Palace upholds Philippine Airlines in spinoff

Philippine Daily Inquirer
August 18, 2011
By Paolo G. Montecillo

The Office of the President (OP) has upheld the legality of Philippine Airlines’ (PAL) plan to cut 2,600 jobs to reduce costs despite the company’s recent return to profitability.

In a two-page decision signed by Executive Secretary Paquito Ochoa, Malacañang upheld the legality of PAL’s planned closure of three noncore departments, and subcontracting these services out to third-party providers.

The decision noted that the airline’s labor union, PAL Employees’ Association (Palea), had failed to raise new points to convince the OP to overturn its previous decision, which was an affirmation of a ruling made by Labor Secretary Rosalinda Baldoz.

‘Fresh look’

“Clearly… the points raised by Palea in its motion for reconsideration are a mere rehash of those considered, discussed and ruled upon by the Secretary of Labor in her order dated October 29 and affirmed in our decision dated March 25,” the decision read.

The Palace decision said the government “took into account the national interest involved and the interest of labor,” adding that it took a “fresh look and reviewed its findings.” But the Palace said it found nothing “erroneous and unlawful in the aforementioned decision.”

PAL vice president for corporate communications Joey de Guzman declined to comment on the decision, saying the company has yet to receive its official copy of the decision.

Palea officials could not be reached for comment.

PAL’s plan to outsource three departments, namely its call center, in-flight catering and airport services, will affect an estimated 2,600 employees. PAL currently has around 7,000 workers.

Palea earlier threatened to go on strike to protest the job cuts, but the government ordered the union to drop its planned work stoppage because air travel was an industry “imbued with public interest.”

In its petition before the OP, Palea argued that its collective bargaining agreement (CBA) with the airline’s management explicitly prohibits the contracting out of services performed by regular employees.
Palea likewise said the outsourcing was a ploy intended to dissolve the labor union and evade CBA negotiations.

“The intended closure of three departments, despite PAL’s profitable business violates the workers’ rights under a valid CBA, therefore negating PAL’s good faith in implementing the mass termination,” it said.
In a separate statement on Wednesday, PAL said it posted a net loss of $10.6 million for its first quarter of April to June due to high fuel prices, the political unrest in the Middle East and the disaster in Japan.
“The flag carrier attributes the slide to modest revenue growth, eroded by significant increases in fuel prices and other factors like political turmoil in the Middle East and North Africa, and natural calamities like the Japan earthquake and tsunami,” PAL said.

Last month, PAL reported a $72.5-million net income for the fiscal year ending March. The company earlier cited its massive losses in previous years to justify its planned job outsourcing.