PAL workers threaten strike, as rival readies expansion

Wednesday, 21 April 2010 00:00
BY DARWIN G. AMOJELAR Senior Reporter

AMID a huge job cut by its erstwhile rival, Cebu Pacific unveiled on Tuesday a more bullish outlook with a plan to ramp up its acquisition of aircraft.
“We’re seeing a strong domestic travel this year as well as the international market. The consumer confidence is recovering,” Lance Gokongwei, Cebu Pacific president and chief executive, told reporters in a briefing.

Gokongwei said the budget carrier expects to carry 10 million passengers this year from 8.7 million last year.

“We we’re able to sustain the growth despite the economic crisis that affected the Philippines and the entire world last year,” he said.

In the first quarter, Cebu Pacific has flown over 2.4 million passengers.

By 2013, Gokongwei expects the airline to carry 15.1 million passengers.

“Clearly, the low-fare product has been very good. In order to meet our passenger requirements and for us to offer more affordable fare we have to increase our capacity over the next five years,” he said.

Given this rosy outlook, Gokongwei said the company accelerated its firm order by seven to 22 Airbus A320s from the original 15.

The 22 brand new aircraft will cost about $1.4 billion and would be delivered starting this year until 2014.

The new aircraft will be used to serve Cebu Pacific’s new destinations in the Philippines and abroad.

“We are looking at Korea, China and Japan,” Gokongwei said.

He said the purchase of new aircraft will be financed through internally generated funds, the European Export Credit Agency and the proceeds of Cebu Pacific’s long-delayed initial public offering (IPO).

The carrier earlier announced the suspension of its IPO because of election jitters.

“We are considering an IPO at the right time, probably after the elections. It would be better to do it after elections,” Gokongwei said.

The company plans to raise as much as P25.7 billion at P95 per share.

It registered P7.2 billion in revenues in the first quarter this year, up 35 percent from last year.

“For the full year, we expect our revenues to grow at least 30 percent,” Gokongwei said.

Last year, Cebu Pacific’s was in the black at P3.26 billion, a complete turnaround from the previous year’s net loss of P3.26 billion.

Its revenues increased 18.4 percent to P23.31 billion from P19.68 billion in 2008.

In contrast, losses at its main rival, Philippine Airlines (PAL) widened last year. The flag carrier said its financial situation continued to deteriorate, as it incurred over $350 million, or at least P15 billion in losses during the last two fiscal years.

It had 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.

The airline had announced job cuts affecting half of its 7,500 workforce, and the sale of its non-core units, in a bid to keep the 69-year-old company afloat.

PAL management had said the airline is willing to pay a month’s salary for every year of service. The retrenchment tab will run up to P2.5 billion.

The affected workers belong to the in-flight catering services, airport services (including ground handling, cargo terminal/cargo handling, and ramp handling) and call center reservations.

In addition, the airline will let go of 500 more staff for the rationalization of its medical, information technology and human resource units.

PAL’s monthly salary expense runs from $13 million to $13.5 million. It expects to save about P500 million to P1 billion a year with the spin-off of its three non-core businesses.

On Tuesday, its workers’ union, however, warned that the group would file a notice of strike.

Gerardo Rivera, PAL Employees’ Association (PALEA) president, said the union will not accept the retrenchment package of PAL management.

“[Management] should convince us on the real financial status of the company,” Rivera told The Manila Times.

“We will revisit the pending notice of strike filed at the Department of Labor,” he said, referring to an earlier filing aimed at stopping PAL’s outsourcing plan.

PAL said it 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.