(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.)
• Ana Ines de Sequera-Ugarte, Philippine Ambassador to Spain
• Guillermo “Bill” Luz, executive vice president, Ayala Foundation Inc.
• Lisa Macuja-Elizalde, artistic director, Ballet Manila
• J. Gamboa, executive chef, Cirkulo and Milkyway Restaurant
• Alfred V. Ty, president, Federal Land Inc.
I hope that the Philippines would overcome all the concerns of the past: the graft and corruption, the gruesome massacres, the pocket rebellions, the effects of calamities, with a caring administration that will put the welfare of the country as top priority next to God, so that it may cultivate its full potentials and show what it can really do, what it truly is without those aberrations in some of its people and some in the government.
