PAL to get $50-M loan for outsourcing program

Business Mirror
September 9-10, 2011
By Lenie Lectura

FLAG carrier Philippine Airlines (PAL) will borrow $50 million from Credit Suisse to partly finance the flag carrier’s P2.5-billion outsourcing program set to take effect on October 1.

The amount, said PAL chief finance officer Jose Gabriel Olives, will be used to pay the separation and other transition benefits of close to 2,400 affected workers.?An agreement to lend PAL the amount was already signed with the European bank.

“The agreement has been signed. All affected workers from PAL’s catering, ground handling and call center reservations units can rest assured that they will be paid in full by October 2011 as promised,” said Olives.

The PAL official said aside from Credit Suisse, other PAL creditors fully support the airline’s spinoff program that seeks to restructure and make the airline leaner and more competitive in the long term.

Olives said PAL’s domestic and international creditor banks are well informed about the program and recognize this as a global industry trend, especially in the airline industry.

He stressed that PAL will proceed with the spinoff-outsourcing program as originally scheduled. “Of course, the management will maintain the status quo if the Court of Appeals (CA) issues a restraining order. But to-date, we have received no such order preventing us from carrying out the spinoff/outsourcing which has been upheld as valid by the Department of Labor and Employment and the Office of the President,” he said.

Olives added that PAL’s service providers—SkyKitchen Philippines Inc. (for catering), SkyLogistics Philippines Inc. (for ground handling) and SPi Global (for call center services)—are processing the applications of PAL personnel who accepted job offers.

These service providers are committed to absorb all PAL workers to be affected by the spinoff/outsourcing. Interested workers had until yesterday to signify their intention to work for the service firms starting October 1.

PAL workers affected by the spinoff will receive the following: separation pay in the amount of 125 percent of their monthly basic salary for every year of service; P50,000 gratuity pay; 100 percent commutable-to-cash vacation and sick leave credits; and trip pass benefits. On appeal before the Office of the President, the Labor department’s ruling was affirmed but was slightly modified by increasing the gratuity pay by another P50,000 per worker.

In addition, PAL is offering a one-year extension of medical and hospitalization benefits and guaranteed pay for one year of whatever salary is granted by the service providers to those who choose to be employed by the new contractors.

The spinoff program is a chief component of PAL’s survival plan launched in early 2010 after it lost $312 million for the 2008 and 2009 fiscal years. While it posted modest profits of $72.5 million in 2010, it is again back in the red after recording $10.6 million in losses for the first quarter of the current fiscal year brought about by the effects of unstable fuel prices, the devastating tsunami in Japan and lingering conflicts in the Middle East and North Africa. The flag carrier also continues to suffer from the protracted Category 2 rating of Philippine civil aviation regulators, the European Union blacklist against Philippine carriers, cut-throat competition and a host of other external factors.

Meanwhile, the management of Sky Kitchen and Sky Logistics confirmed that they are not registered with the Department of Labor and Employment (DOLE).

In a text message sent yesterday, it maintained that they have the necessary permits and licenses to operate as a service enterprise. “We are unaware however that a service provider company needs to register with DOLE,” the management said.

“We assure everybody, however, that in the performance of our service SKY will comply with all the legal requirements” it added.

The reply was in answer to charges lodged by PAL union legal counsel Marlon Manuel that service providers Sky Kitchen Philippines Inc., Sky Logistics Philippines Inc. and SPI Global Holdings Inc. are operating illegally.

Representing the Philippine Airlines Employees Association (Palea), Manuel said they received a letter on September 7 confirming that the three said providers are not registered as a contractor or sub-contractor.

Citing a DOLE certification, labor department for the National Capital Region (NCR) director Raymundo Agravante stated that the three service providers are in violation of the Department Order 18 Series of 2002.

The three service providers are now included in the case Palea filed before the Court of Appeals.

(With Sara Fabunan)