Showing posts with label CAB. Show all posts
Showing posts with label CAB. Show all posts

November 21, 2010

In the thick of controversy*

TOURISM Secretary Alberto “Bertie” A. Lim likes to joke that his “claim to fame” is really being the younger brother of award-winning broadcast journalist Che-Che Lazaro. But it was their mother, Estefania Aldaba Lim, who was really the first “rock star” in the family. Fanny to her friends, she was the first female psychologist in the Philippines, the first woman appointed Cabinet Secretary, and the first woman to become special ambassador to the United Nations. (Her husband Luis Lim Sr., a San Miguel Corp. executive, passed away when Bertie was only 12.)

Now 61, Secretary Lim says his mother “was able to balance a busy career and being both mother and father to six children. She traveled a lot yet she was able to more than adequately meet our emotional and physical needs. Whenever she was abroad, she would write long letters to us. There was no Internet then so her letters were written longhand and sent by mail. She encouraged us to write her so that she had her finger on our collective pulse all the time. She was very firm but not overbearing. She was a strong woman but we never resented her brand of discipline. Her advantage was that she was a trained clinical psychologist so she knew human behavior quite well.”

I ask what his mother taught him about working for the government. Lim recalls: “My mom did not bring home her work. She did not talk about the rigors of public service. Perhaps we were too young to have been able to appreciate such a conversation anyway, but she did instill in us the value of hard work. At a young age, she sent me to the municipio to acquire a municipal permit. I had to go back several times before I got it right. From her, I learned to deal with people with politeness, and to be very meticulous in my work.”

Smarting from the critics

Patience and politeness are traits Lim certainly needs these days. Less than a day after the Department of Tourism (DOT) launched its new marketing slogan, “Pilipinas Kay Ganda!,” a hail of negative feedback rained on him and his other officials. (See “DOT launches new campaign” in the November 17 issue of BusinessMirror.)

(Botolan beach, Zambales)


Lim admitted in a radio interview on Wednesday that the criticisms hurt (“Masakit ang batikos.”), many of which ridiculed the slogan as being “too showbiz” or “lacking oomph!” Although he did tell me earlier that it was still in its conceptualization stage and was, by no means, final, I asked Lim if he was still open to changing the slogan itself. He texted back, saying: “PKG (Pilipinas Kay Ganda!) will undergo focus group discussions and other market tests before we spend money on its execution. If there are better ideas out there, we are open to them. But if there are only criticisms, then we hope there will be support for the superior idea of PKG.” (See BusinessMirror, Nov. 18, 2010.)+

Controversy is nothing new to Lim. When he was a director of the Civil Aviation Board (CAB), he was unceremoniously booted out by Malacañang after his statements supporting an open-skies policy reportedly ruffled the feathers of Lucio Tan, owner of Philippine Airlines, an ally of then President Gloria Macapagal-Arroyo (PGMA).

“I never got to talk to PGMA nor to her Executive Secretary about the decision to relieve me of my position at the CAB. I was merely told by a Palace functionary that ‘we all serve at the pleasure of the President.’ Then he made me guess what that meant. Since it was an election year, I knew what he meant. I was not surprised.”

That was a learning experience, he says. “The enemies of reform used heavy-handed tactics to force me out of office. I was bloodied, figuratively speaking, but unbowed. That experience taught me that what does not kill you makes you a better person,” Lim stresses.

Under the new administration of President Aquino, his policy push may soon come to fruition. In a speech at the launching of a new hotel in Cebu on November 10, Aquino hinted that he could be leaning toward a “pocket-sized” open-skies policy, where certain provinces would give liberal flying rights to foreign carriers.

If you build it they will come

Of course, Lim recognizes that more than a marketing plan and a liberalized aviation policy, a country first has to have the correct infrastructure to allow tourists to move freely about, from one destination to another.

(Our Lady of the Gate Parish Church, Daraga, Albay)


Fortunately, President Aquino has already made tourism a priority in his administration and has directed the Department of Public Works and Highways to work with the DOT to identify the infrastructure projects in tourism areas that need to be completed.

“The previous DOT administration has identified the Central Philippines as the focus for tourism infrastructure—this includes Palawan, Cebu, Sorsogon, Negros Occidental, Iloilo, etc. But that doesn’t mean we are to neglect the others. We can still push our medical tourism in Luzon…and we are thinking of developing a good destination in Manila. The Jesuits want to rebuild its old San Ignacio Church in Intramuros, so we can showcase all our ecclesiastical art there. We have so many of them just stored in the church bodegas. Then we can open the ground floor of some structures to cafés.”

But it isn’t merely a numbers game for the tourism chief. He would rather go for value than volume. “My philosophy is that if we keep the tourists here longer, it’s better because it will mean more revenues. So it’s important that we connect the destinations via better roads and airports.” So he envisions tourists spending a few days swimming in Boracay, then perhaps move on to Iloilo City to visit its old churches, then on to Guimaras for more beach time. Hopefully, these longer-term activities will help double the country’s tourism receipts which average only $2.5 billion a year, according to DOT statistics.

