It looks like an aeropolitical first. The sudden abandonment of planned open skies talks between Singapore and the Philippines in late July had nothing to do with a dispute between the two nations and all to do with Philippine Airlines initiating legal action against the head its own country's negotiating team.

PAL, which is fighting to protect a declining market share and stem ongoing losses, alleges that Victor Limlingan, the Civil Aeronautics Board director, had favoured Singapore in previous talks.

PAL says a drop of US$4.5 million in revenues since 1996 is due to Limlingan increasing the passenger capacity of Singapore carriers flying to the Philippines by 'unilaterally amending an air agreement that was unfairly favourable to Singapore carriers and damaging to the Philippine national carrier'. Currently, Singapore Airlines operates 19 flights a week to Manila and its regional subsidiary SilkAir flies daily to Cebu and twice-weekly to Davao in the south of the country. PAL operates 12 flights a week to Singapore.

PAL president Jose Garcia demanded a postponement of bilateral talks, saying there were deficiencies in the Philippine panel's position and legal impediments affecting Limlingan. The PAL president wrote to Filipino transportation secretary Arturo Enrile, urging the government to 'reject any form of open skies with Singapore, as this would be immensely harmful to the national interest.'

Manila took notice and with less than 24 hours to go before negotiations got underway cancelled the talks indefinitely. Limlingan told the Philippines News Agency he was surprised by PAL's move, insisting that his actions were proper and had been upheld by the CAB. The decision to allow higher flight frequencies rested with the negotiating panel, which he headed, he argued.

He said the last increase in capacity he approved was in cargo, which benefited both SilkAir and the Philippines-owned Pacific East Asia Cargo. 'I don't see how this could have hurt PAL's interests. They don't operate an express cargo service,' Limlingan said.

Sources in Manila say PAL fears an open skies treaty will allow the Singaporean operators to use the Philippines as a transshipment point, which will place the Manila-based carrier at a disadvantage as it strives to recover from years of heavy losses. PAL posted a US$50.5 million loss in the quarter ending 31 March and forecasts further losses in the 12 months ending 31 March 1998. The carrier predicts a return to profit in 1998/99.

Complicating recovery efforts is the emergence of local rivals under the country's newly liberalised aviation market. Two of those, Cebu Pacific and GrandAir, have applied to fly to Singapore and were eagerly awaiting the outcome of the proposed open skies talks to allow them entry to the market. PAL, which is currently undergoing a US$3.2 billion fleet renewal programme, is aware that a move by its home-grown rivals into Singapore would further reduce its market share.

However, one of PAL's rivals has problems of its own. Lawyers representing Dutch-based lessors ING repossessed a GrandAir Airbus A300 in Hong Kong in July over the carrier's failure to pay US$700,000 in lease charges. GrandAir chief operating officer Guillermo Ruiz blames 'miscommunication' for the default and concedes there had been an 'administrative oversight'. At presstime, he said he expected payment to be made and the aircraft to be back in service quickly.

Tom Ballantyne

Source: Airline Business