PAL says PAGCOR should honor lease contract

PHILIPPINE AIRLINES (PAL) insisted its lease contract with the Philippine Amusement and Gaming Corp. (PAGCOR) for a 10-hectare property in the old Nayong Pilipino complex is legal and valid.

In a statement on Thursday, the Lucio Tan-led airline said it expects PAGCOR to honor the contract, which will expire on July 11, 2033.

“The existing contract between PAL and PAGCOR is legal, valid and binding based on the terms negotiated and finalized by both parties three years ago,” said the flag carrier, which proposed to use the property for a proposed P20billion ($ 400- million) annex to the Ninoy Aquino International Airport (NAIA) Terminal 2.

PAGCOR, under its previous management, and PAL on July 30, 2014 signed the lease agreement for the property located along Manila International Airport ( MIA) Road in Pasay City.

Under the contract, PAL would pay a monthly rental fee of P40 per square meter. At the time of the contract signing, PAL paid one month advance rental and a security deposit equivalent to five months’ rental or P24 million.

PAL issued the statement on Thursday after PAGCOR said it reviewed the lease contract, and found it is “not yet the absolute and registered owner of the property.”

“At any rate, this statement of PAGCOR is immaterial and irrelevant. Assuming for the sake of argument PAGCOR is not the absolute and registered owner of the property, it can still enter into a valid contract owing to the fact that it has control and/or possession over the area and has the legal personality to do so,” the flag carrier said.

PAL also cited Article 12.8 of the contract, which states: “PAGCOR covenants and warrants it is the lawful owner of the leased premises; that is free from all encumbrances; that it has a right and has been duly authorized to lease the same as aforesaid and that it will warrant and defend the same against the lawful claims and demands of all persons.”

It added that PAGCOR, as owner of the leased property, had already accepted its initial payments, gave permission to conduct tests, and issued statement of accounts.

PAL acknowledged that the lease contract only allows it to use the property as aircraft parking, ramp, and apron facility. The contract requires PAL to secure “prior written consent from PAGCOR” if it would use the property for another purpose.

“PAL recognizes the role of PAGCOR and reiterates its willingness to engage with PAGCOR and other stakeholders in pursuit of its goal to work with government in building, developing, enhancing and upgrading airport infrastructure,” the flag carrier added.

Last week, PAL revived its proposal for a NAIA Terminal 2 annex, which would handle 1215 million passengers per year and be able to serve 12 to 17 widebodied and single-aisle jets.

“PAL has been doing its share to help decongest NAIA while stimulating air travel to the Philippines. PAL’s proposed P20-billion passenger terminal is in fact a testament to such commitment which will benefit the flying public, Philippine tourism and the national economy,” PAL President Jaime J. Bautista said last week.

Mr. Bautista said that once the project is approved by the government, the groundbreaking is targeted for February 2018, completion of construction by December 2020 and start of operations in July 2021. —