gee, Seair's Nikos Gitsis must be thanking his lucky stars he didn't accept the buy-out offer of Zest Airways' Alfredo Yao.

Here's the email:

On Tue, 11/25/08, Marge Polintan <******@yahoo.com> wrote:

Customer Relations/ZEST AIR:

We are a party of 17 (15 adults and 2 minors) who all took the Manila-Caticlan on Nov. 22 and returned to Manila on Nov. 24 via Kalibo-Manila when our return flight was diverted from Caticlan to Kalibo.

We checked in all 17 of us at Caticlan about 4:10PM only to be told that we have to motor to Kalibo as our flight was diverted. When we asked why, we were given the most stupid reasons that only a moron can accept. Your MR. RODEL URGUELLES informed us that the plane could not take off as sunset was at 5:20. (1) Our flight was supposed to leave at 5:00PM so clearly we would have been up in the sky when sunset was supposedly setting in. (2) Another stupid reason given to us was that the Caticlan airport had no runway lights making it impossible for us to take off!!!! Why in heaven's name do you schedule late afternoon flights knowing that the Caticlan airport is not fitted with lights (I seriously doubt if is this is true). (3) We also asked why we were not contacted to let us know that they were moving our flight earlier. They were able to contact us before we left Manila that our departure was moved to an earlier time. (4) We informed your Mr Urguelles that we had a pregnant lady in our party and were concerned about the long trip from Caticlan to Kalibo. We were asking for a guarantee that should she suffer a miscarriage, the airline will be made answerable for it. Of course he could not give any guarantee. Having no choice we took the risk and motored to Kalibo for a good one hour motor ride. Upon reaching Kalibo, we found out that two other Zest Air flights were likewise diverted. We were made to wait some more as the planes coming from Manila were delayed. I surmised that this was the main reason why our flights were moved from Caticlan to Kalibo.

We were finally herded to an airplane for our flight to Manila. With grumbling stomachs and exhausted from the trip from Caticlan, we had to make our way inside the airplane in darkness. When we asked the flight attendant why there were NO cabin lights, we got another STUPID response and were informed that they are conserving energy and therefore we have to grope for our seats in darkness without any airconditioning. Madilim na Mainit pa!!!!!! What would have been a one hour flight seemed like an eternity as it took us about an hour and a half to reach Manila in darkness.

Having undergone all these nerve wracking experience what was more irritating apart from the stupidity of your staff is the fact that they did not even offer any apology for all the inconvenience we were experiencing. I think you should all go back to school and take courses on basics of good manners, effective management and people skills. Your staff is sorely lacking in all of these!!!!!!

This is our first and last time we are flying ZEST AIR. You can be assured that the 17 of us will be your worst advertisement and will make it a point to inform all our friends and other concerned agencies.

Passengers
MARGARITA S. POLINTAN
LUIS MANUEL S. POLINTAM N
MIA MARGARITA S. POLINTAN
JOSEFINA S CRISTOBAL
MARIANO CRISTOBAL III
RIZZA JOIE CRISTOBAL
EMMANUEL UBIADAS
CATHERINE UBIADAS
GABRILLE ERIN UBIADAS (Minor)
VIRGINIA AGALOOS
BERNARDO AGALOOS III
AILEEN AGALOOS
RACHEL EUSTAQUIO
BERNADETTE NEWELL
ZANDRA NEWELL
ANDREW NEWELL (Minor)
TIMOTHY BLANK

AFTER two weeks, below is the response of Zest Air's Customer relations department. Geez, not even a personal call to apologize to Ms. Polintan? No offer of a comp hassle-free trip next time? How totally lacking in respect for their passengers. Tsk, tsk.

From: Customer relations
To: Marge Polintan <****** @yahoo.com>
Sent: Wednesday, December 3, 2008 3:53:54 PM
Subject: Re: [stcqchs'65] Fw: ZEST AIR/ASIAN SPIRIT NEVER AGAIN-A HARROWING EXPERIENCE

Mam,

I apologize for the inconvenience and have noted your concerns and complaints, the old planes will be grounded and 5 new planes will be in placed.

Best regards

NOW I know Rodel Arguelles, who has been Asian Spirit's Caticlan station manager for the longest time. I've never had a problem w/ him. He has been one of the more efficient employees I know in Asian Spirit. So I'm not so sure what has happened to him. Could be a reflection in the change of management style and their policies.

And yaaak! Ipis! I've also heard that the planes' toilets are not cleaned well. Plain soap and water are used instead of that blue toilet-duck product. So Zest Air management would rather cut expenses that make sure their passengers are safe from health risks huh? Sweet.

There was a time when Asian Spirit was one of the best and most efficient budget carriers in the country. Now that it's been transformed to Zest Air, it is just sh**. Sad.

Airlines respond to growing demand for online bookings

ALL over the world, major international airlines are responding to the growing demand for customers booking and paying for their tickets via the Internet, and are, thus, beefing up their online-transaction capabilities by redesigning and offering promotions on their respective web sites.

