business

Local airlines cancel commercial flights until May 31

May 15, 2020

PHILIPPINE Airlines (PAL), Cebu Pacific, Cebgo and Philippines AirAsia on Wednesday announced the extension of the suspension of their commercial flights until May 31.     The local carriers issued their advisories after the government’s decision extending the so-called “community quarantine” period in Metro Manila and other areas until the end of May.     PAL, operated by PAL Holdings, Inc., said: “We confirm that all Philippine Airlines domestic flights to or from our hubs in Manila, Cebu and Clark will remain canceled up to May 31, 2020.”     The flag carrier also said it was “evaluating the possibility of flying international routes and/or domestic routes to and from its Davao hub, in coordination with concerned government authorities.”     “We will announce any planned flights once these are finalized,” PAL added.     PAL plans to operate a reduced number of weekly flights on most domestic routes and on selected international routes by June 1. “But this will depend on the COVID-19 (coronavirus disease 2019) conditions: community quarantine restrictions, travel bans imposed by various governments and their impact on  passenger demand, and above all on the public health and safety situation in each of the countries that PAL serves,” it said.     Affected PAL passengers can convert their tickets to a travel voucher. They may also rebook their tickets for free or request a refund without penalties.     Cebu Pacific, operated by Cebu Air, Inc., and its subsidiary Cebgo said its domestic and international flights remain canceled from May 16 to 31.     Philippines AirAsia, Inc. also canceled all its domestic and international flights until the end of May.     Cebu Pacific and Cebgo said affected passengers can rebook their travel tickets for free, place the full cost of their tickets in a travel fund valid for one year, or request a full refund.     “Processing of refunds will start after the Community Quarantine is lifted and regular work schedules resume. However, due to the unprecedented volume of requests for refunds, the process will take as long as three (3) to four (4) billing cycles,” Cebu Pacific said.     For its part, Philippines AirAsia said its guests with existing flight bookings made on or before 12 May 2020 with a departure date between March 23 and July 31, 2020 can select any new travel date before October 31, 2020 on the same route for an unlimited number of times without any additional cost, subject to seat availability.     Philippines AirAsia also said its guests can choose to retain the value of their tickets in the AirAsia BIG Member account for future travel with the airline to be redeemed within 730 calendar days from the issuance date.     “The travel date of the new booking can fall on any date within the published flight schedule on airasia.com,” it added.     AirAsia Group Berhad announced recently the new rules that its passengers will have to follow when flight operations resume after the government-imposed lockdown period. It said guests will be required to bring and wear their own face masks before, during and after flight. Guests without masks will be denied boarding.     PAL assured the public that all its aircraft have air filtration systems, and all its crew will be in full personal protective equipment to protect every passenger on board against viruses. Social-distancing cabin seating options as well as simplified meal or snack service will also be carried out.     Cebu Pacific passengers, as in other airlines, will also be required to wear face masks upon entry at the airport terminal and for the duration of the flight.     The budget carrier will minimize face-to-face contact between its ground staff and passengers.

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SMC abandons Holcim buy as PCC closes to end review

May 15, 2020

THE Philippine Competition Commission (PCC) has learned that San Miguel Corp. (SMC) pulled out its plan of acquiring Holcim Philippines, Inc. (HPI) when the antitrust body is nearly finished with the second phase of the review of the transaction.     SMC made a disclosure to the Philippine Stock Exchange Monday about backing out from the deal but PCC said it has yet to receive formal notice from both parties withdrawing the transaction.     SMC subsidiary First Stronghold Cement Industries Inc. (FSCII) will no longer buy the 85.73 percent share of HPI after the agreement has expired in accordance with its terms.     The acquisition deal amounts to USD2.15 billion.     “The Commission notes that the 10 May 2020 deadline was internally agreed upon by the transacting parties and was within their prerogative to extend as needed,” the PCC said in a statement Tuesday.     The PCC is doing the Phase 2 review of the transaction but was suspended, along with all proceedings, due to the enhanced community quarantine.     SMC and HPI have yet to get PCC’s nod after its Merger and Acquisition Office flagged competition concerns arising from the transaction, such as monopoly in Northwest Luzon and increased market power and potential collusion among inter-related cement companies controlled by FSCII in the Northeast Luzon, Central Luzon, and Greater Metro Manila areas.     “The Phase 2 review of the transaction was suspended upon the parties’ submission of voluntary commitments. PCC rejected the proposed commitments after they were found insufficient to address the competition concerns, reverting the transaction to Phase 2 review. The parties, however, have yet to file their respective comments to answer the competition concerns raised in the SOC,” the antitrust body said. (PNA)

