PAL to slash 3,500 jobs, take in foreign partner

PHILIPPINE Airlines announced Monday a wider outsourcing plan that would eliminate 3,500 non-core jobs as a condition precedent to the capital-short flag carrier taking in an unidentified airline-related company as partner.

“PAL becomes more attractive to investors after the spin-off [of non-core units],” airline president Jaime Bautista told reporters.

The airline also planned to outsource the medical, information technology, human resources and administrative services, in addition to the catering, ground handling and call center operations, he said.

The flag carrier could expect to save up to $1 billion in operating costs if it could successfully trim its workforce to about 4,000 by the end of the year from 7,000 now, Bautista said. It had around 15,000 employees in 1993 when it was privatized and acquired by taipan Lucio Tan.

The early retirement of the 3,500 employees would cost the airline about P2.5 billion in separation benefits, calculated at one month’s salary for every year of service.

It was not immediately clear if the PAL Employees Association would accept the proposed financial package.

Bautista said the carrier aimed to reduce its workforce to around 100 employees per airplane, particularly for its 19 wide-body aircraft. The carrier has 41 airplanes, including 22 short-hauls used for domestic and regional flights.

Bautista said a non-Lucio Tan company had been chosen after a negotiated bidding to handle the non-core airline services for a three-to-five-year contract.

The move to outsource non-core operations was a pre-condition made by possible investors,’’ he said.

“If the airline continues to maintain the non-core business, the costs would remain high due to pro-labor work rules and lower productivity of the workers.”

The airline reported a net loss of $40.2 million in the first nine months of the fiscal year ended in December from a net loss of $330.2 million a year earlier.

Revenue rose 15 percent to $1.08 billion, but expenses, at $1.1 billion, overran the cash flow, threatening debt payments to foreign creditors.

The airline carried 7.02 million passengers during the period, up 7.3 percent from 6.54 million.

Bautista declined to name the planned foreign partner, whom he said would be infusing new capital equivalent to at least 25 percent of ownership interest.

Asked if a good offer had been made to acquire the entire airline, Bautista answered, “Kapitan [Lucio Tan] is willing to give it up.

“PAL is not a bankrupt company—it only needs [to have] additional equity and to rationalize its organization and workforce.” –Jeremiah F. de Guzman, Manila Standard Today