All representatives of airlines interviewed for this piece—Philippine Airlines, Singapore Airlines, Emirates Airlines and Northwest Airlines— also predict stronger growth in Internet bookings, especially in Asia and the Pacific as computer penetration and usage rise.

Todd Anderson, director for marketing and distribution of the Minneapolis-based Northwest Airlines, said in a telephone interview that for Asia-Pacific, the reservations made via its web site (http://www.nwa.com) “generally vary by market and by country…between 2 percent and 35 percent [with Singapore on the higher end of the scale]” accounting for total bookings by the airline. The rest of the bookings are made via travel agents and general service agents (i.e. accredited ticket agents).

(Click here for the rest.)

Disillusioned

CONTINUING my tirade about Asian Spirit, I really had high hopes for this airline, which in the past, had merely suffered from the lack of proper marketing support and strategy. I had so believed in the leadership and abilities of its new owner, Zest-O king Alfredo Yao, who became my idol especially after interviewing him, and finding out how much he had struggled to become the success that he is today. I was amazed at how humble he still remained, despite his fame and fortune.

What was memorable in that interview was his response to my question on advice he could give to new entrepreneurs. This is what he said:

“If you’re just starting in business, get out of your comfort zone. Being an entrepreneur is really hard work in the beginning. Keep your focus. But more than anything, you must take care to earn the respect of your colleagues and suppliers. You can only do this by having word of honor in any transaction. Success doesn’t come overnight, but by being decent and honest in all your dealings, it will help you in the long run. By word of mouth, people will know you. ’Pag sinabi mong magbabayad ka ng utang, for example, magbayad ka. It is sad that nowadays, this trait, of being trustworthy or having word of honor, has slowly disappeared.(See Look to the Sky, BusinessMirror, May 7, 2008)

I find it really hysterical for him to say something like that and completely do the opposite...e.g. miss payment again on his carrier's insurance premium, after he himself committed to pay Prudential Guarantee by a certain deadline. Tsk, tsk, tsk.

I dunno about you, but I am certainly disillusioned and puzzled by Mr. Yao's behavior.

Feng shui and Sulpicio Lines

CHINESE families in the Philippines continue, to this day, believe in geomancy or feng shui, to help them ensure luck and prosperity in their lives and their businesses.

I remember Joseph Chau of Mandarin Oriental, whom I met sometime in 2001 or 2002 while making pahula in the lobby of the Pan Pacific Hotel in Malate (he was a devotee of Aling Puring Alvior then), telling me that Sulpicio Lines was one of those transport businesses which had their logo redesigned to ward off the bad luck that seemed to be hounding them.

By then, Sulpicio Lines had already figured in three major maritime disasters — the sinking of M/V Doña Paz in 1987 (death toll: 4,000); M/V Doña Marilyn in 1988 (death toll: 77); and M/V Princess of the Orient in 1998 (death toll: 70, and 88 still missing).

I am no longer sure if it was Joseph who redesigned Sulpicio Lines' logo or it was someone else (his Mandarin O. predecessor perhaps the late Paul Lau?) but by the time I met Joseph, the shipping line was already sporting the new logo using the more modern yellow-green "S" enclosed in a circle with a yellow background looking like the sun. (Sorry I can no longer find the old logo online.)

The new logo seems to have worked for Sulpicio Lines as it didn't figure out in any more disasters since its M/V Princess of the Orient sank near Fortune Island in Batangas in 1998. Then last week, or 10 years after its last mishap, it's M/V Princess of the Star sank off Romblon amid stormy weather. (As of June 27, newspapers reported 124 confirmed dead and 56 surivors. The ship was carrying 862 passengers.)

Which goes to show, that no matter how much you believe in geomancy, human error and frailty will negate every positive vibe the feng shui was supposed to have engedered. (Then again I find it queer that Sulpicio Lines' luck seems to run out every 10 years or so...hmmm.)

* * * *
WELL, well, what's this I hear? Another transport company just had their offices blessed and feng shui'ed last Wednesday, June 25, 2008.

According to my sources, Asian Spirit had a feng shui ceremony that day, which coincidentally, was the day the airline committed to pay the premium it owed its insurer, Prudential Guarantee. One of the quirky things that happened was during the blessing ceremony, all women who gave birth this year were told to leave the offices, as they are considered unlucky I suppose.

You would expect that all things would have gone well for Asian Spirit from then on. (If you recall, the airline had seriously jeopardized its passengers who flew on its planes from June 19-23, 2008, because the carrier had no insurance. See my earlier blog entries.)

Sorry to disappoint you feng shui believers out there. Because by the end of the day, AIG London, Prudential Guarantee's reinsurer, sent the airline a Notice of Cancellation of its insurance policy after...gasp! missing the deadline to pay Prudential! Ay anovayan Ambassador Yao!

Of course, by next morning, June 26, Prudential Guarantee was paid. Pero sa true lang, ano pa ang silbi ng feng shui kung inefficient naman ang management ng airline na ito? To think nag-PR pa sila saying they were mounting "mercy flights" to Kalibo, Aklan, and San Jose, Antique, ferrying relief goods for the victims of Typhoon Frank. Tsk, tsk. Bilib na sana ako pero...wa din.