“We tend to spread the infrastructure across many places, we never complete the infrastructure in one place. For example, we build an airport, but there’s no road to the airport. How can you develop the product (tourist destination) and promote it if infrastructure isn’t complete?” Lim asks.

This has been essentially the template of Thailand, which has similar natural attractions as the Philippines, but has been able to attract the tourist numbers. In 2009, there were 14.15 million visitors to Thailand, compared to the Philippines’ three million. “Ninety-five percent of Thai roads are well-paved compared to our 20 percent. Their main gateway in Bangkok has several times the capacity of ours in Manila. They have pursued a more liberal civil aviation policy. There is three times the number of flights from Tokyo to Thai airports than there are from Tokyo to Philippine airports. So airfares from Tokyo to the Philippines are higher than airfares from Tokyo to Thailand due to greater competition. The Thais do not impose the common carriers tax (3 percent of the foreign carriers gross receipts here) that we do, and their airport officials do not charge the airlines for overtime as they are on three shifts, 24/7. We have to overcome these barriers to be more competitive,” Lim stresses.

Lifting of aviation taxes eyed

He also says it is imperative that the Aquino administration “work overtime to get an upgrade” from the U.S. Federal Aviation Agency and the European Union. In 2007, the FAA downgraded the Ninoy Aquino International Airport to category 2, because of its failure to meet safety standards, while in April 2010, the EU banned Philippine carriers from operating in the region. “The FAA downgrade has prevented one of our carriers (Philippine Airlines) from utilizing their new aircraft from flying into their originally intended destination. As a result, the airline has to continue to use their old and less fuel-efficient aircraft which are not as passenger-friendly. The European downgrade means that travelers from Europe are not covered by their insurance policies when taking domestic flights in the Philippines. Since tourists have lots of choices in their destination, they will pass over the Philippines to avoid all these hassles.”

(Songsong Ruins in Batanes)


But even if the government does manage to get the Naia upgraded, it is already too congested, what with its limiting runways. So the solution goes back to one already hatched during the administration of former President Fidel V. Ramos, that is, to move the international traffic to Clark, Pampanga. “While Naia has two runways, they are perpendicular to each other. Hence, the two are as good as one since both cannot be used simultaneously. Since [the Diosdado Macapagal International Airport in Clark] has the space to expand to a third parallel runway, it is the logical gateway to the country's main port of entry,” he explains.

He adds that he is also working with the Bureau of Internal Revenue to see if certain taxes imposed on foreign carriers could be lifted, such as the carriers tax and the gross billings tax. "If we remove this tax, the revenue to be generated for the increase in tourists will more than compensate for that loss of that common carriers tax (3% of the international carrier’s gross receipts),” he said. This tax isn’t imposed by any other country.

The gross billings tax, meanwhile, imposes a 2.5% tax on the gross revenues earned by the international carrier in the country. “Each tourist spends about $750 directly in this country. This, in turn, creates jobs in other allied sectors like transportation, agriculture, so you will need only 200,000 extra tourists to make up for the loss of the common carriers tax alone.”

Lim is also batting for the professionalization of tour guides. Having been president of Ten Knots Development Corp., former owner and operator of El Nido Resorts, he helped set up the El Nido Foundation which aims to improve the quality of life of the residents, as well as preserve the destination’s natural beauty and resources. He says they could use the same template in El Nido where “we got local guides who could give local color to the tourists. It was easier to keep them because they already resided there. We want those who have been trained already to, in turn, train the local guides in the provinces and regions, because they are the ones who know the history, the culture and the stories behind those local landmarks.”

When Lim is not busy rushing to yet another meeting, battling the mounting paperwork on his desk, or fending off his critics, he tries to keep fit by swatting at tennis balls every morning. He is married to the former Carla Campos Abreu, and they have been married for 38 years. “We lived one block apart from each other. I was studying in Ateneo, she in Maryknoll, so we were also neighbors in school. We met in a group date watching a movie.” The couple has three accomplished children—Lorenzo, 34; Laszlo, 32; and Liana, 23—and two grandchildren.

*This is an expanded version of my column, Something Like Life, originally published in the Nov. 19, 2010 issue of the BusinessMirror. Due to space constraints, I wasn't able to include Secretary Lim's position on other tourism-related issues for the paper. Let me add that this feature was planned a long time ago, even before the PKG controversy blew up, and was updated to reflect Lim's views on the matter. Something Like Life is published every Friday in the Life section of the BusinessMirror. Photo of Lim courtesy DOT. Tourism images copyright Ma. Stella F. Arnaldo, 2010.

+(UPDATE) Govt drops ‘Pilipinas Kay Ganda’ slogan. Read it here.

(UPDATE 2): 'Pilipinas Kay Ganda' officially dead, according to Sec. Lim. However, I think DOT still owes the public a more detailed explanation about what really happened especially in the light of the Campaigns & Grey press release. Was C&G actually paid or not? The taxpayers have a right to know. Abangan!

June 27, 2008

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!

June 26, 2008

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!

June 24, 2008

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

May 13, 2008

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...

May 07, 2008

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.)