Déjà vu at PAL

November 13, 2010 01:28:00
Solita Collas-Monsod
Philippine Daily Inquirer

DOES A company have the right to restructure its organization, weed out redundant employees, and contract out or “outsource” a business function that used to be performed in-house, to an external provider? Of course, was the universal reply from those I asked. So Philippine Airlines (PAL) has the right, according to Labor Secretary Rosalinda Baldoz, and she and PAL have been fiercely defending their actions/decision respectively.

Does a company have the right to terminate all of its old (not necessarily in age but in terms of years of service) employees, and then hire them back, directly or indirectly, at entry-level wages and no seniority privileges? Of course not, was the universal reply. Lawyer Lorna Kapunan was one of those I asked, and she was emphatic about it. So PAL was wrong on this, according to its employees, because that is what it is doing.

How to reconcile these two seemingly opposite situations? Simple, say the employees. Certainly PAL will be “outsourcing” (Situation 1). But the outside company is really an inside company—owned, controlled or operated by Lucio Tan, his family, or his dummies. Smoke and mirrors and corporate veils are being used to disguise the situation, but the end result is the same: employees terminated will be rehired at lower wages, and zero seniority (Situation II).

How do the employees know that the firms that will undertake the previously in-house services are actually in-house firms? They point to Tan’s son, son-in-law, some PAL officials as officers/owners of the firms being considered. Plus the very fact that PAL is offering the soon-to-be-terminated employees first crack at employment with the new (outsourced) service provider—at lower rates, obviously, and as “contractuals”—looks to be a dead giveaway. The disguise is careless.

PAL claims that this “outsourcing” is necessary because it has been losing money—the reported figures are over $300 million or P13 billion for 2008 and 2009. But why did it lose money? Its president, Jimmy Bautista, has been quoted as attributing this to a combination of low demand, restrictions to its expansion to lucrative routes in the United States, and a bad hedging decision that led to the airline paying a lot of money for oil that got cheap.

The low demand part is easy: the global economic crisis was in full flow in 2008 and 2009, and travel was a natural victim—something like a 7-percent decrease in worldwide demand.

The restrictions part is a little more complicated: it involves the US Federal Aviation Administration (FAA) and the International Civil Aviation Organization (ICAO), the former having downgraded the Philippines in 2008 due to deficiencies in our Air Transportation Office (ATO), and the ICAO giving the Civil Aviation Authority of the Philippines (CAAP), ATO’s successor, a failing grade in its audit. All these wreaked havoc on PAL’s flight expansion plans in the United States, as well as its use of two brand-new Boeing 777 aircraft for US flights (not allowed).

And what was the bad hedging decision? This was sometime in 2008, when there was speculation that the price of oil would go through the roof (over $150 a barrel). PAL management bet that prices would go up, so it bought its oil forward, paying current prices against future deliveries. It lost the bet, i.e., prices went down instead of up, and PAL took a financial bath—rumors of the loss ranged from $150 million to more than $300 million.

The reader will notice that the reasons for PAL’s losses in 2008 and 2009, as reported by Bautista, had nothing to do with high labor costs. So why is labor bearing the brunt of the losses?

More to the point, how much is supposed to be the cost savings attached to the labor retrenchment? Again, from news reports, this will be something like $20 million—or all of 6.7 percent of PAL’s total losses.

In sum, PAL lost $300 million, through no fault of its labor. But it is using that as an excuse to take out labor (that just coincidentally comprises 70 percent of PAL Employees’ Association [Palea], the labor union, and most of its officers), even though the “outsourcing” scheme will reportedly reduce its losses by a mere 6.7 percent.

One cannot help conclude that this is nothing but a union-busting move. And yet Secretary Baldoz swallowed the PAL version hook, line and sinker.

The irony of it is that this whole sorry mess gives anyone with a long memory a sense of déjà vu. Twelve years ago, PAL did the very same thing—terminating pilots and flight crews—over 1,500 employees. PAL made the same claim: losses (arising from the Asian financial crisis). It then rehired a great number of them—but at entry level wages, loss of seniority (and for the pilots, a promise not to form a union). PAL sold off its profit centers to Tan-owned companies, terminating the PAL employees in the process, and then rehiring them at lower wages and no job security. And managed to swing a 10-year suspension of the CBA with Palea.

An excerpt from the 2008 Supreme Court decision ordering PAL to reinstate the 1,400 or so flight crew it had terminated, says it all: “It was unfair for PAL to have made such a move; it was capricious and arbitrary, considering that several thousand employees who had long been working for PAL had lost their jobs, only to be recalled but assigned to lower positions, and, worse, some as new hires, without due regard for their long years of service with the airline.”

Perhaps Secretary Baldoz should be reminded that she is the secretary of labor, not of management. And that the LE in DOLE stands for “labor” and “employment,” not for “labor exploitation.