PAL: Layoffs necessary to ensure survival

By Jess Diaz (The Philippine Star) Updated November 11, 2010

MANILA, Philippines - The decision of Philippine Airlines (PAL) to lay off about 2,600 personnel was meant to ensure the survival of the carrier, the airline’s president, Jaime Bautista, told congressmen yesterday.

He said the layoff is the result of a restructuring program, which called for the sale of three “non-core units” – in-flight catering, airport services and call center reservations – and to contract the same to a third party.

“This will ensure PAL’s continued survival in a cut-throat industry buffeted by massive losses in the last two years,” he said.

He said PAL has lost $312 million (about P15 billion), forcing it to embark on a restructuring and cost-reduction program.

“The sale of the three core units was only done as a last resort after 14 cost-cutting measures proved inadequate to guarantee PAL’s continued operations,” he added.

Bautista appeared before the House committee on labor and employment, which opened an inquiry into the impending layoff of workers of the airlines in the three units that it plans to sell.

The Department of Labor and Employment (DOLE) has upheld PAL’s decision to retrench personnel. The affected workers have the option of appealing the ruling with the Court of Appeals.

Northern Samar Rep. Emil Ong, committee chairman, earlier said his panel would respect the decision of the labor department on the case.

“The DOLE has upheld, not only once but twice, PAL’s position that the planned spin-off is a matter of sound business judgment in order to maintain the survival and sound financial health of the company in a globally competitive airline industry,” Bautista said.

He said the retrenchment would cost PAL about P2.5 billion, with each worker receiving up to P1 million in benefits.

These include separation pay equivalent to 125 percent of monthly salary, a one-time P50,000 cash gratuity, 100-percent cash conversion of vacation and sick leave credits, free plane tickets depending on years of service, and one-year extension of hospitalization privilege, he said.
He stressed that PAL would be unable to survive if it does not restructure and cut costs.
Bautista denied the workers’ claim that PAL would resort to “contractualization” after closing down its three non-core units.