Wednesday, 03 November 2010 13:17 Lenie Lectura & Recto Mercene / Reporters
Business Mirror
PHILIPPINE Airlines (PAL) is in talks with several banks and foreign creditors to help the flag carrier raise P2.5 billion needed to restructure its operations.
Word of the negotiations with financiers came as political pressure mounted for the government to halt PAL’s plan to lay off 12,600 employees in its so-called noncore units as it struggles to survive the impact of the global slump on airlines.
The restructuring involves the spinoff of PAL’s in-flight catering, airport services and call-center reservations. This move will help the airline save P500 million to P600 million a year, but will displace 2,600 employees, the majority of whom are already in the early 40s to mid-50s.
However, the plan is to have them rehired by the service provider that will assume the operations of PAL’s noncore assets. Depending on their performance during the six months’ probationary period, PAL said their employment status can be made regular on the seventh month.
“Given its recent losses and current financial position, PAL would be hard put to raise P2.5 billion, but this is a bitter pill we have to swallow,” said PAL president Jaime Bautista.
“Bautista said the flag carrier plans to finance the severance package of close to 2,600 rank-and-file workers by securing loans from government financial institutions, like the Development Bank of the Philippines or Land Bank of the Philippines and even foreign creditors. If this is not possible, we will seek financing from other PAL creditors,” he said.
PAL chief finance officer Jose Gabriel Olives said discussions with the banks are ongoing. The talks are being done more or less simultaneously. “We prefer it this way rather than talking to one, then moving to another. But we have to finalize this as soon as possible, within the year preferably,” he said.
On Friday the Department of Labor and Employment (DOLE) recognized the PAL management’s prerogative to restructure its operations, sparking protests from the workers’ unions, and an appeal for Malacañang Palace to intervene. However, President Aquino said there are remedies for the workers, such as seeking a reconsideration with the DOLE; or, going to court, as they announced, in which case, the Palace said, the Executive branch will abide by whatever the court says.
Bautista said the spinoff was grounded on valid and lawful cause, “it being an obvious effort to prevent continued heavy and substantial losses.”
The 2,600 regular and rank-and-file workers affected are members of the PAL Employees Union (Palea). Since Palea has 4,100 members, there will still be some 1,500 of them left after the spinoff.
On the other hand, Labor Secretary Rosalinda Baldoz took jurisdiction over the planned strike of the Flight Attendant and Stewards Association of the Philippines, rendering an earlier planned walkout moot and academic.
The planned spinoff of PAL’s noncore assets was originally estimated to cost about P2 billion under the original DOLE decision. However, last weekís ruling of Labor Secretary Rosalinda Baldoz upped the figure by more than P400 million due to enhanced separation benefits and other modifications in the financial and noncash awards.
Barring the grant by a higher court of a temporary restraining order to be sought by Palea, Bautista said PAL management plans to implement the appropriate provisions of the DOLE’s order after the prescriptive period for further legal remedies has lapsed.
“The effectivity depends if the order will become effective 10 days from receipt. Of course, we will have to work with employees, and the date will depend when we can finally make arrangements with them. If they will not cooperate with us, then we will work with service providers for them to hire other employees,” said Bautista.
Bautista stressed that third-party service providers like PLDT e-Ventus for the call center is owned by PLDT; Sky Kitchen for catering and Sky Logistics for airport services are both owned by Cebu-based businessman Manny Osmeña. These service providers are not owned by PAL chairman Lucio Tan or any of his family members.
But there is a possibility that PAL will spin off more of its noncore assets so that the airline can concentrate on its core business, which is to fly passengers. “If given the chance, we will also study and implement it in our other departments if that is possible. We want to concentrate on our core business, which is flying. This is now the practice of the industry, which is to outsource an airline’s noncore business,” explained the PAL official.
Bautista stressed that the decision to spin off was difficult but necessary. “At the end of the day, PAL wants to be remembered not for the 2,600 jobs it lost, but the more than 4,000 it saved,” he said. There will still be 4,000 employees to be retained by PAL, said its president.
Contrary to claims by Palea, Bautista said the airline is not engaging in contractualization. “The spinoff means PAL will sell its in-flight catering, airport services and call-center reservations, which will lead to the early retirement of affected rank-and-file workers. They will all receive their respective separation pay and benefits that are much more than what the Labor Code provides,” he explained.
He said Palea’s apprehensions on the spinoff can best be allayed by referring to the actual events of the successful turnover in 2000 of PAL’s Maintenance and Engineering Department to Lufthansa Technik Philippines (LTP), a world-class maintenance, repair and overhaul service provider.
The more than 1,300 mechanics and other skilled workers who transferred to LTP and are now enjoying fulfilling careers can confirm those spinoff anxieties are unfounded, he said.
Ten years later, PAL was compelled to further spin off three noncore units and focus on the core business of air transport in order to survive a compendium of debilitating issues, which include, among others, a $312-million loss 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 from budget airlines; the previous government’s liberal grant of air-traffic rights to foreign carriers and other factors.
Passengers assured: No disruption
Bautista also assured PAL passengers and customers that the implementation of the spinoff will not affect the flag carrier’s daily flights and other ground services.
PAL employees will continue to provide excellent service, and those who violate the law would lose their benefits, Bautista said.
He added that PAL will mount more flights during the Christmas holidays, especially to San Francisco, Los Angeles, Las Vegas and Vancouver, including Japan and Korea.
Lawmakers cry ‘foul’
LEGISLATORS urged President Aquino to exhaust all means to protect the rights of PAL workers. At the same time, congressmen described as “inhumane” the DOLE decision allowing the layoff of 2,600 PAL workers.
“I am certain P-Noy [Mr. Aquino] understands the gravity of this PAL row. This appeal only serves as an urge to his Excellency to intervene and exhaust all means provided by the law to act and protect the PAL workers’ labor rights and job security. After all, these affected workers are also his boss,” said Pwersa ng Masang Pilipino Rep. Jose Victor Ejercito of San Juan.
Ejercito said Mr. Aquino should not dilly dally on the DOLE’s decision, which he said was made in haste and with no serious deliberation.
Party-list Rep. Emmi de Jesus of Gabriela agreed with Ejercito, saying that while for some people it is not easy to cross the second-richest Filipino tycoon, she wonders what Mr. Aquino thinks is at stake for him if he, being the President of the Philippines, compels PAL owner Lucio Tan to respect the constitutionally mandated obligation to protect the rights of the workers and promote their welfare. --With F. Marasigan
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