PAL employees dodge leave-without-pay

MANILA – Employees of local carrier Philippine Airlines expressed fear that they could be the next casualties as the local airline struggle with its finances.

In a feedback letter to abs-cbnNEWS.com, a reader who claims to be an employee who belong to PAL’s Network Management and Telecommunication Services (NMTS) department forwarded what was supposed to be an email memo that urged employees to go on forced leave without pay.

PAL appeared to be urging its employees to take one week leave per month starting August 17 until the third week of December this year as part of the airline’s cost cutting measures.

Below is the alleged undated letter sent by reader thepalinsider@yahoo.com:

With the current financial status of the company, all administrative personnel of NMTS department will have to go on Leave Without Pay for one (1) month. The leave will be taken on a one (1) week period per month starting the 17th of August 2009. To complete the one month Leave without Pay, the last batch of leaves will be until third week of December 2009.

Those who are in critical operations are encourage to be physically present in their workplace but not required to render the 8 hour duty. This will be a great sacrifice on your part but, we, each one, will have to contribute our best to uplift the financial situation of our beloved company.

I will be making the draft schedule of each and every administrative personnel Leave Without Pay, to be discuss with Mr. Jonathan Steven Lim and Mr Joseph Fermin. Tomorrow, this will be submitted to our VP, for his final approval.

Once again, our company is in need for our contribution and self-sacrifice to help in our own little way, the financial situation of the company.

The letter was reportedly signed by “Ted Simons,” whom we later learned is an assistant vice president of PAL.

Network management

In a phone interview, PAL corporate communications head Jonathan Gesmundo told abs-cbnNEWS.com/Newsbreak that the letter was indeed sent “internally, to the NMTS employees.”

When asked whether the letter reflected the financial situation of the company, Gesmundo replied that “Philippine Airlines would rather not make a comment.”

He also refused to confirm whether the employees who were being asked to go on forced leave without pay are regular employees.

Gesmundo later told abs-cbnNEWS.com/ Newsbreak that because the memo was “leaked to the media,” they are no longer pursuing the measure.

In PAL’s definitive information statement given to shareholders for its annual stockholders’ meeting in March 2009, it said that the Network Management and Telecom System group is housed in PAL’s facility in Nichols, Pasay City.

In the airline industry lingo, the tasks of network management include developing new flight schedule variants and evaluating them in terms of expected passenger demand and revenue. This may involve configuring a system that combines direct point-to-point traffic with connection traffic so airlines can increase the density and profitability of intercontinental flights, and diversify their client base.

Industry sources said this task is especially important when the airline is evaluating the potential synergies with alliance partners.

Government bailout

“We are all left (in the dark),” reader thepalinsider@yahoo.com shared in his feedback letter. “They don’t (sic) give the valid reason.”

The reader then raised a white flag. “Will the government take over the company to save it? It is still the country’s flag carrier. I fear that a lot of families will suffer the cause of this financial crisis.”

The Philippine government has bailed out PAL in the past, especially when it still monopolized the local airline industry.

In the aftermath of the 1997 Asian financial crisis, PAL, Asia’s first airline, retrenched some 5,000 employees, translating to some P24 million in monthly expenses.

Following a labor unrest, PAL, which was then sold to beer and cigarette tycoon Lucio Tan, shut down its operations. PAL employees and top management eventually entered into an agreement, which was facilitated by former President Joseph Estrada, and the airline that bears the Philippine flag in its logo entered into a court-approved financial rehabilitation period.

Oil and downgrade

By 2007, PAL had successfully turned itself around and formally exited the rehabilitation program.

However, several factors resulted in the current financial quandary that PAL now finds itself in. These include fiercer competition both in the domestic and international markets following the relaxing of regulatory barriers and the rise of budget airlines.

In 2008, PAL also bore the brunt in the decision of the United States Federal Aviation Administration to downgrade the standard of the Philippine aviation from Category 1 to Category 2. This prevented PAL from further enhancing its trans-Pacific routes, which were its most profitable markets.

The skyrocketing of oil prices by mid-year did not help either. In July 2008, oil reached a record high of $147 per barrel, twice the current costs. Fuel accounts for about 40% of airlines’ total operating costs.

For fiscal year ending March 31, 2009, PAL Holdings, the listed parent company of PAL, disclosed to the local stock market that its net income plunged 77% to $30.6 million from $130.5 million recorded in the previous fiscal year.

PAL had said it will push through with its expansion plans this year despite the global crisis. It even said announced new job openings for reservation, ground crew, and flight staff as it prepares for the delivery of new planes.

It had also started to join the budget airline bandwagon to buck the global aviation trend of declining revenues.

Yet, the following quarter—from April to June 2009—PAL Holdings’s financial remained bleak. It  recorded a total comprehensive income of P1.7 billion, or 47% lower than the P3.2 billion posted in the same period last year.

Despite lower fuel prices (expenses dropped 11%) during the quarter, PAL’s revenues were down 12% to $394 million. It cited declines in both traffic and passenger yields due to a sluggish global economy and the A(H1N1) scare. – Maria Althea Teves, abs-cbnNEWS.com/Newsbreak with Karen Flores, abs-cbnNEWS.com