MANILA Diversified conglomerate San Miguel Corp (SMC.PS) wants to expand its airline business via a regional acquisition and by growing its fleet as it seeks to reclaim the top position its unit Philippine Airlines (PAL.PS) lost to budget carrier rivals.
Ramon Ang, president of both San Miguel and Philippine Airlines (PAL), said the carrier was looking to invest in a regional airline and restructure its operations to become a low-cost carrier.
San Miguel acquired minority stakes in PAL and its affiliate in April in a deal worth about $500 million, the conglomerate's first foray into the airline business. After the deal was signed, San Miguel took over management control of the airline.
"At the moment, there are several opportunities for PAL to acquire some other companies in the region for us to have good synergy," Ang told reporters after San Miguel's annual shareholders' meeting.
He also said the airline was in talks with aircraft manufacturers as it aims to beef up its current fleet by adding at least 100 new planes in the next five to seven years. A local newspaper said in April the firm may spend $500 million to $1 billion for its refleeting program.
Eduardo Cojuangco, San Miguel chairman, said the new management was targeting Asia's oldest airline to "be in the black in two years time".
"The immediate task at hand, after putting in place an efficiency plan that will lower operating cost, is to differentiate and reposition PAL," he told the stockholders.
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Philippine Airlines has suffered from high jet fuel prices in recent years and tough competition from its main rival, budget carrier Cebu Air Inc (CEB.PS).
Ang also said San Miguel plans to sell up to 80 billion pesos ($1.9 billion) of perpetual preferred shares in September in what would be the biggest capital raising by any private corporation locally, to refinance costly preferred shares.
The country's largest conglomerate was still studying whether to launch a single or multi-tranche offer, Ang said.
It had issued 72 billion pesos worth of preferred shares to stockholders, including the government, in 2009.
San Miguel told the stock exchange on Wednesday it was contemplating an issue of Series 2 preferred shares and an increase in its authorized capital stock, but did not give an amount.
Its capital raising will be bigger than BDO Unibank Inc's (BDO.PS) planned stock rights offering this month, which could raise as much as $1 billion.
Shares of San Miguel were up 0.3 percent on Thursday, outperforming the broader market .PSI which fell 1.7 percent.
The group has spent at least $3 billion since 2007 for its aggressive acquisitions away from its traditional food and drinks businesses and into sectors such as energy, telecoms, mining, banking, infrastructure and airlines.
(Editing by Muralikumar Anantharaman)