Attention Director Carmelo Arcilla of the Civil Aeronautics Board...hoy gising!

Inefficiencies in civil aviation regulations

Whew! Airline insurer back

FLAG carrier Asian Spirit is once more insured by Prudential Guarantee and Assurance Inc., this after the airline revoked its appointment of an insurance broker and committed to settle the carrier’s premiums Wednesday, June 25.

In a letter addressed to Lucio Fernandez, vice president for aviation and marine of Prudential Guarantee, dated June 23, 2008, and received by Prudential at 7:23 p.m., Asian Spirit chief finance officer Albert Toribio said: “After a careful evaluation of the situation, I have decided to revoke the appointment I made in favor of Empire Insurance Co., as exclusive broker of record.

“I hope this letter will set the record straight that we have never rescinded the existing insurance covering our aircraft with your company. It is our desire to continue to preserve our harmonious relationship.”

In his letter, a copy of which was obtained by the BusinessMirror, Toribio added: “As regards to our premium payment for the 2nd Quarter, we will make remittances by Wednesday.” (Read the rest here.)

Click this to read the letter: File0303.PDF

* * * *
I used to love riding Asian Spirit.

Despite the minor irritants like sales agents eating instant mami while serving passengers buying tickets at the Express ticketing office or slight confusions in our bookings, its flights were hardly delayed, except for one or two incidents I know of. A friend of mine waited hours in the Caticlan airport on her way back to Manila, but airline personnel never even bothered to announce the flight delay. But I loved the jet service to Caticlan which was the fastest among other carriers serving the same route from Manila.

In all my years riding the airline and writing about the aviation industry, not once did Asian Spirit, to my knowledge, miss out on paying its insurer, nor flown its planes without being covered by an insurance policy. The old management also made sure that, so there would be no problems in case of accidents, their planes were all insured to about $500,000 per quarter.

So it comes to my surprise that the carrier, now under new management, was brazen enough to fly without insurance coverage from June 19-23, 2008, and the situation would have continued, if only we didn't find them out. Imagine if anything happened last week? Who would pay for the damages or claims of the victims? Ang scary naman ha!


(Amb. Fred Yao, fruit juice king, banker, and now Asian Spirit owner.)

What's even more irritating is talking to airline officials who are obviously lying and make it appear that all is well. To ascribe everything to just a case of "misunderstanding" is too simplistic. Airline officials had to wait for five days before rectifying the said "misunderstanding". And thanks to its owner, Ambassador Alfredo Yao, the problem was settled. Imagine having your company owner come to your rescue because of your stupidity? Duh.

Then you have the clueless and lax monitoring system of the Civil Aeronautics Board.

When I asked CAB, why despite the expired insurance contract filed with them for Asian Spirit (Feb. 07-08), the agency didn't have a new one on file, the person-in-charge I spoke to said the airline had until June 30 to submit reportorial requirements including new contracts. So for all we know, the carrier had been flying without any insurance since March 1, 2008! I mean how would the CAB know that our airlines are all covered by insurance policies if it doesn't ask for those contracts? Sheer faith?

Oh c'mon! When we have lives and properties at stake, you make sure you have proof that the airlines are in fact, insured! How dare the CAB toy with the lives of the flying public?!

Amid the tragedy of Sulpicio Lines and what appears to be some negligence on the part of the Coast Guard, now arises questions on just how strict are our regulatory bodies in the air transport sector.

If you remember, our country has already been deemed a flight risk by the U.S. Federal Aviation Authority, which downgraded our airports to Category 2, because of insufficient air transport personnel, inefficient monitoring systems, and lack of proper regulations and implementation. No wonder. These agencies can't even be trusted to make sure our airlines fly with insurance!

So is CAB going to fine Asian Spirit for flying without insurance for five days? You know the answer kids. And I'm not liking it all!

Asian Spirit flying without insurance

(Photo from Boracay Budget Travel Tips)

Asian Spirit, the carrier of businessman/banker Alfredo Yao, is flying amid questions about its insurance cover.

A source at Prudential Guarantee and Assurance Inc. confirmed that it is no longer the airline’s insurer as of June 18.

A check with the Civil Aeronautics Board (CAB) shows, however, that Asian Spirit has not submitted any new filing to show any change in its insurance company.

An official of Prudential Guarantee said Asian Spirit has “no insurance at the moment…. Asian Spirit has rescinded the policy of Prudential by declaring that it is no longer their authorized insurance company.” The official who requested anonymity said an airline insurance policy usually is contracted annually, “so they [Asian Spirit], pre-terminated their insurance [with Prudential].”

The official made this statement in reference to a letter written by Asian Spirit chief finance officer Albert S. Toribio entitled “Appointment-Sole & Exclusive Broker on Record” on June 18, a copy of which was obtained by BusinessMirror, designating “Empire Insurance Co. Inc., as the exclusive insurance company of Asian Spirit for its Aviation, Hull & Liability, Deductible, War, Personal Accident and other aviation-related insurance requirements.”

Toribio added: “We also confirm our understanding that Empire Insurance Company Inc. has appointed Asian Reinsurance Brokers Pte. Ltd. as Empire Insurance Company Inc.’s exclusive Reinsurance Broker in London for Asian Spirit aviation insurance requirements.

