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Gov’t threatens action vs PAL over billions in unpaid fees

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Lucio Tan-PAL
This photo taken on May 11, 2016, shows Filipino-Chinese tycoon and owner of flag carrier Philippine Airlines Lucio Tan arriving in Davao City to meet Philippines' president-elect Rodrigo Duterte. -- AFP

THE Duterte administration is going after Philippine Airlines, Inc. (PAL) over P7.3 billion in alleged unpaid fees, as President Rodrigo R. Duterte threatened to cut off the flag carrier’s access to the Ninoy Aquino International Airport (NAIA) Terminal 2.

“Final demand for full payment of all unpaid charges has been sent to PAL by the DoTr (Department of Transportation) preparatory to the filing of appropriate legal action in order to protect the interest of the government,” Presidential Spokesperson Ernesto C. Abella said during a briefing on Thursday.

The Department of Transportation said PAL’s unpaid navigational fees and other charges reached P7.3 billion as of Sept. 26, 2017. This includes P6.96 billion payable to Civil Aviation Authority of the Philippines (CAAP) as of July 30, and P322.11 million to Manila International Airport Authority (MIAA) as of Sept. 26.

“The matter of Philippine Airlines’ unpaid charges has existed since past administrations. At issue is that the then government-owned PAL enjoyed privileges, namely waiver of landing, take-off, and other fees. However, such privileges no longer apply to the airline, as the franchise has now been sold to a private entity,” Mr. Abella said. PAL was privatized in 1992.

In a separate statement, the DoTr said it sent letters to PAL since August 2016, demanding full payment of its obligations.

“As a result, discussions were undertaken with PAL to reconcile invoices and documents, which led to PAL’s payment to CAAP of P370 million. PAL also requested to discuss the possibility of paying its arrears in 7 years. All such requests have been denied,” the department said.

For its part, PAL said it is willing to enter into a compromise agreement with the government.

“We look forward to meeting the negotiating panel and we are ready to submit a Compromise Agreement to settle this issue once and for all,” PAL Vice-President for Legal Affairs Clara de Castro was quoted as saying in a statement.

PAL said it submitted a formal settlement offer, which it described as “more than the amount covered by the CAAP supporting invoices,” but did not get an official response from the government.

“The alleged unpaid navigational charges involve complex legal issues which PAL has been trying to thresh out with the authority for years,” the flag carrier said.

To recall, the Court of Appeals in April 2007 approved a compromise agreement between PAL and the MIAA, wherein the flag carrier agreed to pay P2.93 billion over a seven-year period and to start paying aeronautical fees.

The ruling effectively replaced a July 21, 2003 decision of the Pasay Regional Trial Court that barred the airport operator from collecting fees from PAL, pursuant to its charter, Presidential Decree 1590, which had allowed the carrier to pay its franchise fee in lieu of all other taxes and charges levied by the government and state agencies.

The MIAA had first filed the case with the Pasay court, saying PAL lost its tax perks with the issuance of Executive Order 93 by President Corazon C. Aquino in 1986, which removed incentives of various entities.

On Tuesday evening, Mr. Duterte raised the issue of PAL’s unpaid fees during a speech before the Philippine Constitution Association at Manila Hotel.

Sabi ko, you are using government buildings, airport… (May) utang diyan sa runway ’di mo binabayaran. Sabi ko, ‘You solve the problem yourself. I will give you 10 days. Bayaran mo. Pag hindi mo bayaran, eh ‘di sirahan ko. Wala nang airport. So what,” Mr. Duterte said, referring to the NAIA 2 which is being used exclusively by PAL since 1999.

“I do not mind. If we sink, we sink. But I said, ‘We have to enforce the law.” So guys, you guys, if you are put into a great discomfort, sorry. Wala akong magawa. The law is the law. It is the law,” he added.

The President also mentioned that he declined the offer of Mr. Tan, who is PAL’s chairman, to make a contribution to his presidential campaign.

Shares in PAL Holdings, Inc. were unchanged at P5.15, while shares in Mr. Tan’s holding company LT Group fell 4.11% to close at P17.26 each on Thursday. — P. P. C. Marcelo

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