As a Result of Better-than-Expected Revenuew; PAL Can Afford to Shoulder Part of Separation Payments

Business World

Monday, December 21, 1998

Patrisha Joan F. de Leon

The last days of 1998 are turning out to be better than expected for Philippine Airlines, Inc. (PAL) as the flag carrier has expressed confidence it can afford to shoulder at least one half of the separation benefits promised to retiring employees.

A high ranking PAL official told Business World over the weekend that the company’s total revenues have risen to about P45 million per day, making it healthy enough to partially support the voluntary separation program (VSP).

The airline had said it earns about P15 million to P20 million daily in the third quarter of the year.

The PAL official said the improvement in the flag carrier’s financial situation is mainly due to the increased passenger load this Christmas season.

For this month, PAL reportedly averages a load factor of 65% for the 22 aircraft currently operating in its fleet.

Based on PAL’s financial projections under its rehab plan, the carrier is hoping to have a total revenue of $379 million by the end of its 1998-1999 fiscal year this coming March.

The official said the airline management has yet to receive a final report on the number of employees who will be leaving as they have been given until December 31 to file their applications.

However, the PAL official also disclosed that the management will only be able to give retiring employees 50% of their gratuity up front so us not to significantly deplete the flag carrier’s coffers.

Under the VSP, retiring employees will receive a gratuity pay equivalent to one month’s salary for every year of service.

The official added leaders of the 6,700-strong PAL Employees Association (PALEA), whose members are the main subject of the VSP, had already been informed of this development in a briefing conducted right after the airline’s rehabilitation plan was submitted to the Securities and Exchange Commission (SEC). “The 50% clause is a provision in the rehab plan, napag-usapan na namin ‘yan (We’ve already talked about it),” the official said.

Moreover, he noted this arrangement was also the case in the strike settlement between the PAL management and PALEA signed last July 26 where some 1,500 rank-and-file employees voluntarily left the company.

Apart from the gratuity pay, benefits under the VSP also include provisions for trip passes for employees and their immediate family members. The number of trip passes depends on the employee’s length of service.

The VSP was implemented by the PAL management last November 25 as part of the agreement between PAL chairman Lucio Tan and PALEA.

In an earlier interview, PALEA president Alexander Barrientos said the union favored the implementation of the VSP because this was “definitely much better” than an outright retrenchment.

But even as PAL rank-and-file employees still ponder where the second half of their gratuity pay will come from, some 555 members of the Airline Pilots Association of the Philippines (ALPAP) have yet to receive a single cent of their retirement benefits.

The pilots were terminated soon after their June 5 strike which paralyzed the flag carrier’s operations.

However, PAL sources disclosed that it was not likely that the flag carrier management would be inclined to shell out any money for them as they has already been considered “terminated for cause.”

Under the law, this means that the employee/s concerned may not receive any separation benefit because they were terminated for committing an act which has caused serious damaged to the company.

According to Article 282 of the labor code, such act may include serious misconduct or willful disobedience, gross and habitual neglect of work duties, fraud or willful breach of trust, and commission of crime.

“As far as the PAL management is concerned, they have no liability with the pilots anymore,” one source said.

Moreover, PAL sources said ALPAP has its own retirement fund which is managed by a “retirement plan board.”

Although the board has a management representative elected by the pilots, sources said the fund was “distinct and separate from PAL.”

Another PAL source said the retirement fund could already be worth “billions,” it has already been set up “since PAL started” in the 1940s.

PAL source said the flag carrier has been making full contributions to the pilots’ retirement fund every pay day.