“This appointment of Empire Insurance Company Inc. and Asia Reinsurance Brokers Pte. Ltd. rescinds all previous appointments until cancelled in writing.”

Following the letter of appointment of Toribio, Prudential Guarantee wrote Toribio on June 19, a copy of which was obtained by BusinessMirror, saying: “By your unilateral action of appointing another insurance company from the 18th of June 2008, you have in fact rescinded your insurance contract with Prudential Guarantee and Assurance Inc. and therefore there is no insurance policy in effect from the date of issuance of your letter.” (Read the rest here)

* * * *
Here are the pertinent documents I used as basis for this report, aside from my extensive interviews with officials of Prudential Guarantee, the CAB, Asian Spirit, Empire Insurance, and the Insurance Commission.

Rescision of Prudential Guarantee contract asian spirit rescision.pdf

Acknowledgement of Prudential Guarantee that it is no longer AS insurer File0291.PDF

Seair revives talks with investors

(I've been on vacation so this is another lazy post...a story I wrote for BusinessMirror for its May 9/10 issue.)

SOUTHEAST Asian Airlines (Seair) is reviving talks with international investors following the rejection of a purchase offer by the group of industrialist Alfredo M. Yao. Yao is the founder of Zest-O Corp.

A highly-placed source from the local carrier told BusinessMirror “these talks were stalled when we thought we were already going to have a deal with Yao by June. So we’re just reviving them.”

The source declined to identify the foreign groups only saying that these were “from Singapore and Brunei,” for possible “capital infusion” into the local carrier.

Seair owners headed by co-founders Iren Dornier, Nikos Gitsis and the Filipino group led by marketing guru Tomas B. Lopez Jr., declined the offer by Yao to purchase their shares for $2 million (or P84.63 million). This was $1.75 million (P74 million) lower than the “original consensus price” of $3.75 million (P159 million), before Yao’s group conducted due diligence on the airline.

Yao said he still intends to pursue the purchase of the carrier.

Sources familiar with the matter said the $2-million offered by Yao’s group will only pay for the cost of the brand and takeover of employees. The group does not intend to buy the 10 aircraft Seair is currently leasing from Dornier’s Aviation Enterprise Inc. (AEI) and spare parts. Yao’s group will also not cover the debts of the carrier including the payables on the aircraft leases to AEI. “All of the liabilities of Seair will have to be paid by Gitsis [and company],” the sources added.

In the proposed share purchase agreement, “[Yao’s group] will lease aircraft from AEI on a “power-by-the-hour” basis, the same sources added. This means that Yao’s group will pay only for the actual use of the leased aircraft, even if these are parked in the airline’s hangar. With this commitment to lease AEI’s planes, “it’s like the offer price is still the same as what we had initially discussed,” explained another source from the Yao group.

There is also a non-compete clause in the proposed share purchase agreement between Yao and Seair shareholders. This means that Dornier and Gitsis, who are both pilots and who currently own 40 percent of Seair, cannot put up another carrier to compete with Yao’s airline.

BusinessMirror sources observed that “this clause was not present in the initial agreement between Yao and Asian Spirit’s former owners.” Yao said he intends to merge Asian Spirit and Seair into one airline company.

Yao bought Asian Spirit for about P1 billion but turned over a check amounting to only P700 million because his group was taking over the debts and liabilities of the airline.

In an earlier interview, Gitsis said Seair was “open to all possibilities” in terms of investments either through capital infusion or selling the owners’ shares “lock, stock and barrel.”

“We’re still open to selling [even just the shares owned by the foreign group]. In the long run, the airline needs partners that can help in [our] growth, to keep us up with the growth opportunities that are still open in the market,” he said.

Referring specifically to the negotiations with Yao, Gitsis said: “If the need for capital and aircraft is the main motivator, [we] don’t want to sell out. Our hearts are in the company and we are more than willing to stay, and more than willing to work another 13 years. [Dornier and I] love this country and we no longer consider ourselves foreigners. On the other hand, everything has a price in business.”

He said the airline sees massive potential growth in local tourism “and we can contribute to that in many ways.” But he said he hoped the Civil Aeronautics Board (CAB) would allow the airline to do just that by approving its lease purchase agreement with Tiger Airways.

In January 2007, Seair signed a lease purchase agreement with Tiger Air, the low-cost carrier subsidiary of Singapore Airlines. The deal was for the lease of two Airbus 320s from the regional carrier which would enable Seair to fly to Singapore and Macau, as well as other Asian destinations. Local carriers have opposed the agreement saying the partnership would give fifth-freedom rights to Tiger Air, thereby allowing it to transport passengers to a second country and onwards to a third country.

Due to opposition by local carriers, the CAB has yet to approve the agreement, preventing Seair’s efforts to expand its routes to international destinations using the Clark International Airport as a regional hub.

“Tiger Air gave us a challenge. We thought we could live up to the challenge and we’re still optimistic that we can overcome that challenge,” said Gitsis. He admitted that the regional carrier has also expressed interest in buying into Seair, “but we [foreign shareholders] would have to sell out.”