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Finance chief sees '20 deficit to be around P1-T

May 15, 2020

GOVERNMENT expenditures for coronavirus disease 2019 (Covid-19) is expected to increase the budget deficit to around PHP1 trillion this 2020.     This was disclosed by Finance Secretary Carlos Dominguez III Wednesday but assured the public that the government was in a good financial position even before the pandemic hit.     The inter-agency Development Budget Coordination Committee (DBCC) has set a 3.2-percent budget deficit cap for this year amounting to PHP677.6 billion.     Dominguez said there are lots of numbers that economic managers are currently looking at, but cited “the first number you have to figure out (is) what exactly is going to be our deficit for the year.”     “And our estimate is about a trillion pesos, around a trillion,” he said.     Dominguez said the government’s four-pillar Covid-19 response is being funded by the tax collections, the dividends from government-owned and controlled corporations (GOCCs), and loans, among others.     He said that although collections of taxes have been delayed due to postponement of filing of income tax returns (ITR) and other related documents because of the quarantine period, the government will still be able to collect these.     He added the government was able to receive record-high PHP120 billion dividends from GOCCs, and this will be a plus for the Covid-19 response program.     The government has signed several loan agreements with the Asian Development Bank (ADB) and the World Bank (WB), among others.     These include the loan pact with ADB that allows the Duterte government to access up to USD1.5 billion in budgetary support for Covid-19 programs and the USD100-million loan from the WB.     Dominguez said they are also in discussions with the governments of Japan, Korea, China, and France for “project-based bilateral financing.”     He declined to give specifics on where the government’s Covid-19 response financing currently is since they are still awaiting the reports until end-April, but vowed to disclose this once the data is available.     “We are exactly where we want to be,” he added.     Meanwhile, Dominguez said Finance officials “are willing to look” at the Corporate Income Tax and Incentives Rationalization Act (CITIRA) that Senators plan to pass to help companies recover from the economic impact of the global pandemic.     CITIRA is part of the government’s tax reform program that aims to correct the country’s tax system.     Dominguez earlier said Senate Bill No. 1357, or the CITIRA, targets to make incentives given to companies more targeted, which will allow the country to be more competitive in the region.     If this bill is approved this year, the special tax rate on gross income will be increased immediately this year from the present five percent to eight percent then to nine percent next year, and to 10 percent by 2022.     On Wednesday, Dominguez said they are “willing to look at it (CITIRA) and most likely cut it further more quickly than originally planned.” (PNA)

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PH banking system resilient vs. impact of health crisis

May 15, 2020

REFORMS instituted in the past serve as buffers for the Philippine banking system vis-à-vis the impact of the global pandemic caused by the coronavirus disease 2019 (Covid-19), Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said.     In a briefing aired over the central bank’s Facebook page Thursday, Diokno said the domestic banking system and the Philippine economy in general is facing the pandemic “from a position of strength.”     He said the domestic financial system is the country’s first line of defense against the pandemic, and the banking industry is up for this task since it remains adequately capitalized with total banking assets accounting for 81.7 percent of the financial system’s resources as of last February.     “Reforms have been put in place to maintain sufficient buffers in times of crisis and ensure business continuity to serve financial consumers and to keep the economy going,” he said.     The sector’s overall loan quality “was satisfactory”, with a non-performing loan (NPL) ratio of 2.1 percent, he said.     Deposits remain the banks’ main funding source with a share of 85.2 percent of the total.     Capital adequacy ratio (CAR), a gauge of banks’ financial strength, of universal and commercial banks (U/KBs), stood at 15.4 percent on a solo basis, and 16 percent on consolidated basis as of end-2019.     These are higher than BSP’s 10-percent minimum threshold and Bank of International Settlements’ (BIS) 8-percent minimum requirement.     Total portfolio grew by 10.2 percent year-on-year as of last February.     “I believe the banking system is now benefiting from prudential reforms carried out during the last 20 years. Moving forward, the BSP will continue to pursue proactive measures aimed at further strengthening the banking system,” Diokno said. (PNA)

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Bank lending expands faster in March

