PAL says Palace OKd spin-off plan; 2600 jobs at stake

Published by rudy Date posted on March 25, 2011

MANILA, Philippines (UPDATED) – Malacañang gave its nod to the plan of local carrier Philippine Airlines (PAL) to spin-off 3 non-core units that would result in job losses.

On Friday, PAL said in a statement that it welcomed the decision released by the office of Executive Secretary Pacquito Ochoa Jr. to uphold the previous ruling of the labor department approving the controversial spin-off plan.

This decision came 4 months after Ochoa’s office assumed jurisdiction over the high-profile labor case that pitied management against PALEA, or Philippine Airlines Employees Association.
Retrenchment benefits

Before Malacañang took over the labor case at PAL, the labor department had approved a compensation package for the affected employees worth P2.5 billion.

PAL said the Malacañang approved the spin-off but required an additional P50,000 gratuity pay per affected ground crew.

Thus, each of the around 2,600 employees who will be retrenched will receive the ff:

* Separation pay equivalent to 1.25 month’s salary for every year of service;
*  Additional gratuity of P100,000 per affected employee (higher by P50,000 per Malacanang order);
* 100% commutation to cash of unused vacation leave and sick leave balances;
* 1-year extension of the medical and hospitalization benefits;
* Trip pass benefits depending on the number of years of service.

“Our hearts go out to the employees who will be affected by the restructuring move,” PAL President and COO Jaime Bautista said in the statement.

At stake are the jobs of about 2,600 ground crew employees who are members of PALEA.

PAL wants to spin off its in-flight catering, airport services and call center units in a bid to stay cost competitive in the airlines industry.

On Thursday, 95% of PALEA’s union members voted in favor of a plan to stage a strike that would paralyze the airlines’ operations.

Strike two

This is the second time a decision from the executive department was announced on the heels of PALEA’s plan for a work stoppage.

Earlier, Labor Secretary Rosalinda Baldoz affirmed PAL’s outsourcing plan as a “management prerogative” and directed PAL to increase retrenchment benefits to P2.5 billion from P2 billion.

PALEA held a strike vote but also appealed to Malacañang to take over the matter.

Majority of PALEA’s members agreed to go on a strike, but this was averted when President Aquino himself announced that the Office of the Executive Secretary will assume jurisdiction of the case.

PAL and PALEA have been conducting talks at the Palace, but these have been slowly progressing.

Aside from discussions on the outsourcing plan, PALEA also pushed for the negotiation of a collective bargain agreement.

PALEA’s leaders said the CBA has been put on hold for 12 years and negotiations now should be revived since PAL reported a huge financial turnaround in its fiscal year 2010.

PAL insisted on finalizing the outsourcing issues first and the CBA later.

That’s when the labor union went back to the labor department for another round of strike voting.

Aside from PALEA, the Lucio-Tan led airline also have ongoing labor woes with its cabin crew employees.

Open skies

The ongoing row between PAL and 2 of its labor unions was partly the reason for the Aquino government to consider the liberalized aviation policy.

The Philippines is an archipelago of over 7,100 islands and flying is a growing transportation preference as the shipping sector has been plagued by safety issues.

A strike could paralyze PAL’s local and international operations.

In the local market, PAL has been overtaken by another local carrier, Gokongwei-led Cebu Pacific, but PAL’s international operations still brings most of the international tourists.

PAL was hit hard by lost opportunities when the aviation regulatory body of the United States and European Union blacklisted its peer body in the Philippines due to safety issues.

Nonetheless, PAL recently announced that it expects to earn $1.6 billion for fiscal year 2011 despite volatile prices of oil, which make up 40% of the airline’s total operating expenses. –

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