- - - -

P.S. I flew to Caticlan and back to Manila over the weekend via Seair and noticed that the drinks served to passengers were made by Zest-O. Hmmm...

Seair ‘rejects’ Yao offer, but talks ‘active’

(Seair owners: Iren Dornier, Nikos Gitsis, and Tomas B. Lopez Jr. representing Filipino shareholders. Photos of Dornier/Gitsis from the Iren Dornier Project. Photo of Lopez from AIM.)


THE owners of Southeast Asian Airlines (Seair) said they have rejected the offer of industrialist Alfredo M. Yao to purchase the airline, but the fruit-juice king’s camp stressed the two sides are still “actively talking.”

A highly placed source in the carrier told the BusinessMirror: “The deal is off. The offer is $2 million. [It's] too low from the original consensus price [between the owners and Yao’s group].”

Contacted for comment, Yao said, “Their group and ours are still talking. Nick [Gitsis, co-founder and director of the carrier] is still in the States, so we haven’t spoken to each other.”

While Yao did not wish to confirm how much his group’s offer price was, the Seair source said the owners had agreed to sell their shares to Yao at $3.75 million (or roughly P158 million at P42.315 to the dollar).

The price only covers the cost of the airline brand and the takeover of the staff, but not the planes. The 10-plane fleet of Seair — composed of three Dornier 328s and seven LET-410s — are turboprops currently leased from Aviation Enterprise Inc., a company owned by Seair founder Iren Dornier.

The source added that the notice to formally reject the deal has already been transmitted to Yao’s group.

Yao is widely known for having developed the fruit-juice drinks under the Zest-O brand, now the largest-selling ready-to-drink fruit-juice brand in the country. His recent purchase of Asian Spirit boosts his interests in the tourism sector, where he also owns a hotel in Subic Bay. (See my profile interview of Yao in the blog entry below.)

Despite the rejection of Yao’s offer, the Seair source was confident that the airline would continue operating. “We have a good safety record. We are No. 1 in our market.” He added that Dornier will continue to infuse capital in the airline even if the local shareholders won’t.

Gitsis earlier said a deal with Yao’s group could be announced before the end of June. (See “Yao bucks tide, may buy 2nd airline,” BusinessMirror, April 14.) The two parties have been negotiating Seair’s purchase since July 2007.

(Industrialist Fred Yao)

Meanwhile, aviation analysts who requested anonymity said that with Yao’s recent purchase of Asian Spirit, he doesn’t need to purchase another carrier. “He has his own airline already, with its own staff and planes.

Both of them [Seair and Asian Spirit] serve almost the same markets, so he [Yao] really doesn’t need another airline.” The analysts added that unlike Asian Spirit, Seair does not have a congressional franchise and is not a designated flag carrier.

A source in Yao’s group confirmed this. “Strictly speaking, we don’t need them [Seair]. It’s not imperative that we buy them. But we can learn from their expertise and benefit from their niche marketing.”

Yao has already successfully lured Seair’s operations manager, Eli Tabora, to join Asian Spirit, but is still keen on recruiting Avelino Zapanta, current president of Seair and former president of Philippine Airlines, to be head of a merged airline company. Yao’s group is also impressed with the marketing savvy of Patrick Tan, Seair’s vice president for commercial affairs.

Despite the rejection of the offer, a source in Yao’s group said the businessman is still pursuing his plan to buy Seair. “The upside for us buying Seair is, they have good people, and we can do single administration [of routes and ticketing], and let’s face it, they have a good reputation in the niche market they are serving. The downside to us, of course, is there is a cost to all of that.”

The source stressed that both groups are still “actively talking. There are just some areas of confusion [with regard to the offer price]. I think it just wasn’t explained to them very well why the offer is such. They may have interpreted it differently.”

While he declined to go into specifics, he noted that since Seair’s planes are not included in the purchase price, “why should we pay for the spare parts? But essentially, our offer to them is still the same.” Other sources said the carrier also has debts which are going to be taken over by Yao’s group.

This was essentially the same tactic Yao used in taking over Asian Spirit. While the purchase price for that carrier was P1 billion, the actual check turned over to its former owners was only about P700 million because of the debts and liabilities of the carrier that Yao’s group would be assuming.

As for Yao’s offer to Seair’s owners, the source said: “We didn’t offer an inordinately low price. I think we just have to explain to them how we came up with this figure.” The offer to purchase Seair for about $2 million (or P84.63 million) was made after Yao’s group completed its recent due diligence of the airline.

In an interview on February 13, Gitsis admitted to BusinessMirror the pinch the carrier has felt with the entry of larger carriers in its major routes: “We’re still the fastest flight to Boracay (Caticlan). We still have the most modern planes. But we have felt a reduction in revenues, and a softening in the market prices.”

The Manila-Caticlan route, a major revenue earner for Seair, is now being serviced by major carriers such as Philippine Airlines through its subsidiary PAL Express/Air Philippines, and Cebu Pacific. Current fares to Caticlan have dropped to about P588, one-way, excluding insurance, taxes and other surcharges.

