San Miguel to invest $8.5b in Philippine Airlines

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Philippine Airlines, Asia's oldest carrier, is facing fierce competition on the Southeast Asian market

The Philippine’s food and beverage major San Miguel, which bought a 40 per cent stake and took over management control of the unprofitable national carrier Philippine Airlines in April, said it plans to invest $8.5 billion over the next ten years to restore the airline.

“If we rebrand, refleet, instill strong financial discipline, and create a good relationship with our work force, then definitely, this thing will fly,” San Miguels President Ramon Ang told Philippine media recently.

Philippine Airlines, Asia’s oldest carrier, has missed out on the opportunities the thriving Southeast Asian market is holding for air transport due to mismanagement, an aging fleet, continued labour disputes, and security problems at its main hub, Manila International Airport.

San Miguel is now drafting plans to open regional routes on profitable single-aisle aircraft and take up the competition with low-cost carriers. For example, the region’s leading discount airline, AirAsia, has recently launched its new subsidiary, AirAsia Philippines, that now operates three domestic routes in the Philippines and aims to connect the country to AirAsia’s large regional network. Philippine Airlines also lost a lot of business to expanding low-cost carrier Cebu Pacific.

Analysts say the investment into Philippine Airlines makes sense as the country currently faces an economic boom. Foreign direct investment is returning as wage costs rise in China and other Southeast Asian countries. The service sector, especially call centers and other back-office businesses, is expanding, and foreign-currency inflows of Filipino overseas workers are strong. The Asian Development Bank has said that GDP growth in the Philippines in 2012 will reach 4.8 per cent and five per cent in 2013 on expectations of a more favorable external environment and a stronger momentum in infrastructure investment.

 

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Reading Time: 2 minutes

Philippine Airlines, Asia's oldest carrier, is facing fierce competition on the Southeast Asian market

The Philippine’s food and beverage major San Miguel, which bought a 40 per cent stake and took over management control of the unprofitable national carrier Philippine Airlines in April, said it plans to invest $8.5 billion over the next ten years to restore the airline.

Reading Time: 2 minutes

Philippine Airlines, Asia's oldest carrier, is facing fierce competition on the Southeast Asian market

The Philippine’s food and beverage major San Miguel, which bought a 40 per cent stake and took over management control of the unprofitable national carrier Philippine Airlines in April, said it plans to invest $8.5 billion over the next ten years to restore the airline.

“If we rebrand, refleet, instill strong financial discipline, and create a good relationship with our work force, then definitely, this thing will fly,” San Miguels President Ramon Ang told Philippine media recently.

Philippine Airlines, Asia’s oldest carrier, has missed out on the opportunities the thriving Southeast Asian market is holding for air transport due to mismanagement, an aging fleet, continued labour disputes, and security problems at its main hub, Manila International Airport.

San Miguel is now drafting plans to open regional routes on profitable single-aisle aircraft and take up the competition with low-cost carriers. For example, the region’s leading discount airline, AirAsia, has recently launched its new subsidiary, AirAsia Philippines, that now operates three domestic routes in the Philippines and aims to connect the country to AirAsia’s large regional network. Philippine Airlines also lost a lot of business to expanding low-cost carrier Cebu Pacific.

Analysts say the investment into Philippine Airlines makes sense as the country currently faces an economic boom. Foreign direct investment is returning as wage costs rise in China and other Southeast Asian countries. The service sector, especially call centers and other back-office businesses, is expanding, and foreign-currency inflows of Filipino overseas workers are strong. The Asian Development Bank has said that GDP growth in the Philippines in 2012 will reach 4.8 per cent and five per cent in 2013 on expectations of a more favorable external environment and a stronger momentum in infrastructure investment.

 

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