Tycoon Tan prioritises the turnaround of Philippine Airlines

In this picture taken on December 23, 2010, PAL plane at the tarmac of NAIA Terminal 2 in Manila, the Philippines.(Bloomberg/Edwin Tuyay)

Billionaire Lucio Tan said he plans to return his group’s Philippine Airlines to profit before selling a stake, two weeks after the carrier’s president said talks with a strategic investor were likely to produce a deal by the end of this year.

PAL Holdings, the carrier’s parent, booked a net loss of 501 million pesos (9.8 million dollars) in the second quarter after reporting a 1.13 billion peso deficit in the previous quarter as higher fuel costs and aircraft lease charges boosted expenses. Tan, chairman of the LT Group conglomerate, spoke in an interview in Manila on September 7, and didn’t elaborate on the airline’s plans to return to profit.

“I will not sell unless it earns money,” said Tan, 83. “Airlines are a very competitive business.”

Tan, the Philippine’s second-richest person, is vowing to revive profit at the carrier amid an increase in tourist arrivals in the country. Philippine Airlines has been acquiring new planes and expanding destinations and flight frequencies as rising income among Filipinos boosts travel.

“While PAL needs to get back to profitability, one thing that makes it attractive for investors is Philippine tourism is picking up, giving the airlines an earnings growth driver,” said Manny Cruz, an analyst at Asiasec Equities.

Tourism Surge

Tourist arrivals in the Philippines rose 13 percent in the first half of the year to 3.36 million, according to Tourism Department data.

The LT Group chairman is seeking a strategic partner for the airline after buying San Miguel’s stake in 2014, taking control of the venture. PAL Holdings President Jaime Bautista said on August 30. the airline has been in talks with a strategic foreign investor and wants to close the deal by the year’s end.

Tan, who also controls the biggest cigarette-maker in the Philippines, had a net worth of 5.9 billion dollars as of September 8, according to Bloomberg Billionaires Index. His wealth gained about 13 percent, or 651 million dollars this year, boosted by a 39 percent advance in LT Group shares. The listed flagship is the holding company for his airline, banking, liquor, brewery, property and tobacco businesses.

Easy Life

The LT Group chairman is also preparing to hand over the reins to the conglomerate, saying he has a succession plan in place.

He declined to say who would take the helm or when they would take over. Michael Tan, his son and LT Group president, is among the likely successors, along with Lucio “Bong” Tan Jr., the son who heads the group’s liquor-maker Tanduay Distillers and builder Eton Properties Philippines. Son-in-law Joseph Tan Chua is president of MacroAsia, an aviation-support provider and a partner of Deutsche Lufthansa.

“Tan is still relatively hands on compared with the other tycoons of his generation,” said Paul Michael Angelo, analyst at Regina Capital in Manila. “But we shouldn’t see a major disruption on operations arising from succession, as Tan has put in place key executives and delegated key management functions.”

Tan said he still gets up at 4 a.m. to play golf before a minimum eight-hour day running his conglomerate.

“I am old,” said Tan. “My wish now is for an easy, easy life.” – Bloomberg