The carrier’s plans to tie up with Tiger Airways so it could lease two planes from the regional airline to service more domestic points, and enable Seair to fly to Macau, Singapore and other regional routes from the Clark International Airport, have also been strongly opposed by other local carriers.

“We’ve had delays with the CAB (Civil Aeronautics Board) in trying to lease planes from Tiger Air to put in service in the Philippines. We have had no approval for that. It’s been a long process. We’re surprised why we’re getting this reaction from larger companies when we’re a small company,” Gitsis said of the other challenges Seair has had to overcome.

Dornier and Gitsis own 40 percent of Seair while the rest of the shares are owned by a Filipino group led by marketing guru Tomas B. Lopez Jr.

(My story on Seair was published on the front page of the BusinessMirror on May 6, 2008. Blog entry contains corrections with regards to the offer price.)

Look to the sky: a profile of Zest-O's Fred Yao

ALFREDO M. Yao is a man who rarely rests.

He says the last vacation he had with his entire family was two years ago in New Zealand, and remembers a few regional cruises with his wife. He tells the BusinessMirror he would rather be on his toes, working, on the lookout for new business opportunities. “I always tell my children, ‘Never be complacent.’ Work as if someone’s burning his heels behind you. You have to keep running. That’s my business philosophy, that’s my secret. I just don’t sit down. I’m not complacent, even to this day. There should be some threat from competitors, from other brands…. You shouldn’t be able to sleep.”

For someone who stresses that “vacations are not for me,” Yao, ironically, is now Philippine tourism’s latest champion. He recently completed the purchase of Asian Spirit, a 12-year-old airline primarily flying between Manila and Caticlan, and is looking at buying another carrier, Southeast Asian Airlines, with the intention of merging both companies. He has also bought the Legenda Hotels and Suites in the Subic Bay Freeport, and is just waiting for its former owners to turn over the property to him. Last year he was appointed by President Arroyo as special envoy to develop tourism between the Philippines and China, which is why he is now looking into the possibility of expanding Asian Spirit’s regional routes to include Xiamen and Shanghai.

“I just thought it’s a good opportunity [buying Asian Spirit]. There’s a lot of room to grow here in local aviation and tourism market. There are so many unexplored areas. Our country is so beautiful, we have a lot of resources, all we need is to develop these sites, put in the infrastructure, then bring the tourists there. I think tourism will help boost the economy,” he says.

(For the rest of my interview of Fred Yao, pls. click here.)

Cebu Pacific causes airport bedlam

UPDATE (11 am): I got a text message from my friend Miggy who's supposed to fly to Cebu today w/ her hubby for the weekend. But guess what? All Cebu Pacific flights are delayed today because their computers melted down! The domestic terminal is just in total chaos!

I RECEIVED a text message close to 2 a.m. today from my fab ex-editor who's now based in Singapore. James was mightily pissed that he got stuck at the airport on the way home to Manila because Cebu Pacific had apparently overbooked its flight. He and 49 others. What's more, the ground crew seemed to have all disappeared with no promise of even a light snack or anything to make the unlucky passengers feel comfortable while waiting for the next flight.

UPDATE: According to James, they were just given another round-trip voucher and promised seats in tonight's flight to Manila. I guess that means another 50 booked passengers in tonight's flight will get bumped off again. Common airline practice is when a carrier overbooks or for some reason, can't make its scheduled flight, it should book its passengers on the next available flight in another airline. Why didn't Cebu Pac do this? Sobrang pagtitipid naman 'yan Papa Lance! Shouldn't customer service come first?

What's more, Cebu Pac's external PR Gatchie Reyes told James that they were told by Cebu Pac that the 50 bumped off passengers last night were booked in a hotel. O da va, nag-creative writing course pa ang mga lokah?!

This is probably the Nth time I have heard this complaint about Cebu Pac. Last year, galpal Francine also got stuck for more than five hours at the Mactan International Airport after her flight to Manila was super-delayed for undisclosed reasons. She was at airport by 5 pm but flew past 10 pm. Buti nalang pinakain sila ng isang hita ng Jollibee chickenjoy. (We learned later that one plane had engine trouble thus necessitating a scramble for aircraft plying other routes and trying to catch up with scheduled departures elsewhere. But like, this is also the Nth time I've heard this reason.)

So what's up with Cebu Pac really? It boasts of new planes and yet can't keep a simple promise of flying out all their booked passengers on time? I've been covering the business beat for the longest time, especially the travel/aviation beat, I still don't understand why airlines have to overbook their flights. Surely Cebu Pac's reservations people can see in their computers if they've reached the seating limit already for their flights? And at this time of the year, the peak of the summer season, there are just too many travelers going on vacation so it really is imperative for them to make their flights. I would understand overbooking during the lean season when flights are no longer that much in demand.

And these cases of overbooking and delayed departures are happening everywhere Cebu Pac flies. Over in Caticlan, the joke is Cebu Pac is virtually using Asian Spirit as its GSA (general service agent) because they always pass on passengers to the latter (well, so much the better for AS I suppose. This is extra income for them.) But duh, why boast about now flying to the gateway of Boracay when it can't even deliver the minimum service required of a carrier?

