Originally created 09/24/98

Philippine Airlines closes after stalemate with union



MANILA, Philippines -- Philippine Airlines closed down today after last-minute talks with its main union failed to produce a compromise on a restructuring plan.

PAL became the largest Philippine company to fail since Asia's currency crisis, which hit just as the airline was launching a $4 billion expansion and refleeting plan.

The closure of PAL, the oldest airline in Asia, leaves many parts of the 7,000-island Philippine archipelago without air service. Two smaller carriers were grounded last week over safety concerns and financial problems.

The airline had said it would shut down unless workers accepted the rescue plan, which it said was a prerequisite for recovering from a series of crippling strikes and Asia's currency crisis.

Hours before its scheduled midnight closure, PAL resumed talks with its ground workers' union after it agreed to partially accept the management plan. But after several hours of negotiations, PAL said it could not accept the union's conditions.

"It is unfortunate that no agreement was reached," said PAL executive vice president Manolo Aquino. "Therefore it is with a sad note that we announce the closure of Philippine Airlines."

PAL's demise saddened many Filipinos. Several television stations broadcast poignant scenes Wednesday from its 57-year history. At PAL offices around the country, airline workers held masses and prayer rallies, hoping for a way to avoid the flag carrier's closure.

At Manila's airport, scores of employees, many dressed in black and carrying signs reading "Keep PAL flying," held a prayer vigil in front of the domestic terminal.

The government, meanwhile, struggled to prepare for the impact of a shutdown on the country's already ailing economy.

PAL had a 50 percent share of domestic passenger traffic, down from 75 percent before a pilots' strike in June.

The only alternative for travel among the country's islands is slow, often-unreliable ocean ferries. Last Friday, a ferry carrying 454 people sank in storm-whipped waters south of Manila.

PAL was founded on Feb. 26, 1941, by a group of businessmen who wanted to profit from a gold mining boom in the northern Philippines. The first flight carried five passengers from Manila to the northern mountain city of Baguio.

In July 1946, four chartered PAL planes took American servicemen home from the Philippines, making PAL the first Asian airline to cross the Pacific.