Philippine Airlines hopes to secure this year a mix of foreign bank loans and guaranteed financing to fund its planned USD$800 million fleet renewal.

The airline, controlled by Filipino businessman Lucio Tan, may later use Tan's listed holding company, Baguio Gold Holdings, to raise some equity as well, PAL Chief Executive Jaime Bautista said on Tuesday.

"Baguio Gold is a vehicle which PAL can tap or can use in the future," said Bautista, a certified public accountant who started his career in the airline as comptroller in 1993.

Bautista, who has worked for Tan companies for 27 years, is also president of Baguio Gold, while Tan himself, a septuagenarian who flies around Manila in his personal helicopter, is chairman of PAL and of Baguio Gold.

"If Philippine Airlines would need additional funds, for example we need to finance additional airplanes and the creditors will ask us to get more equity, we can run to the holding companies that own us and those holding companies can go to Baguio Gold to ask for additional investments," Bautista said.

Under a plan announced in August, Baguio Gold is acquiring a set of six companies, also controlled by Tan, which between them hold 82 percent of PAL.

In a deal set to be completed by the year-end, Baguio Gold will pay PHP136 million pesos (USD$2.7 million) in cash for the companies, and acquire debts of PHP8 million - PHP9 billion (USD$160 million - USD$180 million), which could later be converted into equity.

Baguio Gold will then be renamed PAL Holdings after it raises its authorized capital to PHP20 billion (USD$398 million) from PHP400 million now.

PAL, the Philippine flag carrier which shut down briefly in 1998 due to labor disputes before entering into a 10 year rehabilitation program, is to acquire three Airbus A319s under operating leases this year and another one in 2007. It will acquire five Airbus A320s starting next year and into 2008.

"We are working on the financing of these. It can be direct purchase or it can be an operating lease also," Bautista said regarding the A320s.

"The downpayment will be funded by internally generated cash. For the balance we are looking at either commercial financing or export credit agency guaranteed financing."

PAL previously said it was planning to get guarantees from export credit agencies which would allow the airline to get more favorable interest rates from banks.

Since PAL has placed firm orders for narrow-body aircraft with Airbus, the airline could negotiate for guarantees from Britain's Export Credit Guarantee Department, German credit insurer Hermes and France's Coface, the company said earlier.

By the end of 2008, PAL plans to have a fleet of 36 aircraft, up from 32 at end-March 2006 after retiring some of its older planes.

PAL, which serves 32 international destinations, also has an option with Airbus to add five aircraft to its wide-body fleet between 2009 and 2012.

PAL has been back in profits for the past two years but this year expects earnings to fall because of high fuel prices.

Bautista said PAL continues to hold nearly 50 percent of the domestic air traffic market, despite aggressive marketing by its rivals, led by Cebu Pacific.