Philippine Airlines Grounded

Government officials and executives of ailing Philippine Airlines held out little hope Friday of stopping the closure of Asia's oldest carrier.

On Thursday, the carrier announced it will halt operations next week after 57 years because of its unions' rejection of a management-proposed rescue plan.

The closure of the flag carrier would be a devastating blow to the country, leaving many areas of the sprawling archipelago of 7,000 islands without air service.

In a further blow, two smaller airlines were grounded Friday.

Regulators suspended Air Philippines, the country's second-largest airline, for failure to comply with safety standards.

Grand International Airways, a smaller carrier, canceled its flights because of unpaid insurance and fuel bills, employees said.

President Joseph Estrada met separately with Philippine Airlines majority owner Lucio Tan and union officials to try to broker a last-minute deal to save the airline.

But Estrada's executive secretary, Ronald Zamora, said the ground workers' union rejected the president's proposal for a referendum among union members on whether to accept the management proposal.

Philippine Airlines has offered workers 20 percent ownership of the company in exchange for a 10-year suspension of their collective bargaining agreements, a condition which officials of all three PAL unions say is unacceptable.

"If you try to take away the soul of the union, we will have to uphold our principles," said Abel Capili, a board member of the ground workers' union. "We may have to accept the closure of PAL."

Zamora said no more meetings were scheduled with either side.

"I think management is not going to change its mind about the closure," he said.

PAL has been devastated by a series of strikes and by Asia's currency crisis, which hit just as the airline was launching an ambitious $4 billion expansion plan.

During a crippling 22-day pilots' strike in June, the airline fired the pilots, cut most of its routes and laid off 5,000 of its nearly 14,000 workers. But the layoffs triggered a strike by ground personnel.

PAL executive vice president Manolo Aquino said some hope still remained that the airline could survive, but "as we come closer to the deadline, the possibility of stopping the closure becomes dimmer."

He said the unions would have to make "a big move" to stop the closure process.

The management proposal gives workers three seats on PAL's board. Each worker would receive 60,000 shares of stock worth about $6,900.

Even with the support of the unions, the airlines' creditors, owed $2.1 billion, might withdraw their support if they feel the viability of the airline is in doubt, Aquino said.

Foreign creditors have loaned the airline about $1.6 billion, with the bulk coming from a consortium of European banks led by Credit Agricole Indosuez to help finace the fleet modernization program.

Written By Claro Cortes