May 15, 2020

OUTSTANDING LOANS disbursed by universal and commercial banks rose by 12.9% in March, faster than the downward-revised 12% pace in February, according to data from the Bangko Sentral ng Pilipinas (BSP).     Inclusive of reverse repurchase agreements, lending rose by 14%, quicker than the upward-revised 11.3% logged in the prior month.     Data showed the rise in production loans, which made up 87.6% of the total credit, continued to be the main driver of growth. Lending to the sector grew quicker at a pace of 12% from the 9.4% seen in February.     The sustained increase in production loans is attributable to an increase in credit for real estate activities (21.8%); information and communication (20.8%); financial and insurance activities (17.2%); wholesale and retail trade, repair of motor vehicles and motorcycles (6.8%); and electricity, gas, steam and air-conditioning supply (7.7%).     Other sectors also saw rise in loans except for manufacturing (-0.4%) and mining and quarrying (-5.3%), the BSP said.     On the other hand, growth of loans disbursed for households eased to 22.9% from the upward-revised 37.7% logged in February. This was mainly due to the slower expansion in credit card and motor vehicle loans during the month.     UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the pickup in lending to the market’s reaction after the easing moves done by the central bank since 2019.     “Since last year, we know that the BSP has been on an easing stance. RRP (reverse repurchase rate) cuts were made including other liquidity measures such as the RRR reduction. The market has been responding and liquidity in the market has been ample and growing,” Mr. Asuncion said in an e-mail.     In 2019, the BSP slashed rates by a total of 75 basis points (bps) before opting for a pause. By yearend, the overnight reverse repurchase rate was at four percent while lending and deposit rates were at 4.5% and 3.5%, respectively.     Meanwhile, reserve requirement ratios (RRR) were slashed by a total of 400 bps last year, which reduced the RRR of big banks as well as thrift and rural banks to 14%, four percent, and three percent as of end-2019.     BSP Governor Benjamin E. Diokno has said monetary policy tends to work with a lag of about three to nine months.     For this year, the BSP has been aggressive as it seeks to curtail the impact of the virus on the economy. It has cut rates by a total of 125 bps thus far which reduced overnight reverse repurchase, deposit and lending rates to record lows of 2.75%, 3.25% and 2.25%, respectively.     The BSP has likewise reduced RRR of universal and commercial banks by another 200 bps to 12%.     In the coming months, the lockdown measures may dent lending growth, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.     “Bank loans could start to slow down in April and May 2020 and could even potentially contract in Q2 2020 together with the broader economy, depending on how long the lockdown would last,” Mr. Ricafort said.

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SMC drops $2-B Holcim acquisition

May 12, 2020

SAN MIGUEL Corp. (SMC) is terminating its $2.15-billion acquisition of Holcim Philippines, Inc. after failing to obtain clearance from the Philippine Competition Commission (PCC).     In a statement on Monday, the diversified conglomerate said it would “no longer proceed” in buying 85.73% shares in Holcim after its agreement lapsed on May 10 without getting the required approval of the PCC.     With the discontinuation of the proposed acquisition, SMC said the supposed tender offer of Holcim shares held by minority shareholders is likewise withdrawn.     SMC, through First Stronghold Cement Industries, Inc. (FSCII) — a unit of SMC subsidiary San Miguel Equity Investments, Inc. — was buying 5.53 billion common shares in Holcim, the local arm of Switzerland-based LafargeHolcim Ltd.     The deal was made on May 10, 2019 with the purpose of expanding SMC’s foothold in the country’s cement industry.     As part of the transaction, FSCII was supposed to do a tender offer of shares in Holcim held by minority investors equivalent to 14.27% of its total issued and outstanding capital stock.     While the Department of Trade and Industry earlier said the buyout might result in lower prices of locally produced cement, the PCC said it might substantially lessen competition in the grey cement market in Luzon.     It flagged that FSCII is under SMC, and SMC is under Top Frontier Investment Holdings, Inc., which has two cement plants set to open in the next two years: Northern Cement Corp. and Oro Cemento Industries Corp.     The PCC likewise noted that SMC President and Chief Operating Officer Ramon S. Ang is the majority owner and chairman of Eagle Cement Corp.     “Sellers, distributors, and hardware owners in the relevant markets viewed Eagle Cement and Northern Cement as ‘sister companies’ and part of the Top Frontier group,” the competition watchdog said in January.

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