More PAL workers to lose jobs to outsourcing

Lucio Tan-led flag carrier Philippine Airlines (PAL) plans to retrench more workers as it moves to outsource two more units, aside from three set to be shut down by the end of May. PAL President and Chief Operating Officer Jaime J. Bautista said in a press briefing on Monday the airline might outsource its medical and information technology departments and some human resource processes following a decision to do away with the in-flight catering service, airport services and call center reservations. He said the company was in the process of finalizing contracts with several service providers that will handle catering, ground and call center services. These third-party providers will not form part of the Lucio Tan group, he added. More than 3,000 employees will be affected by the first round of retrenchments. Bautista said the number of medical and information technology workers to be affected by another round of retrenchments was yet to be determined. PAL will pay about P2 billion in benefits in the first round. Retrenched employees will be given separation pay equal to a month’s salary for every year of service. The Philippine Airlines Employees’ Association (PALEA) could not be reached for comment. PAL has been planning the outsourcing of noncore units since September 2009, but was sidetracked by complaints filed by the PALEA with the Labor department. PALEA sought preventive mediation from the National Conciliation and Mediation Board last Sept. 18, but union officers sought the suspension of talks in October due to lack of progress. The Labor department stepped in, failed to present an acceptable early retirement plan to the union. PALEA has also asked Malacañang to intervene. Talks on the retrenchment plan were stalled anew in March as PALEA held elections for a new set of officers. Bautista said PAL had sent a letter informing the union of the May 31 deadline due to the deteriorating financial situation of the airline. He said the airline management would meet with PALEA officials soon. PAL noted that if the outsourcing scheme does not go ahead, it would continue to lose P500 million to P1 billion. Bautista said PAL was downsizing to attract investors since it needs more equity for expansion. "If you look at the other airlines in the region, many have outsourced the noncore units. We’re the only ones that didn’t," he said. "When we talked to potential investors they all asked, ‘What is your plan for the noncore areas?’ They knew that if those employees were in-house, the cost would be high. They wanted a lean company." He declined to identify potential investors, citing nondisclosure arrangements. Bautista said Tan was willing to dilute his shares in the airline. PAL said it was expecting another net loss for the fiscal year ending last March 31 after carrying more than nine million passengers. It reported a net loss of $40.2 million in the nine months of its fiscal year, better than the $330.2 million posted in the previous year. Revenues rose by 15 percent to $1.08 billion but expenses reached $1.1 billion. — Emilia Narni J. David, BusinessWorld