PAL and the reality on the ground

Speculations are rife that Philippine Airlines is for sale. The business sections of Manila dailies are replete with stories of tycoons and taipans casting a covetous eye on PAL.

The airline’s problem with the employees’ union and its recent setback from a Supreme Court ruling reinstating dismissed members of the Flight Attendants and Stewards Association of the Philippines and awarding them back wages would be enough to make any businessman throw in the towel.

While taipan Lucio Tan would like to keep PAL afloat, good business sense dictates that he can only do so if he can cut losses by outsourcing the airline’s non-core jobs like catering, airport services and passenger reservations call centers. Some 2,500 employees would be affected by the outsourcing plan that has been upheld by Labor Secretary Rosalinda Baldoz. An appeal by the Philippine Airline Employees Association to Malacañang has been denied and the union has brought its case before the Court of Appeals.

Employees who will be retrenched by Sept. 30 this year have been given the option to accept jobs with the companies PAL contracted for the outsourcing work. It’s a bitter pill to swallow for the affected workers but the airline also has to bite the bullet as it has to pay the retrenched employees a hefty sum in compliance with a court ruling mandating a fair separation pay.

Some 400 union members have availed of the separation package plus the option to be hired by PAL’s contracted outsourcing company.

Taking the money and still having a job made sense to some of the employees. The hardliners in the union, however, decry the loss of their seniority if they agree to be contractual workers.

The reality on the ground though is that whoever takes over the national flag carrier would not keep the remaining workers. Hong Kong-based First Pacific Co. Ltd , reportedly told brokers of the deal that it favors outsourcing because it wants a “lean and mean” airline to be competitive with foreign carriers and domestic market rival Cebu Pacific.

Because of the staggering cost of maintaining and operating an airline, foreign carriers too have opted to merge and also outsource some of their non-core business. What PAL is doing is simply following market trends to survive stiff competition.

However, Ramon Ang, a close business associate of Tan, told reporters that the taipan is not selling and would prefer forging an alliance with a foreign carrier. Ang added that although Tan has no cash flow problem, he would welcome the entry of a new investor to pursue plans for the upgrade of its present fleet and acquisition of new planes.

Ang also clarified that conglomerate SMC is not looking to buy PAL “but it’s me who is personally looking at it.” This confirms his standing as a major player in Philippine business. He already owns the posh Diamond Hotel on Roxas Boulevard which he bought from a Japanese group.

Vic Agustin’s column Cocktales in the Manila Standard’s business section, seems to have the inside track on this latest wheeling and dealing for PAL . His reported sighting of First Pacific’s Manuel V. Pangilinan and PAL president Jaime Bautista together is fueling the talk about Lucio Tan’s exit from the airline business.

Giving further credence to MVP’s acquisition of PAL is the recent news of First Pacific putting up a new aviation company called Pacific Global One Aviation Inc., without doubt a subsidiary firm to serve as support system for a PAL under new management. –Alejandro del Rosario, Manila Standard Today