No golden parachutes

Sunday, 07 November 2010 00:00
BY BENJAMIN G. DEFENSOR
The Manila Times

MANY will argue that the decision of Secretary of Labor Rosalinda Baldoz to permit Philippine Airlines to outsource its in-flight catering, airport services and call center reservation operations is not the private sector-government cooperation that President Benigno C. Aquino 3rd meant in his State of the Nation Address. But the Department of Labor sees the PAL move as valid exercise of managerial prerogatives.
Which brings us to the first question management guru Peter Drucker asks from any enterprise consulting him:

“What is your business?”

PAL management’s obvious answer would be: “We transport people and goods.” Since people must be fed as they are transported, is catering part of its business? And Drucker is likely to say that let the caterers do the catering for that is their business and may be expected to do a good job of it.

And this is what Secretary Baldoz meant when she said she found PAL’s decision “to be a just, reasonable humane and lawful exercise of its management prerogative to reorganize their corporation structure for purposes of viability of its operations, subject to the entitlement of affected employees to transition guarantees and benefits.”

It used to be that gourmet food and drinks or a reasonable facsimile thereof, was part of the attractions airlines use to lure passengers. But anyone who has flown with any international airline recently will testify that in-flight meals are no longer what they used to be, although it may be slightly better that dialing for pizza—for only pizza is what you are likely to if you just fly from Manila to Hong Kong or back.

For in short n short haul flights, some airlines may be just dialing pizza for the passengers.

A full-scale commissary with its attendant personnel would only bloating the cost of air tickets for airlines desperately fighting for passengers in a depressed market and escalating costs.

Many air travelers today accept the fact that in the era of budget fares, budget meals are to be expected. So what’s the point of a full-fledged commissary?

As pointed out by Secretary Baldoz, the PAL spokesman said, “if there is no spin-off, PAL will close down and 7,500 workers will be displaced without separation pay. Not to mention the adverse effects on PAL’s shareholders, the riding public and public interest.”

This is not the first instance where PAL spun off an ancillary service to service provider. It sold its maintenance and engineering department to Lufthansa Teknik Philippines.

And this is not the first time that PAL workers may have miscalculated. Earlier, the cabin crew union declared a strike over among others an age limit for female cabin crew personnel. At that time, it was known that Secretary Baldoz has received a temporary appointment and may be expected to be careful about alienating a sector of labor. Besides there was even a threat that the government may hasten open skies policy negotiations should there be a disruption of air travel if PAL be hit be crippled by a strike.
So the cabin crew union filed a strike notice.

At the start of the row, Secretary Baldoz made it known that she was indeed going to step into the dispute of avert the strike. It was assumed that she would have to take her signals from the President on the matter. But at the height of the dispute, President Aquino removed her designation as acting secretary and made her appointment permanent.

She promptly she announced government takeover of the labor dispute at PAL. She then said that any strike or work stoppage by disgruntled PAL flight attendants would be illegal. The flight attendants union promptly dismantled preparations for strike.

In the outsourcing dispute, she again received support from the Presidential Palace. Some of the affected workers held a demonstration to ask the President to reverse the ruling of Secretary Baldoz.

Presidential spokesperson Abigail Valte said the Palace could not intervene “at this point” and suggested that the affected unions seek reconsideration. But she said that she found Secretary Baldoz’s decision “based on law.”

Workers who will be displaced by the PAL’s decision will be absorbed three companies. “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,” Secretary Baldoz said.

All displaced workers will not exactly get golden parachutes but neither will they go to the poor house or become wards of the state. Each will receive an average of million pesos. The awards will range from around P500,000 to something like a million-and-a-half pesos each. And they may keep their jobs with the new service providers who will take over from PAL.

A displaced worker will receive separation pay equivalent 125 percent of their salary for every year of service plus an additional gratuity of P50,000. All their used vacation and sick leaves will be converted to cash, their ‘trip benefits’ will be monetized and they will enjoy hospitalization and medical benefits for a year after separation. PAL will have to go in hock to meet these payments estimated to cost some P2.5 billion.

Members of the Philippine Air Lines Employees Association say the retrenchment of some 2000 of their members could spell the death of their union. Organized in 1946, it is said to be the oldest union in the country.

But Palea is just one of the victims worldwide of the effects of technology on jobs. As new technology takes over business and industrial operations, gains in efficiency is bound to affect labor. And costs. The bottom line. And the life of the enterprise itself and its stakeholders.