PAL banking on staff cuts to survive

Manila Standard Today
September 27, 2010
by Jeremiah F. de Guzman

PHILIPPINE Airlines must save about $115 million a year from crew reduction and its planned spin-off of non-core units to continue operating, the company said over the weekend.

The carrier said it needed about $230 million a year to operate, and 50 percent of that money must be generated from cost savings.

The money saved from the airline’s belt-tightening efforts had already been allocated for maturing dollar debt, fuel costs, salaries, aircraft maintenance and other expenses, spokeswoman Cielo Villaluna said.

The airline earlier said it had about $1 billion in debt as of March 2010, down from about $2.3 billion in 1998, when it entered corporate rehabilitation.

In June, the company paid $46 million in principal debt and was required to pay $10 million more every month.

“The cabin crew union demands that funds saved from manpower reduction should be equally divided among them,” Villaluna said.

“If we heed their call to give them the savings, we may have satisfied crew members today but no airline to speak of in the long term.”

The cabin crew in the airline’s Boeing 747 aircraft was reduced to 16 from 18 in July, which was still one crew member higher than the minimum requirement of 15 crew members mandated by international safety standards and the Civil Aviation Authority of the Philippines, Villaluna said.

She said the savings from that reduction were about P70 million, and not P141 million as claimed by the cabin crew union.

Since the crew-reduction program started, the carrier’s cabin services department had not received any complaints about service quality, which showed that the airline’s dedicated staff had been able to meet passenger expectations.

“Contrary to the cabin crew union’s claim, there has been no diminution of employee rights or benefits,” Villaluna said.

“They work a little bit more for the same pay, which simply means more efficiency.”

Despite improving traffic and revenue in the first half of the year, Villaluna said, the airline was still strictly adhering to its survival plan, which was crafted after it incurred more than $312 million in losses in the past two years.

“The survival plan became imperative especially after the airline’s equity dipped to just over $1 million in February 2010,” she said.

The airline reported a total comprehensive income of $31.6 million in its April to June 2010 peak months, down 11 percent from around $35.5 million in the same period last year.

Revenue for the three months ended June 30 rose 30 percent to $426.7 million from $327.7 million.

Total expenses grew 37 percent to $391.6 million from $285.5 million as fuel costs pushed up operational expenses.

The airline reported a net comprehensive loss of $14.4 million in the fiscal year ending March 2010 against $297.8 million the previous year.