Sure Cebu Pac can say that passengers choose the carrier because they want to fly cheap, sans any frills. So magtiis kayo! But I think no matter how cheap or pricey a passenger's ticket is, he is supposed to be accorded some amount of courtesy and respect as a paying consumer. Porke't cheap fare, cheap service din? Ang cheap mo naman Papa Lance! Kya nga ba I don't crush you anymore e.

(Disclosure: The last time I rode a Cebu Pac flight was three years ago. Nothing untoward happened then. It's plane was old, but I left and arrived on time. No incident. Which is why it behooves me that despite its massive refleeting, the airline's service has just deteriorated instead of improved. Or shouldn't there be any correlation at all between the two?)

Mercury was in retrograde?

Hmmm...I didn't even notice. According to an astro piece I had stumbled on the Internet, the little planet had gone retrograde from Jan. 28 to Feb. 19. Those who believe in the power that the planet holds over us when it moves backward (actually it doesn't, but I'll save that story later) say that everything just goes funky during such a period. Meetings don't push through, commitments fall apart, even your electrical connections and electronics somehow just become messy.

I somehow came to believe in the Mercury retrograde effect about two years ago when I just couldn't connect to the Internet. My Ibook just went crazy and for no apparent reason, even my Wi-fi router just went stupid. A call to my DSL provider yielded no results because as far as they were concerned, my connections were working properly. A friend I told this to explained it away nonchalantly by saying that the little planet was misbehaving again. Then suddenly, everything was fine.

So whenever I knew that a similar period was coming up, I would hunker down, save and double save my stories on my computer, backed up all my work, and used the Internet rather sparingly. I also would double-confirm any appointments I had.

So I was quite surprised to learn just now that Mercury had gone into retrograde just a couple of months ago and nothing out of the ordinary happened to me. Well except for some idiot who cancelled on our appointment when only the day before, I had reconfirmed it with him. Other than that, everything was rather peachy all throughout that period...my friends and I celebrated our birthdays one after the other, and aside from the rather balmy weather in Boracay where I spent relishing my natal day, it was an enjoyable period. Hmmm...maybe I'm immune to Mercury's effects already?

(On hindsight, one effect of the retrograde Mercury I had observed on some people was at the airport on Feb. 15, and some editor-friends of mine on a Seair flight to Boracay, said they had been at the airport since 6 am that day for their 8 am flight. Because of some malfunctioning plane, they were scheduled to fly at 3 pm instead. Egads! Sis and I, booked on Asian Spirit, only experienced a 30-minute delay in our departure.)

As promised, the story: Mercury actually doesn't move in reverse, it just appears to be so when observed from Earth, because of how the Earth and Mercury move around the sun. But astrologers swear this is a significant astrological event. Anyway, for believers out there, the next period for retrograde Mercury is May 27 to June 19, 2008; and then from Sept. 24 to Oct. 15, 2008.

Sightings

WAS about to have dinner at the Shang Palace in Makati Shangri-La Hotel last night, and as Ms. RP and I were looking for a good table, I espied a function room with its door open. As I passed, Kris Aquino looked up. She appeared very sad, distressed, and obviously in pain. My heart immediately went out to her...the poor girl. She had just had a miscarriage and was dealing with the illness of her mother, former President Cory Aquino. Let's all pray for them please.

In one another table at the far corner of the restaurant was former First Lady Loi Ejercito and her amigas. I think they all have the same cosmetic surgeon.

In yet another function room with its door ajar, were Ambassadors Fred Yao (of Zest-O Corp.) and Donald Dee (chairman emeritus of PCCI) along with Asian Spirit owners Tony Ang (founder of CATS Motors), Toti Turalba (Active Group Inc.), and Lakas party/Ramos power broker Noel Oñate. There were two tables in that room, and all the men were dressed in business suits, while the women were spiffy in their nice cocktail dresses. Were they perhaps meeting about Yao's takeover of Asian Spirit? Could smell the tension in the air. Hmmm...

MS. RP and I eventually found a good table, but to our utter disappointment, there was no dimsum available. Diners can only order those delicious treats at lunchtime. Drat! I almost wished we had eaten at Inagiku instead.

Travel news: Bye, bye Palau

(I now wish I had pursued our gang's plan to visit Palau again this year. Sad to see the Asian Spirit flight go which was really a very convenient way, not to mention cheaper way, for tourists to to travel to Palau. My report on this development below:)

Asian Spirit drops Koror flights — again — for now
Marianas Business Journal, Oct. 15, 2007

Rainbows are commonplace in Palau. The rock island across my hotel room balcony during my visit to Palau in 2006.

MANILA, Philippines — After relaunching the route in May, Asian Spirit will be dropping its flights from Koror to Cebu, effective Monday, Nov. 5.

In a phone interview, Jack Po, executive vice president of Asian Spirit; told the Journal, “While it saddens me to confirm this, yes, we are suspending our flights because of the realignment in our business plans. There are increasing demands by passengers in the Philippines for flights to our key service areas such as Caticlan, Aklan, which we have to meet. However, we hope to return to Koror soon when conditions are more ideal.”

