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Tycoon Tan says Philippine Air profit comes before stake sale

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Billionaire Lucio Tan said he plans to return his group's Philippine Airlines Inc 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.

[MANILA] Billionaire Lucio Tan said he plans to return his group's Philippine Airlines Inc 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 Inc, the carrier's parent, booked a net loss of 501 million pesos (S$13.2 million) 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. Mr Tan, chairman of the LT Group Inc conglomerate, spoke in an interview in Manila on Sept 7, and didn't elaborate on the airline's plans to return to profit.

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

Mr 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.

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Market voices on:

"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 Inc.

TOURISM SURGE

Tourist arrivals in the Philippines rose 13 per cent 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 Corp's stake in 2014, taking control of the venture.

PAL HOLDINGS 

President Jaime Bautista said on Aug 30 the airline has been in talks with a strategic foreign investor and wants to close the deal by the year's end.

Mr Tan, who also controls the biggest cigarette-maker in the Philippines, had a net worth of US$5.9 billion as of Sept 8, according to Bloomberg Billionaires Index. His wealth gained about 13 per cent, or US$651 million this year, boosted by a 39 per cent 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 Inc and builder Eton Properties Philippines Inc.

Son-in-law Joseph Tan Chua is president of MacroAsia Corp, an aviation-support provider and a partner of Deutsche Lufthansa AG.

"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."

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

"I am old," said Mr Tan. "My wish now is for an easy, easy life."

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