PAL to Get Better Deal from Northwest

Filipino Monitor

November 26 – December 9, 1998

Headliners

MANILA, Nov. 26 Malacañang has expressed hope that Philippine Air­lines (PAL) can get a better deal from US-based Northwest Airlines, which can make Manila its

operation hub in Asia.

President Joseph Ejercito Estrada said that PAL Chairman Lucio Tan is now in the United States to get the best terms possible for the national flag car­rier.

Tan reopened negotiations with Northwest after calling off talks with Hongkong-based Cathay Pacific Airways due to a major disagreement over Cathay’s insistence to retrench thousands of PAL pilots and other employees.

This downsizing plan, which Tan found unacceptable, runs counter to the President's earlier commitment to pro­tect the security of tenure of PAL workers.

"As a businessman, he is looking for the best partner for PAL,” he said. “That's a private matter between PAL and Northwest which we won't interfere with.”

Earlier, Estrada called on the management of PAL to ensure the retention of its workers “at all costs" when negoti­ating with foreign investors wanting to buy into the financially-troubled airline.

For his part, Executive Secretary Ronaldo Zamora said he believes PAL can become an operations hub instead of a mere subsidiary should it link up with Northwest Airlines instead of Cathay Pacific.

Zamora said Cathay, a competitor of PAL in the Asian market, had planned to make its Manila operations a mere subsidiary.

"Even before, many were saying that PAL would fit better with North­west,” he said.

Tan earlier turned down Cathay's demand to fire workers, including 200 pilots who stuck with him when PAL went on strike two months ago. According to reports, these 200 pilots are among 3,000 PAL employees Cathay plans to fire as part of its streamlining program for PAL.

Zamora said that even without the labor issue, a merger with Cathay would not have been the best for PAL since both are competitors in the region.

He pointed out that the government, which continues to have a stake in PAL, was not fully in favor of Cathay's plan to make its Manila operations a mere sub­sidiary.

Northwest, on the other hand, have the resources to transform PAL into its operations center in the region, Zamora said.

Tan Stands Firm Behind PAL Workers

Filipino Monitor

November 26 – December 9, 1998

Editorial

MASS LAYOFF of Philippine Airlines workers under a proposed Cathay Pacific rehabilitation program is enough good reason for PAL officials to call off merger talks with the Hong Kong-based airline.

Disagreement over the retrenchment plan may yet force Philippine Airlines to resume negotiations with Northwest Airlines, which is also interested in a merger.

Cathay’s retrenchment plan was just too much for PAL chairman Lucio Tan who felt he has an obligation to the workers, especially the pilots who stayed on with PAL at the height of the crippling pilots’ strike.

It would, indeed be a bad idea for PAL to enter into a deal which would involve the layoff of workers who remained loyal to the airline during rough times.

Remarks from Malacañang Executive Secretary Ronaldo Zamora revealed Mr. Tan’s feelings toward PAL workers.

“Mr. Tan would not want retrenchment which is more than what he had committed to the union. He will not sacrifice more than what is needed,” he said.

This was the view of President Estrada who said the main concern of the government are the workers; that there will be no layoffs when PAL decides to merge with either Cathay or Northwest.

By standing firm behind the PAL workers, Mr. Tan had displayed an enlightened attitude toward labor-management relations.

When he took over the PAL management from the government, Mr. Tan ruled out retrenchment measures even when he knew that the airline had more than enough.

The PAL Chairman reportedly flew to the United States, presumably to renew negotiations with Northwest, a much bigger airline than Cathay Pacific and a non-competitor in the Asian route.

Cathay wants to trim the PAL workforce to about 5,000, but Mr. Tan did not want to cut the number of workers below 8,000 to avoid antagonizing the union.

Cathay also wanted to layoff some 200 pilots, a proposal also opposed by the PAL Chairman.

PAL had earlier accepted a preliminary investment offer from Cathay Pacific, the two companies had announced that they will draw up a comprehensive plan to rehabilitate the ailing Philippine flag carrier.

The International Finance Corporation, the investment banking firm of the World Bank plans to shoulder 20 percent of Cathay’s proposed investment.

PAL’s 20 percent stake in the airline was what the PAL management under Mr. Tan promised the workers in exchange for a 10-year period of industrial peace, while PAL is undergoing rehabilitation.

Based on management estimates, PAL needs some P6 billion for a smooth run of its domestic and international flight operations.

The government is right to intervene in the merger negotiations because at a time when a lot of people are losing their jobs, it must undertake all possible efforts to save these PAL workers. There is no reason why it should not encourage PAL to seek a better deal.