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PAL History photo

Philippine Airlines was founded on February 26, 1941 by a group of businessmen. The government invested in the company in September.

Upon the outbreak of the Pacific war on December 8, 1941, the two Model 18s and their pilots were impressed into military service. They were used to evacuate planeless American fighter pilots to Australia until one was shot down over Mindanao and the other was destroyed on the ground in an air raid on Surabaya, Indonesia.

After the war, Soriano revived PAL and was elected its president in January 1946. On February 14, PAL resumed operations with five ex-military twin-engine Douglas DC-3s and a network of eight points. The payroll had 108 names.

In July of the same year, PAL chartered four-engine Douglas DC-4s to fly American servicemen home. The first flight left Manila July 31, making PAL the first Asian airline to cross the Pacific. Regular service between Manila and San Francisco started on December 3, 1946. On May 13, 1947, PAL opened a route to Europe. It acquired its own DC-4s.

PAL bought out one competitor in May 1947 and another in September 1948. In the process, the government became the majority stockholder. Soriano remained as president under a management contract between him and PAL.

Four-engine Douglas DC-6s were acquired in 1948 and DC-6Bs were purchased in 1952. These were operated to 16 cities abroad. Twin-engine Convair 340s were added in April 1953 for the services to Hong Kong, Bangkok and Taipei. On March 30, 1954, the government ordered the immediate cancellation of international services as an economy measure. All of the four-engine airplanes were sold. The Convair 340 service to Hong Kong was retained.

Nearly all local airports permitted nothing better than the DC-3s. In June 1955, the single-engine De Havilland DHC-3 Otter introduced a rural air service to airports where DC-3s could not operate. They would bring some 17 towns in the Visayas and Mindanao into the domestic network.

Improvement of some trunkline airports allowed the use of the Convair 340 in the domestic services starting in 1953. The four-engine Vickers Viscount turboprop came in 1957. The twin-engine Fokker F-27 began to replace DC-3s at some airports in March in 1960.

Soriano left PAL in March 1961. Eduardo Z. Romualdez, board chairman since 1954, became the president in a concurrent capacity. Following a change of national administration in January 1962, Col. Renato L. Barretto, former vice president for operations, was elected to the PAL presidency. He resumed international services with the four-engine Douglas DC-8 jetliner, initially across the Pacific on June 20, 1962. Barretto left in August 1963. Rafael G. Igoa was president from October 1963 to March 1964.

Domestic services expanded to a total of 72 points as airports were improved or opened. The Viscount was introduced on trunkline routes and the Convair 340 began to be phased out. The DC-3 remained the mainstay of the domestic operations. However, the rural air service was stopped in May 1964.

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In January 1965, the government decided to relinquish control of PAL and bid out half of its shares. Benigno P. Toda, Jr., board chairman since March 1962, acquired majority control of the airline. He was elected chairman and president. At the same time, the government permitted two other local airlines to compete with PAL on domestic routes.

The twin-engine BAC 1-11 Series 400 introduced domestic jet service to Cebu, Bacolod and Davao on May 6, 1966. The Viscounts were sold. The Hawker Siddeley 748 started replacing F-27s in November 1967 as standard turboprop equipment. The BAC 1-11 Series 500 replaced the Series 400 airplanes in October 1971.

The government decreed PAL to be the only domestic airline again as of January 1, 1974. Twin-engine Nihon YS-11 turboprops were added to the domestic fleet. PAL's first McDonnell Douglas DC-10 widebody tri-jet joined the airline in July of the same year.

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In November 1977, the government reassumed control of PAL with the Government Service Insurance System holding the majority shares. Roman A. Cruz, Jr., president and general manager of the GSIS, was elected to be concurrently the president of PAL. Toda left the airline.

Cruz brought into the fleet the Boeing 727 trijet in July 1979 and the Boeing 747 and Airbus 300 widebody jets in December of the same year. The DC-8s were phased out. Cruz also initiated the construction of three important PAL facilities - the Technical Center, Inflight Center and Data Center.

Following the "Edsa Revolution" in February 1986, Dante G. Santos became PAL president. He launched a massive modernization of the domestic fleet with the acquisition of the Shorts SD360 in May 1987, the Fokker 50 in August 1988 and the Boeing 737-300 jet in August 1989. The SD360 turboprops replaced the HS.748 in 1988.

