By Jocelyn Uy
Philippine Daily Inquirer
First Posted 02:31:00 11/01/2010
MANILA, Philippines—The Department of Labor and Employment has given flag carrier Philippine Airlines (PAL) the green light to proceed with the layoff of 2,600 employees as a consequence of its plan to outsource services to cut costs.
In a decision promulgated on Friday, Labor Secretary Rosalinda Baldoz said contracting out services and closing down PAL’s in-flight catering, airport services and call center reservation operations were lawful.
Baldoz said these were valid exercises of managerial prerogative.
“We find [these] to be a just, reasonable, humane and lawful exercise of its management prerogative to reorganize the corporate structure for purposes of viability of its operations, subject to the entitlement of affected employees to transition guarantees and benefits,” the decision said.
PAL plans to sell its units providing in-flight catering, airport services and call center reservations to third parties and engage their services to reduce costs.
Losses
The flag carrier said it lost $312 million in the last two years due to the global recession, volatile fuel prices, the US Federal Aviation Administration’s downgrade of the Philippines’ aviation safety rating to Category 2, cutthroat competition with low-cost carriers and other factors.
“As correctly pointed out by Secretary Baldoz’s decision, ‘if there is no spin-off, PAL will close down and 7,500 workers will be displaced without separation pay,’ not to mention its adverse effects on PAL’s shareholders, the riding public and public interest,” PAL spokesperson Cielo Villaluna said in a statement.
PAL welcomed Baldoz’s decision affirming its prerogative to spin off three noncore business units.
“Most airlines in the world, and almost all carriers in Asia, are now using third parties to supply and render noncore services. In PAL’s case, it is implementing the spin-off to cut costs and ensure the airline’s continued survival,” Villaluna said.
So far only PAL’s maintenance and engineering department was spun off and bought by Lufthansa Technik Philippines in 2000.
A copy of the dispositive portion of Baldoz’s decision was obtained by the Inquirer Sunday.
Package modified
The documents showed that Baldoz ruled in favor of businessman Lucio Tan’s PAL, affirming an earlier order by then acting Labor Secretary Romeo Lagman and dismissing the charges of unfair labor practice filed by the PAL Employees’ Association (PALEA) due to “lack of merit.”
PALEA had filed a motion for reconsideration on June 28 challenging Lagman’s decision that was promulgated on June 15.
But Baldoz modified several components of the transition benefits package to be extended to the affected workers, which represent half of PAL’s total workforce.
Among the modifications she ordered were an increase in separation pay to 125 percent per year of service from 100 percent and an additional gratuity of P50,000 to be extended to each of the affected workers.
Workers to be absorbed
Baldoz also ordered that vacation and sick leave balances be 100-percent convertible to cash regardless of the period of service and that affected workers shall be awarded their trip pass benefits. The hospitalization and medical package shall also be extended for a year.
The terminated employees shall be absorbed by their respective service providers, and PAL shall guarantee payment of their salaries for a period of at least one year from the time of their separation from employment as the original decision provided.
These employees shall be absorbed by SkyKitchen Phil. Inc. (catering), SkyLogistics Phil. Inc. (airport services) and ePLDT Ventus, a PLDT subsidiary (call center), according to the decision.
“And PAL shall be bound and held liable by way of guarantee in favor of all affected employees, for payment of one year, or whatever salary is guaranteed respectively by service providers upon their admission to employment with said service providers,” Baldoz stated.
PAL assured that those to be affected by the spin-off would receive separation pay and other benefits apart from the opportunity to work with the new service providers if they so desire.
“Workers in other industries are not as lucky,” Villaluna said.
Death of job security
PALEA president Gerry Rivera Sunday slammed the decision, saying that the labor department’s go-signal for the retrenchment of 3,000 workers signified the “death of job security” at PAL.
“The order is not a win-win solution that balances the interest of workers for job security and management for financial viability,” Rivera said in a statement.
“Instead, it is simply management’s slightly improved offer disguised as (the department’s) decision,” he added.
Zombie positions
Rivera said Baldoz’s decision, released at a time when Filipinos mark All Saints’ and All Souls’ Day, was symbolic for the loss of 3,000 regular jobs would “conjure 3,000 zombie positions which will have cheaper wages, less benefits, no security of tenure and no protection by a union.”
Rivera said the union would bring their case to the Court of Appeals. They would also hold a protest action on Monday at the labor department’s main office in Intramuros, Manila, to denounce Baldoz’s decision.
“The protesters plan to bring a mock coffin with the message ‘RIP PAL Workers’ and an effigy of Baldoz as the mythical ‘Kamatayan,’” he added.
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