SC affirms ruling on PAL dismissal of cabin crew

Abs-cbn news
10/06/2009 9:00 PM

MANILA - The Supreme Court has affirmed with finality its July 22,2008 ruling that the dismissal of some 1,400 cabin crew personnel of local carrier Philippine Airlines (PAL) was illegal.

In a 31-page resolution penned by Associate Justice Consuelo Ynares-Santiago, the Court’s Special Third Division denied for lack of merit the motion for reconsideration filed by PAL seeking the reversal of the ruling.

The High Tribunal held that the Lucio Tan-led airline’s reduction of personnel was illegal as it failed to comply with certain standards established under the law.

The Court dismissed PAL's claim that the pilots’ strike on June 5, 1998 caused the company to bleed financially, thus justifying the retrenchment of the flight attendants belonging to the Flight Attendants and Stewards Association of the Philippines (FASAP).

“We find this argument untenable. The strike was a temporary occurrence that did not necessitate the immediate and sweeping retrenchment of 1,400 cabin or flight attendants,” the High Tribunal noted.

The Tribunal's 2008 decision has made PAL a landmark case that provided lessons to shaky companies that are considering retrenchment of its employees. It has also become a guide to labor unions and employees to detect forms of illegal dismissal. (Read: Retrenching workers? Don’t repeat PAL’s mistake)

Recently, PAL has offered early retirement packages to its employees until end-October as it plans to reduce its 8,000-strong workforce by at much as 10% this year.

At present, the company said manpower accounts for 18% of the company's total expenses.

Backwages, reinstatement

While affirming the core of its 2008 decision, the High Tribunal has reconsidered its previous order that PAL immediately reinstate the retrenched cabin crew, and pay their backwages and separation pay.

It said these are no longer feasible since a substantial fraction of the 1,400 flight attendants have already been recalled, reinstated, or relieved from the service while others have already reached the mandatory retirement age or even died. A good number of the retrenched employees have also received separation pay and signed quitclaim.

Previously, PAL's monetary award to the affected flight attendants would reach a whopping P2.3 billion.

Based on review of the case' records, the Supreme Court said that it will instead remanded the case to the labor arbiter “solely for the purpose of computing the exact amount of the award” to be given to the dismissed employees.

“After finality of this case, the records will have to be remanded to the labor arbiter who decided the case at the first instance. There the actual amount of PAL’s liability to each and every flight attendant will be computed. Both parties will have a chance to submit further proof and argument in support of their respective proposed computations,” the Court said.

The SC also reduced to P2 million the award of attorney’s fees and expenses of litigation. In its previous decision, the Court directed PAL to pay attorney’s fees equivalent to 10% of the total monetary award.

Pilots' strike

During the oral arguments on the case, the SC said PAL admitted that the principal and true reason it had to lay-off cabin personnel was not the downsizing of aircraft fleet size but the June 5, 1998 pilot’s strike, where around 600 of its pilots abandoned their planes and refused to fly.

As a result of this pilots’ strike, PAL said it suffered revenue losses equivalent to P100 million daily and P50 million of lost fixed costs.

The Court, however, held that there was no necessity for PAL to permanently implement its retrenchment scheme considering that the strike was only temporary.

It added that PAL could have implemented other cost cutting measures as temporary measure to defer the adverse effects of the pilots’ strike.

11 years after

After the 1998 retrenchement of the flight attendants, PAL is again reducing headcount to cut costs.

PAL is offering early retirement packages to its employees until end-October as it plans to reduce its 8,000-strong workforce by at much as 10% this year.

At present, the company said manpower accounts for 18% of the company's total expenses.

"We are currently reviewing our entire organizational set-up. We want to make PAL lean and mean so it will be agile and flexible enough to adapt to the new economic climate," PAL Holdings President Jaime Bautista previously told reporters during its recent annual stockholders meeting.

"We now have lower capacity, so we need to reduce manpower," Bautista explained.

Aside from reducing its workforce, Bautista confirmed that PAL will outsource its non-core services to prevent the company from incurring further losses.

In a notice sent to the PAL union early this month, he said services to be initially outsourced on November include catering, passenger handling, ramp handling, and cargo-handling operations.

Due to the brunt of the economic crisis on the global airline industry, PAL Holdings Inc. reported a total comprehensive loss of P12.26 billion for fiscal year ending March 31, 2009.

These losses are the holding firm's second in a row after losing P528.54 million in the previous year.

PAL has also reported a 12% drop in total revenues from April to June, its first quarter for fiscal year 2009.

Early this month, the International Air Transport Association (IATA) said the global airline industry is likely to lose $11 billion this year due to the economic crisis, higher than its previous forecast of a $9-billion loss. IATA said this would be driven mainly by lower passenger and cargo traffic this year, which the group expects to drop by 4% and 14%, respectively.