Zest Air na naman!

AT about 10:30 a.m. today, I received a text message from a media colleague telling me that another MA-60 plane of Zest Airways overshot the runway at the Caticlan Airport, the gateway to Boracay. Mercifully, no one was hurt. Strangely enough, none of the online media sites carried the news. Strange ano? Or tanga ba to even wonder there's no news about it?

(Zest Air owner Fred Yao)

Another strange thing, despite this being the second landing accident of Zest Air in less than 6 months, the gov't-run Civil Aviation Authority of the Philippines, which replaced the inutile Air Transportation Office, hasn't grounded the airline. The CAAP pala is even more inutile than CAB. Or maybe it's because they're afraid of Zest Air's owner Fred Yao of the Zest-O fame, who is reputedly very close to the presidentita? Hmmm. (Click here for photos of the first crash in Jan. 2009, and the story in Manila Standard.)

CAB didn't even bother to lift a finger to investigate the airline, still called Asian Spirit then, flying w/o insurance last year, the now infamous Ipis incident, and didn't ground Zest Air despite the first incident of undershooting the runway resulting in injuries.


Now, this is an appeal to the riding public: Just bec. an airline offers cheap flights, it doesn't mean you should jump at the chance. Check out the background and track record of the airline first before making that final booking and reservation. Don't take chances w/ your life and with the lives of your loved ones. It pays to google. In cyberspace, there are a number of bloggers who've written about their travails of riding in this or that airline. It pays to be well-informed. And yes, the life you save may be your own.

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.

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!

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.)