Landmark Deal; Lucio Tan gives union 20% of PAL

Philippine Daily Inquirer
Saturday, September 12, 1998
Armand Nocum

Lucio Tan, chair of Philippine Airlines, yesterday agreed to give 20 percent ownership of the company to its employees as part of a deal with the ground crew union to save the ailing airline.
In exchange, the PAL Employees Association (PALEA) agreed to suspend its collective bargaining agreement with the management for 10 years.
The deal came after three days of marathon meetings between PAL and PALEA officials in an undisclosed hotel in Manila. It was sparked by a 72-hour ultimatum given by Tan for PALEA to accept the six-point condition he has laid down, or else he would close down PAL and sell its assets.
PAL management said the deal gave the "ailing flag carrier a new lease on life." It said the "landmark deal" was reached after both sides agreed to make a "big sacrifice" to ensure the survival of the airline."
But Popoy Legman, head of Bukluran ng Manggagawang Pilipino, a federation of workers where PALEA is affiliated, called the agreement a "sellout."
In a statement, PAL management said the employees would be given three seats in the company's 15-member board of directors.
Each employee will receive 60,000 shares of stock from the Tan group's shareholdings in the company, the statement added.
Such transfer would mean that Tan agreed to transfer 30 percent of his group's holdings (equivalent to about 20 percent equity) to employees' control, giving employees a say in charting the future of the company, PALEA said.
But the employees won't be allowed to dispose or sell these shares until their retirement, PAL said.
There will also be no salary deductions, and retrenched union members who have not received separation pay will be rehired. Their medical benefits will be untouched, PAL added.
There are around 3,000 union members still employed by the airline after some 4,000 have opted to retire.
PAL said last week it lost P2.2 billion in the first quarter of the fiscal year, which began April 1, mainly because of work stoppages brought about by the strike.
A 22-day strike by its pilots in June caused the heaviest damage canceling two-thirds of its flights and causing revenue losses of about P200 million a day. PAL said.
The airline said its losses also rose due to soaring dollar-denominated payments and continuing lease payments on unused planes which have not yet been returned.
PAL reported a loss of P8.08 billion in the last fiscal year.
PAL is seeking to restructure its debts and has obtained permission to suspend payments to domestic and international creditors amounting to $2.1 billion while it prepares a rehabilitation plan. The plan includes layoffs, the disposal of most of the airline's planes and a sharp reduction of flights.
The airline had fired all the striking pilots after they ignored a government return-to-work order.
At the height of the strike PAL laid off 5,000 of its more than 13,000 workers to minimize its losses. It also halted an ambitious $4-billion refleeting and modernization program.
The ground crew union went on strike in July but returned to work after the company agreed to suspend for one month the retrenchment of 1,800 of its members.
In a letter to Tan, the 13 PALEA officials said the "PALEA boards of directors have voted to accept your personal proposal as simplified and clarified during a meeting with you this morning."@