PAL offers to pay gov't ₱4B to settle debt issue

Metro Manila (CNN Philippines, September 28) — The Philippine Airlines (PAL) is offering to pay the government P4 billion to finally settle a years-old issue on unpaid navigational charges.

The country's flag carrier on Thursday said less than half or P3.6 billion of the P6.91 billion being demanded by the Department of Transportation (DOTr) is backed by invoices.

This was also confirmed by Transport Undersecretary for Aviation Manuel Tamayo. "Yes, that is right. Only P3.6 billion can be substantiated with invoices."

As a compromise, PAL said it is willing to pay P4 billion in tranches over seven years.

PAL said it already submitted an offer to the Civil Aviation Authority of the Philippines (CAAP) through its inter-agency panel of negotiators, but has not received a response yet.

"We look forward to meeting the negotiating panel and we are ready to submit a Compromise Agreement to settle this issue once and for all," PAL added.

In a statement on Wednesday, PAL said it will "continue to cooperate" with the government to finally to resolve "complex legal issues," which PAL has been threshing out with the CAAP for years.

PAL said the same legal issues were the subject of a court case between PAL and the MIAA years ago, where the court ruled in favor of PAL.

Despite the favorable ruling, PAL said it opted to amicably settle with the MIAA.

The Court of Appeals in 2007 upheld a compromise deal between the MIAA and PAL for the settlement of P2.93 billion in unpaid aeronautical fees in tranches for seven years. It reversed a 2003 decision by the Pasay regional trial court for the MIAA to stop collecting fees from PAL.

PAL was a government-owned and controlled corporation with tax privileges and exemptions prior to its privatization in 1992.

PAL said it received an August 2016 letter from the DOTr demanding payment of navigational charges amounting to P6.63 billion.

The DOTr on Wednesday said PAL must now pay over P6.91 billion, down from P7.28 billion, after it made initial payment of P370 million to the CAAP. 

The DOTr said the payment was a result of discussions after it sent letters to PAL in August 2016 "demanding full payment of all unpaid charges" at the order of DOTr Secretary Arthur Tugade.

However, the DOTr said it has denied PAL's requests to pay over P6 billion in arrears in seven years.

"Thus, final demand for full payment of all unpaid charges has been sent to PAL, preparatory to the filing of appropriate legal action in order to protect the interest of government," the DOTr said in its Facebook post.

Duterte: I'll have to shut down NAIA terminal if PAL won't pay debts

The issue on PAL's unpaid fees gained steam after President Rodrigo Duterte warned PAL to settle its debts or he will have to shut down the Ninoy Aquino International Airport Terminal 2, which PAL exclusively uses for most of its regional and international flights.

In a speech at the 56th anniversary of the Philippine Constitution Association late Tuesday, Duterte said he turned down the campaign money offered by PAL chair and chief executive officer Lucio Tan because of his debts.

"Sabi ko, you are using government buildings, airport, you have a back…utang diyan sa runway 'di mo binabayaran," Duterte said.

(Translation: "I said, you are using government buildings, airport, you are not paying your debts there for the use of the runway.")

Duterte said he gave Tan 10 days to pay his debts.

"Sabi ko (I said), 'You solve the problem yourself. I will give you 10 days. Bayaran mo. 'Pag hindi mo bayaran, eh 'di sirahan ko.' Wala nang airport (Pay them. If you don't, I will shut it down. No more airport). So what?" Duterte said.

He said he will be left with no choice but to order the closure of NAIA Terminal 2 even at the expense of Filipino passengers.

"Kayo Pilipino (You Filipinos) have to travel overland from Luzon to Davao… I do not mind. If we sink, we sink. But I said, 'We have to enforce the law.' So guys, you guys, if you are put into a great discomfort, sorry. Wala akong magawa (I cannot do anything). The law is the law," Duterte added.

In August last year, Duterte said he turned down campaign money from business magnates like Tan, not because it is "a bad practice," but because it is difficult to be compromised as a leader.

CNN Philippines' Claire Jiao contributed to this report.