Following the "Edsa Revolution" in February 1986, Dante G. Santos became PAL president. He launched a massive modernization of the domestic fleet with the acquisition of the Shorts SD360 in May 1987, the Fokker 50 in August 1988 and the Boeing 737-300 jet in August 1989. The SD360 turboprops replaced the HS.748 in 1988.

The government had, in the meantime, decided to privatize PAL anew. On January 30, 1992, PR Holdings, a consortium led by Antonio O. Cojuangco, president of the Philippine Long Distance Telephone Co., won the bidding for 67 percent of the shares. In the transfer of management to the consortium on March 25, Cojuangco was elected chairman and chief executive officer.

Belmonte left PAL on the same date to successfully run for election to the House of Representatives. The BAC 1-11s were retired in May following completion of the deliveries of B737s. The Shorts SD360s were also phased out in September.

Resolution of a representation issue within PR Holdings resulted in the election of former Secretary of Agriculture Carlos G. Dominguez as chairman and president on March 1, 1993.

Within the year, two brand-new Boeing 747-400s joined the PAL fleet and immediately put into use for non-stop flights across the Pacific.

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On February 12, 1994, Jose Antonio Garcia was unanimously elected as PAL's 12th president and chief operating officer. Dominguez remained chairman and chief executive officer.

A new service between Manila and Osaka, launched in 1994, brought to 34 the number of points in PAL's international route network. The airline took delivery of its third B747-400 in May 1995.

On January 30, 1995, Lucio C. Tan, the majority stockholder of PR Holdings, was elected chairman and chief executive officer during a special board meeting, replacing Dominguez who remained as board member.

Meanwhile, a reorganized management, buoyed by a Tan commitment to infuse P5 billion in fresh capital, immediately embarked on a massive restructuring program aimed at reestablishing PAL's position in the global arena.

The delivery of the carrier's fourth B747-400 in April 1996 signaled the start of an ambitious $4-billion modernization and refleeting program that aimed to make PAL Asia's best airline within three years.

The centerpiece of the program was the acquisition of 36 state-of-the-art aircraft from manufacturers Airbus Industrie and Boeing Co. from 1996-99. The refleeting sought to give PAL the distinction of having the youngest fleet in Asia and allow the expansion of its domestic and international route network.

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On June 5, 1997, PAL was relaunched as "Asia's Sunniest" airline to cap its new marketing and advertising thrust.

The refleeting program was about halfway through when the full impact of the Asian financial crisis struck the airline industry early in 1998. By March 31, the end of the fiscal year, PAL had reported its largest annual loss ever - P8.08 billion.

The airline's financial difficulties were compounded by a series of labor disputes that began when the pilots' union staged a three-week strike in June 1998. This was followed by a strike by the ground personnel union on July 22. This ended four days later with the signing of a deal between the union and management.

But PAL's financial troubles continued to take their toll and on June 19, 1998, the company filed for receivership with the Securities and Exchange Commission, which then appointed a committee to oversee the rehabilitation of the flag carrier.

The airline downsized its operations as the Asian financial crisis dragged the region's once-vibrant economies into recession in 1998. The fleet was reduced from 53 to 22 aircraft, many domestic and international routes were discontinued, and the work force was reduced.

At the same time, PAL's creditors also demanded a long-term guarantee of industrial peace as a condition for their continued support of the airline. Management and the ground crew union conducted marathon negotiations toward this goal but the talks ultimately broke down.

At midnight of September 23, 1998, PAL was forced to cease operations after the union rejected a management proposal for a 10-year suspension of the collective bargaining agreement in exchange for representation in the PAL board of directors. PAL's closure ended 52 years of uninterrupted service to the nation.

But President Joseph Estrada's personal intervention brought PAL back to life. The president brokered a deal between the two sides that resulted in a landmark agreement signed by PAL chairman Lucio Tan and union president Alexander Barrientos at Malacanang Palace on September 29.

The pact was ratified by union members in a referendum on October 1 and 2, and on October 7, PAL took to the skies anew with services to 15 domestic points out of Manila. On October 29, the flag carrier resumed international services with a flight to Los Angeles and San Francisco.

