PAL Cedes Three Board Seats to Employees Union

Daily News
September 14, 1998

MANILA – Philippine Airlines staved off certain closure after management and the PAL Employees’ Association (Palea) finally came to terms, giving the ailing flag carrier a new lease on life.

The landmark deal was reached after both sides made a big sacrifice to ensure the survival of the airline. PAL Chairman Lucio Tan agreed to transfer approximately 30% of his group’s holdings (equivalent to about 20% of PAL’s equity) to employees’ control and cede three board seats to union representatives.

In return, Palea, which represents the airline’s ground crew, agreed to suspend its Collective Bargaining Agreement with management – a selfless move that enabled the negotiations to succeed and overcome a major hurble in PAL’s rehabilitation plan.

After deliberating Tuesday night last week, Palea’s Board of Directors voted to accept management’s innovative proposals to achieve long-term industrial peace in PAL.

This includes a novel stock transfer scheme under which each employee will receive 60,000 shares of stock from the Tan Group’s shareholdings in PAL.

The agreement will give Palea, the airline’s largest union, representation in PAL’s 15-man board of directors. Three board seats have been reserved for labor nominees, while management continues to recognize the unions.

Tan’s offer, which is unprecedented in Philippine labor relations, allows PAL employees a personal stake and direct participation in charting the future of the airline.

The CBA moratorium is a key condition required by PAL’s creditors, on whom the fate of the flag carrier hinges. It is intended to ensure uninterrupted industrial peace and harmony while the airline tackles its multifarious problems and rebuilds to become competitive again.

The accord augurs well for the eventual approval of PAL’s rehabilitation plan, which is in the final stages of fine-tuning before submission to the Securities and Exchange Commission later this month.

The fruitful outcome of the negotiations, which took weeks, was the result of the creative and patient efforts of various groups from PAL, the government, labor and private sectors.

Crucial roles were played by Renato Constantino, Jr. and business executive Norberto O. Chingcuanco in shepherding the difficult talks towards a successful conclusion.

The presidential task force on the rehabilitation of PAL, headed by Finance Secretary Edgardo Espiritu, also helped in the process. (PNA)