AB CAPITAL WINS BIDDING FOR PHILIPPINE AIRLINES

AB CAPITAL WINS BIDDING FOR PHILIPPINE AIRLINES

A consortium with technical backing from Korean Air Lines won the long- stalled bidding for Philippine Airlines with an offer of US$367.9 million, surpassing the government-set minimum by more than $50 million.

AB Capital & Investment Corp. beat two other locally led groups for 67 percent of the airline in a sealed bid auction. The government's privatization committee unanimously endorsed the sale Thursday."It's hard to judge whether the price is high, low or about right," William Burke of Avmark Asia Ltd. in Hong Kong told The Journal of Commerce. ''It was probably deemed acceptable given the tremendous pluses and minuses PAL has."

He and other analysts said extensive housecleaning may be needed to weed out cronies left over from the corrupt days of ousted President Ferdinand Marcos. But they were generally optimistic.

"PAL is well positioned for growth and success," said Mr. Burke, who heads the regional arm of Avmark Inc., a Washington-based industry consultancy. "It has good traffic rights, a youngish fleet, solid maintenance facilities and English-speaking engineers.

"With the right management it has excellent potential in its own right or as a potential merger partner for an overseas carrier," he said.

The day before the auction, Feliciano Belmonte Jr., PAL president, forecast record earnings of US$45 million (1.3 billion pesos) for the fiscal year through March 31.

Mr. Burke offered a caveat on what he called "much talk" about PAL being on the road to profit. "I understand they have delayed some hefty outlays, for both capital equipment and pension funding," he said.

Like many state-owned carriers, PAL is required to serve loss-making domestic destinations as a public service. The Philippines, a collection of 8,000 islands, has an abundance of these.

Filomeno Francisco, executive vice president of AB Capital & Investment, refused to identify the other partners in the winning consortium. AB Capital itself is controlled by Andres Soriano, chairman and 3 percent owner of the beer-to-food conglomerate San Miguel Corp., the country's largest commercial enterprise.

Korean Air Lines, which will act as technical consultant, is a unit of Hanjin group, which also operates Hanjin Shipping Co.

Once regarded as a sleeper, KAL has moved into the upper echelons of Asian airlines. It is particularly strong in cargo services and operates what is believed to be the largest cargo warehouse on the U.S. West Coast.

PAL, which marked its 50th year in 1991, is Asia's oldest airline. It operates seven Boeing 747-200Bs, nine 737-300s, seven Airbus A300-B4s, two McDonnell Douglas DC-10-30s and a clutch of short- and medium-haul aircraft for domestic routes.

A number of foreign carriers decided against bidding, including Northwest Airlines.

Two others, like Korean, took part only as advisers - American Airlines and the Speedwing unit of British Airways. Their bids weren't disclosed.