Asian Spirit, he said, is preparing to “engage in a major battle” with the larger-capitalized airlines in the Philippines, which are going to fly to Caticlan, the gateway to Boracay Island, Aklan. “We want to focus on our turf, which we had developed when no one was flying to the destination yet.” The Manila-Caticlan service is often called the “bread and butter” route of Asian Spirit, which helps subsidize its flights to 15 other destinations. The other destinations are considered vital in terms of public welfare but are typically low revenue earners for the airline because of unstable passenger loads.

The news of the suspension caught most tourism-related companies in Palau by surprise. It was only in September that Asian Spirit hosted a familiarization tour in Cebu for Palau government officials, businessmen and media.

Reacting to the development, Sam Scott, president of Palau Sea Ventures Inc. and Sam’s Tours; said, “This is very sad and unfortunate news that is very disappointing, to say the least. Sam’s Tours has been working very hard with [Asian Spirit] and hosted many [familiarization tours], including the most recent one from Cebu.” On June 16, Sam’s Tours co-hosted a familiarization tour with the airline and other Palau tourism and business groups for about 60 visitors from Cebu, which included dive center owners, travel agents, media, airline staff, business delegates and other dignitaries.

“The repercussions will be enormous and the tourism industry as a whole in Palau will suffer for some time. I can only hope that we will have a chance to see Asian Spirit back in the skies soon,” Scott said. He added that the airline “indicated [the flight’s suspension] was due to maintenance, but I have a hard time believing that when they indicated no start-back-up date.”

Interviewed in Manila, Surangel Samuel Whipps Jr., whose family co-owns Palau Micronesia Air — Asian Spirit’s partner in Koror — told the Journal, “You know, Asian Spirit has been very good to Palau. They’ve been able to provide competition [for other carriers] which is good for Palau because there have been a lot of visitors. Unfortunately, the number of people traveling [the Cebu-Koror route] was not enough. So we’re looking at how to market it. Maybe it was our fault — the marketing was not ready for Cebu. We expected more people, but the tourism connections were not there yet.” The Whipps family’s Surangel & Sons acted as the general service agent for the Philippine carrier.

Palauans welcomed the entry of Asian Spirit in Koror because it helped bring down the cost of airfare to the Philippines, where a number of them have business dealings, go shopping, and receive medical treatment. Roundtrip fare from Koror to Cebu cost $330 per person, the same rate now offered by Continental Air Micronesia, which flies Koror to Manila. When it was the only airline serving the Koror-Manila route, Continental’s airfare reached as high as $600 per person especially during holidays. “I just checked with Continental because we wanted to come here in December and their rate’s already $510,” Whipps said. “It’s interesting what Continental will do now that they have their monopoly back,” he added.

The Palau businessman said for now, there are no plans for PMAir to hook up with other international carriers serving the Pacific, such as Virgin Blue and Pacific Blue, of British tycoon Richard Branson, president of Virgin Blue Holdings Ltd. “We’re always open to other options, but Asian Spirit was willing to take a risk to fly to Palau. They said this was not the end. They just need to refocus and they will be back.”

Sam Scott of Palau Sea Ventures Inc. expresses disappointment over suspension of Asian Spirit's service in Koror. (Photo by Peter Marquez)

Sam’s Tours, together with other members of the Philippine-Micronesia Alliance, had expressed optimism about the three times weekly Koror-Cebu-Koror flights because it would boost the group’s chances of marketing the Philippines and Palau as scuba diving destinations to more Asian markets. The tour agency had barely recovered from the cancellation of the Davao-Koror service of the airline, but Scott said in September, “We are very excited about the Cebu-Palau route of Asian Spirit.... This will definitely be a big winner for us here in Palau.”

Whipps added the Koror-Cebu route had “a lot of potential. Palau was going to tie up with Cebu Doctors Hospital and two other hospitals in Cebu. It’s much closer and with the flight frequencies, it would’ve been better for our patients. Also there were a lot of business opportunities...people are so used to coming to Manila, they don’t think of Cebu. As one Cebu businessman told me, the minute you step out of the plane, you don’t need to go to Manila anymore because you can find everything in Cebu.” Cebu is the second major urban destination in the country after Manila, the capital.

For its part, Asian Spirit is expected to go head-to-head with larger and more profitable airlines to protect its Caticlan route. Air Philippines, the budget carrier of Filipino-Chinese tycoon Lucio Tan, who also owns Philippine Airlines, will be flying to Caticlan by Dec. 15 using three to six Bombardier Q300 50-seater turboprops; Cebu Pacific, owned by JG Summit Holdings Inc., of food and beverage magnate John Gokongwei, will be flying to Caticlan by February 2008 using two Avions de Transport Regional 72-500s turboprops initially, gradually increasing to 14 by 2013.

Asian Spirit plans to bring in two more British Aerospace 146-100s, which are 86-seaters, to increase their jet service to Caticlan to 16 flights a day from the current six. Along with its turboprop service, the flights are expected to rise to as many as 25 a day during the peak seasons of summer and Christmas. MBJ