PAL cedes 20% of equity to union

The Philippine Star
Saturday, September 12, 1998
Marichu Villanueva

Philippine Airlines (PAL) chairman and majority owner Lucio Tan ceded yesterday 20 percent of equity in the floundering flag carrier to the labor union, a company statement said.
The airline said that in exchange, the union has agreed to suspend its collective bargaining agreement (CBA), which observers said would give the loss-making airline enough breathing room to improve its cash flow and reduce overhead costs.
In another development, President Estrada ruled out any infusion of equity by the government to bail out PAL despite its investment in the flag carrier.
"I think the management of PAL will have to do it on its own (financially). The government is not in a financial position to assist them or help them," the President said during an open forum following the Manila Overseas Press Club's "President's Night" at the Manila Hotel Thursday.
An airline statement said both sides signed the equity deal yesterday after two weeks of talks, adding that the move "staved off certain closure" of the carrier.
Under the agreement, Tan agreed to transfer about 30 percent of his group's shares to the PAL Employees Association (PALEA), which would entitle its members to three seats in the 15-member board.
The shares involved in the transaction translate to a 20 percent stake in PAL, the statement said. The agreement includes a novel stock transfer scheme that enables each PAL employee to receive 60,000 shares from Tan's stock in the airline, the statement said.
“In return, PALEA, which represents the airline's ground crew, agreed to suspend its collective bargaining agreement with management," it added.
The suspension of the collective bargaining agreement, expected to prevent the union from mounting strikes in the future, was a key condition required by PAL's creditors under a rehabilitation plan for the ailing airline.
PAL earlier this year sought protection from its creditors after a debilitating 22-day pilots' strike in June forced airline operations to grind to a halt.
It said last month it would drastically cut its fleet size from the original 54 planes to between 21 and 25 to survive a financial tailspin that has pushed the airline to the brink of bankruptcy.
PAL sacked about 5,000 ground crew and 600 pilots after the pilots' strike in June although it later hired new pilots and took back some of the strikers.
PAL's net loss in the three months to June surged nearly 10 times from a year earlier to P 4.9 billion. It lost P1.9 billion in June alone following the pilots' strike.@