Philippine Airlines moves forward with labor restructuring scheme

PHILIPPINE Airlines (PAL) is going ahead with plans for a company spinoff effective October 1, which will affect 2,600 employees in its catering, airport services, and telesales operations divisions.

The job transfers to third-party companies will create savings of US$10-15 million annually, according to PAL COO Jaime Bautista, who said in media reports that it was “a painful but necessary decision to ensure PAL’s viability and long-term survival”.

The flag carrier was hit by union protests last Friday and Monday, staged by the Philippine Airlines Employee Association, who want lawmakers to review the legality of the subcontracting agreement.

PAL spokesperson Cielo Villaluna told TTG Asia e-Daily: “These measures are part of a cost-control strategy – in fact, a survival strategy – in response to fuel price increases, the global recession, and cut-downs in travel. We’re the only (airline) company in Asia that has not spun off its catering department.”

Bautista had reported to PAL stockholders back in 2009 that the flag carrier foresaw workforce cuts would be needed after the global economic slump caused major slowdowns in travel.

PAL posted staggering losses of US$301 million in 2008, after registering profits of US$30.6 million in 2007. Prior to this, PAL underwent nine years of restructuring following the 1997 financial crisis.

In August, the airline netted PHP3.09 billion (about US$72.5 million) for the fiscal year ended in March, but then posted a net loss of US$10.6 million in the subsequent quarter ended June 30.

PAL, which currently operates a fleet of 36 aircraft, has a confirmed order for four A320s and four B777-300ERs, due for delivery between 2012 and 2013, which should help address efficiency costs associated with volatile fuel prices.

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