Philippine Airlines and AirPhil outlook improves as new ownership cements two-brand strategy

Philippine Airlines (PAL) and low-cost sister carrier AirPhil Express are embarking on a new but still challenging era following the sale of large minority stakes in the two companies to Filipino conglomerate San Miguel. While Lucio Tan will continue to control majority stakes in both airlines, the deal is significant as it provides USD500 million required for fleet renewal and reinvigoration at PAL and for expansion at AirPhil, which will be used to fight off increasing LCC competition. It is also significant as San Miguel will gain management control of both carriers, which could lead to some adjustments in the group's strategy.

The deal, which was completed last week, hardly comes as a surprise. On numerous occasions Mr Tan has looked to sell part of his stake in PAL, of which he took control 20 years ago after the flag carrier was privatised. The latest round of negotiations with San Miguel and one other potential buyer have been dragging on since late last year. Industry sources say Mr Tan was initially reluctant to include AirPhil, which has a brighter outlook than PAL given its focus on the faster growing budget end of the market, and cede management control in either carrier.