Smaller domestic carriers, such as Air Philippines, were too small to fill in for PAL on short notice. They would need at least six months to get a full schedule going, the carriers said, because many of the smallest transport companies don t fly regular flights and only fly when they have cargo to haul. With its options running out, the government assented to a temporary deal with Hong Kong-based Cathay, which took on domestic routes on a charter basis. The move was seen as a necessary evil by the Filipino business community. Optimists point to PAL s dominant position in the Philippine cargo market, where the airline held 60 percent of the export market of a vibrant, albeit weakened, economy.
Skeptics point to the airline s poisonous management-labor relations.
Others say Tan and his associates expanded the airline recklessly during Asia s boom years and say any deal should keep management decisions firmly in the foreign investor s corner. The labor dispute may be a significant factor in PAL s troubles, but it should not even be the chief scapegoat, said Blas F. Ople, a Filipino senator, in a recent column in the Manila Bulletin. The labor costs of PAL cannot exceed 10 percent of its total operating costs. He acquired 36 new aircraft, which plunged the carrier into a cesspool of dollar-denominated debt and created appalling overcapacity. He was talking only about PAL, of course, but ailing flagship carriers everywhere should probably pay attention.