PAL accepts DOLE decision, 'spin off' to cost P2.5 billion

CEBU, Philippines – Philippine Airlines (PAL) announced yesterday that it will abide by the decision of the Department of Labor and Employment (DOLE), recognizing the PAL management's prerogative to restructure its operations, a move that will cost the flag carrier an estimated P2.5-billion.

In a media briefing, PAL President and CEO Jaime Bautista said the planned spin-off of PAL's In-Flight Catering, Airport Services and Call Center Reservations was originally estimated to cost about P2-billion under the original DOLE decision.

However, last week's ruling of labor secretary Rosalinda Baldoz upped the figure by more than P400-million due to enhanced separation benefits and other modifications in the financial and non-cash awards.

"Given its recent losses and current financial position, PAL would be hard put to raise P2.5-billion but this is a bitter pill we have to swallow. PAL believes DOLE's decision is 'just, reasonable and humane.' Since it has the force and effect of a law, we must respect the ruling," he said.

Bautista said the flag carrier plans to finance the severance package of close to 2,600 rank-and-file workers by securing loans from government financial institutions like the Development Bank of the Philippines or Land Bank of the Philippines. "If this is not possible, we will seek financing from other PAL creditors," he said.

Barring the grant of a higher court of a temporary restraining order to be filed by the PAL Employees Association (PALEA), Bautista said PAL management plans to implement the appropriate provisions of DOLE's Order after the prescriptive period for further legal remedies has lapsed.

"By not contesting the DOLE Secretary's decision, especially the grant of additional benefits, PAL hopes to finally implement a long delayed corporate restructuring that aims to stabilize the airline's finances and eventually lead to an expansion and improvement of services," he said.

Bautista stressed that the decision to spin-off was difficult but necessary. "At the end of the day, PAL wants to be remembered not for the 2,600 jobs it lost, but the more than 4,000 it saved," he said.

While the increased benefits will bear heavily on the airline's precarious financial position, PAL said it will do its best to pay all affected employees the modified package approved by DOLE.        He then urged PALEA leaders to respect the DOLE decision and look at the bigger picture of the airline's continued survival amid a difficult operating environment.

"Sec. Baldoz, no less, assured PALEA there will be no jobs lost in the spin off. Aside from receiving their benefits, all affected workers have the option of applying for positions in the third party service providers if they so choose," he said.

As this developed, Bautista also assured PAL passengers and customers that the implementation of the spin off will not affect the flag carrier's daily flights and other ground services.

Contrary to claims by the PAL Employees Association (PAL), Bautista stressed that the airline is not engaging in contractualization. "The spin off means PAL will sell its In-Flight Catering, Airport Services and Call Center Reservations which will lead to the early retirement of affected rank-and-file workers. They will all receive their respective separation pay and benefits that are much more than what the Labor Code provides," he explained.

Bautista stressed that third party service providers like PLDT e-Ventus for Call Center/Reservations is owned by PLDT while Sky Kitchen for Catering and Sky Logistics for Airport Services are both owned by Cebu based businessman Manny Osmeña. These service providers are not owned by PAL Chairman Lucio Tan or any of his family members.

He said PALEA's apprehensions on the spin off can best be allayed by referring to the actual events of the successful turn-over in 2000 of PAL's Maintenance and Engineering Department to Lufthansa Technik Philippines (LTP), a world-class maintenance, repair and overhaul service provider.

The more than 1,300 mechanics and other skilled workers who transferred to LTP and are now enjoying fulfilling careers, can confirm those spin off anxieties are unfounded, he said.

Ten years later, PAL was compelled to further spin off three non-core units and focus on the core business of air transport in order to survive a compendium of debilitating issues which include, among others: a US$312 million loss in the last two years due to the global recession; volatile fuel prices; the US Federal Aviation Administration's down-grade of the Philippines' aviation safety rating to Category 2; cut throat competition from budget airlines; the previous government's liberal grant of air traffic rights to foreign carriers, and other factors. (FREEMAN)