Monday, 21 June 2010 00:00
PHILIPPINE Airlines (PAL) said it has secured government approval of a planned retrenchment brought about by the spin off of its three non-core units. In a statement, the flag carreir said the decision of the Department of Labor and Employment (DOLE) recognizes the company’s financial troubles and the need to spin-off none-core services as part of its survival strategy.
The affected units are in-flight catering services, airport services (including ground handling, cargo terminal/cargo handling, and ramp handling) and call center reservations.
PAL had said that the spin off will entail letting go some 3,500 out of its 7,500 workforce.
The planned retrenchment was originally set on May 31, but was suspended after the Labor department assumed jurisdiction over a simmering dispute between PAL management and labor unions.
“With [the] DOLE decision, PAL must now focus on the tough challenge of surviving the crisis and competing amidst a difficult operating environment. To do this, PAL must implement various revenue enhancement and cost control initiatives that includes outsourcing,” the Lucio Tan-owned airline said.
The carrier said the PAL Employee Association (PALEA) will appeal the department decision.
The company said airline operations remain normal, with its domestic and international flights operated according to published schedules.
The airline will outsource its call center reservations to ePLDT Ventus, which would handle reservations, inquiries, bookings, disruption handling, back-office services and other call center services.
PAL’s catering services will be handled by SkyKitchen Philippines, which is owned by businessman Manuel Osmeña.
The airline caterer provides in-flight meals for Cathay Pacific, Qatar and Cebu Pacific.
PAL’s cargo handling would be outsourced to Sky Logistics.
In addition, PAL will rationalize its medical, information technology and human resource units so it can let go of 500 more employees.
The cost-cutting measures would save the company about P500 million to P1 billion a year. PAL is setting aside P2 billion to P2.5 billion to compensate the displaced workers.
PAL was forced to implement the restructuring plan because of the combined effects of the global recession, high fuel prices, the unabated liberalization of the commercial aviation industry, and the recent blacklisting of Philippine carriers by the European Union.
Because of this, PAL’s financial situation continued to deteriorate, as it incurred over $350 million, or at least P15 billion in losses during the last two fiscal years.
Its equity also dropped precipitously to a little over $1.1 million as of February this year, the airline said.
PAL earlier reported a net loss of $54.1 million during the second quarter of its fiscal year ending March from $158.1 million in the same period last year.
DARWIN G. AMOJELAR
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