Asian services resumed on November 11 with flights to Tokyo and Hong Kong. PAL gradually expanded its network over the next two months, restoring services to Taipei, Singapore, Fukuoka, Osaka (via Cebu), Dhahran, Riyadh and Seoul.

With the aviation industry still in the doldrums, PAL continued to search for a strategic partner but in the end, it submitted a "stand alone" rehabilitation plan to the SEC on December 7, 1998. The plan provides a sound basis for the airline to undertake a recovery on its own while keeping the door open to the entry of a strategic partner in the future.

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On January 8, 1999, PAL pproved a 5-year technical assistance agreement with Regent Star Services, an airline management consulting firm formed by former Cathay Pacific executives. These consultants took on full time advisory positions to assist PAL in the following areas of operations: Peter Foster, Chief Company Adviser; Michael Scantlebury, Senior Financial Adviser; Richard Nuttall, Senior Commercial Adviser; Andrew Fyfe, Senior Adviser - Ground Services & Training; and Richard Wald, Senior Adviser - Maintenance & Engineering.

Reorganization followed with the onset of the new consultative group. The Interim Rehabilitation Receiver for PAL announced a new organizational structure on January 21. Luis Juan L. Virata became President & Acting Chief Executive Officer; Jaime J. Bautista, Executive Vice President & Chief Operating Officer; Manolo E. Aquino, Executive Vice President for the Commercial Group; Andrew L. Huang, Senior Vice President & Chief Financial Officer; and Capt. Jose Antonio A. Lozano, Senior Vice President for Operations.

PAL presented the new proposed rehabilitation plan to its major creditors during a two-week marathon meeting that started on February 15 in Washington D.C. and ended on March 1 in Hong Kong.

PAL flew back to Xiamen, after an absence of over nine months, on March 15, 1999 that also marked the 58th anniversary of the airline. On the same date, PAL submitted its amended rehabilitation plan to the Securities and Exchange Commission that comprised a revised business plan and a revised financial restructuring plan. The plan also required the infusion of $200 million in new equity, with 40% to 60% coming from financial investors and translating to no less than 90% ownership of PAL.

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On April 15, 1999, the Securities and Exchange Commission gave an order that sought to clarify certian provisions of the airline's Amended and Restated Rehabilitation Plan that likewise extended the deadline to May 4, 1999. This concerned primarily the details on the source of the $200 million capital infusion.

During an Emergency Board Meeting called on April 19, 1999, Mr. Tan announced his commitment to provide the $200 million capital required for the airline's rehabilitation. Effectively on that date, Mr. Tan had put in escrow $100 million and the other half to be ready on or before May 4. With this capital infusion, Mr. Tan assumed the post as Chief Executive Officer and held 90% ownership of the national flag carrier. Avelino L. Zapanta was likewise elected president and chief operating officer on the same date replacing Jaime J. Bautista.

Reorganization followed in top management positions: Henry So Uy replaced Manolo E. Aquino as EVP - Commercial Group on April 22; and Capt. Julio Hernandez took over the position of OIC - Operations, formerly held by Capt. Jose Antonio Lozano.

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After more than a month of search for new investors, the SEC announced the infusion of $200 million in fresh equity -- fulfilling a principal condition of the PAL's creditors and clearing the way for the implementation of the rehab plan. The Lucio Tan Group of Companies retained a majority stake of 53.69%. Three new investor groups -- Top Wealth Enterprises of Hong Kong, and local firms Maxell Holdings and Richmark Holdings contributed the other half that gave them 35.15% ownership. The Philippine government's stake was diluted from 14.35% to 4.26%. PAL employees increased their holdings from 2.55% to 2.71%. Other private groups retained 4.19% of PAL's stock.

A permanent rehabilitation receiver was appointed by the SEC to replace the IRR on June 7. Seven members of the interim panel were retained to monitor and supervise the implementation of the rehab plan.

After financial restructuring agreements with its major creditors were finalized, PAL signed an agreement with Lufthansa Consulting GmbH on June 19, 1999 for the latter to advise PAL on its ongoing restructuring process. The consultancy subsidiary of the Deutsche Lufthansa Group began a two-month assessment of the PAL's operations on July 1 and started advising the airline on September 1.

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