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THE
owners of Southeast Asian Airlines (Seair) said they
have rejected the offer of industrialist Alfredo Yao to
purchase the airline, but the fruit-juice king’s camp
stressed the two sides are still “actively talking.”
A highly
placed source in the carrier told the BusinessMirror:
“The deal is off. The offer is $2 million too low from
the original consensus price [between the owners and
Yao’s group].”
Contacted for comment,
Yao said, “Their group and ours are still talking. Nick [Gitsis,
cofounder and director of the carrier] is still in the
States, so we haven’t spoken to each other.”
While
Yao did not wish to confirm how much his group’s offer
price was, the Seair source said the owners had agreed
to sell their shares to Yao at $3.75 million (or roughly
P158 million at P42.315 to the dollar).
The
price only covers the cost of the airline brand and the
takeover of the staff, but not the planes. The 10-plane
fleet of Seair—composed of three Dornier 328s and seven
LET-410s—are turboprops currently leased from Aviation
Enterprise Inc., a company owned by Seair founder Iren
Dornier.
The
source added that the notice to formally reject the deal
has already been transmitted to Yao’s group.
Yao is widely known for having developed the fruit-juice
drinks under the Zesto brand, now the largest-selling
ready-to-drink fruit-juice brand in the country. His
recent purchase of Asian Spirit boosts his interests in
the tourism sector, where he also owns a hotel in
Subic
Bay. In an exclusive interview with the BusinessMirror
on page C1 in this issue, Yao talks about his childhood
struggles which became a foundation for his successful
career in entrepreneurship.
Despite
the rejection of
Yao’s offer, the Seair source was confident that the
airline would continue operating. “We have a good safety
record. We are No. 1 in our market.” He added that
Dornier will continue to infuse capital in the airline
even if the local shareholders won’t.
Gitsis
earlier said a deal with
Yao’s
group could be announced before the end of June. (See “Yao bucks tide, may buy 2nd airline,” BusinessMirror,
April 14.) The two parties have been negotiating Seair’s
purchase since July 2007.
Meanwhile, aviation analysts who requested anonymity
said that with Yao’s recent purchase of Asian Spirit, he
doesn’t need to purchase another carrier. “He has his
own airline already, with its own staff and planes.
Both of
them [Seair and Asian Spirit] serve almost the same
markets, so he [Yao] really doesn’t need another
airline.” The analysts added that unlike Asian Spirit,
Seair does not have a congressional franchise and is not
a designated flag carrier.
A source
in Yao’s group confirmed this. “Strictly speaking, we
don’t need them [Seair]. It’s not imperative that we buy
them. But we can learn from their expertise and benefit
from their niche marketing.”
Yao has already successfully lured Seair’s operations
manager, Eli Tabora, to join Asian Spirit, but is still
keen on recruiting Avelino Zapanta, current president of
Seair and former president of Philippine Airlines, to be
head of a merged airline company.
Yao’s
group is also impressed with the marketing savvy of
Patrick Tan, Seair’s vice president for commercial
affairs.
Despite
the rejection of the offer, a source in Yao’s group said
the businessman is still pursuing his plan to buy Seair.
“The upside for us buying Seair is, they have good
people, and we can do single administration [of routes
and ticketing], and let’s face it, they have a good
reputation in the niche market they are serving. The
downside to us, of course, is there is a cost to all of
that.”
The
source stressed that both groups are still “actively
talking. There are just some areas of confusion [with
regard to the offer price]. I think it just wasn’t
explained to them very well why the offer is such. They
may have interpreted it differently.”
While he
declined to go into specifics, he noted that since
Seair’s planes are not included in the purchase price,
“why should we pay for the spare parts? But essentially,
our offer to them is still the same.” Other sources said
the carrier also has debts which are going to be taken
over by Yao’s group.
This was
essentially the same tactic
Yao
used in taking over Asian Spirit. While the purchase
price for that carrier was P1 billion, the actual check
turned over to its former owners was only about P700
million because of the debts and liabilities of the
carrier that Yao’s group would be assuming.
As for
Yao’s offer to Seair’s owners, the source said: “We
didn’t offer an inordinately low price. I think we just
have to explain to them how we came up with this
figure.” The offer to purchase Seair for about $1.75
million (or P74 million) was made after Yao’s group
completed its recent due diligence of the airline.
In an
interview on February 13, Gitsis admitted to
BusinessMirror the pinch the carrier has felt with the
entry of larger carriers in its major routes: “We’re
still the fastest flight to Boracay (Caticlan). We still
have the most modern planes. But we have felt a
reduction in revenues, and a softening in the market
prices.”
The
Manila-Caticlan route, a major revenue earner for Seair,
is now being serviced by major carriers such as
Philippine Airlines through its subsidiary PAL
Express/Air Philippines, and Cebu Pacific. Current fares
to Caticlan have dropped to about P588, one-way,
excluding insurance, taxes and other surcharges.
The
carrier’s plans to tie up with Tiger Airways so it could
lease two planes from the regional airline to service
more domestic points, and enable Seair to fly to Macau,
Singapore and other regional routes from the Clark
International Airport, have also been strongly opposed
by other local carriers.
“We’ve
had delays with the CAB [Civil Aeronautics Board] in
trying to lease planes from Tiger Air to put in service
in the Philippines. We have had no approval for that.
It’s been a long process. We’re surprised why we’re
getting this reaction from larger companies when we’re a
small company,” Gitsis said of the other challenges
Seair has had to overcome.
Dornier
and Gitsis own 40 percent of Seair while the rest of the
shares are owned by a Filipino group led by marketing
guru Tomas B. Lopez Jr. |
