PAL sends out termination notices to employees

Philippine Airlines (PAL) is pushing through with its outsourcing plan despite threats by the affected employees to strike and possibly paralyze company operations.

In a statement on Thursday, PAL said it had started sending termination notices to the estimated 2,600 employees in its in-flight catering, call center reservations and airport service departments.

This followed the affirmation earlier this month by the Office of the President of PAL’s plan to outsource some its job requirements as a legal exercise of “management prerogative” aimed at cutting costs.

“We need this for the long-term survival of PAL. We need to spin off these operations so we can focus on our core business,” PAL president and chief operating officer Jaime J. Bautista told reporters.

The terminations will take effect on Sept. 30, while those who agree to be absorbed by the outsource companies would have to report to their new jobs on Oct. 1.

“We assure the affected workers they will receive their separation pay and other benefits that are at par, if not better, than industry standards. Guaranteed employment also awaits them at our third-party service providers,” he said.

Severance package

SkyKitchen and SkyLogistics, companies owned by Cebu-based businessman Manny Osmeña, will take over the airline’s catering and airport service operations, respectively.

Philippine Long Distance Telephone Co.-owned business process outsourcing firm SPI Global, meanwhile, will take on the airline’s call center operations.

PAL will spend about P2.5 billion on the severance package. Based on the Oct. 29, 2010, ruling of Labor Secretary Rosalinda Baldoz, PAL workers affected by the spinoff would receive the following: Separation pay of 125 percent of their basic monthly salary for every year of service; P50,000 gratuity pay; 100 percent commutable-to-cash vacation and sick leaves; and trip pass (travel) benefits.

On appeal in the Office of the President, the Department of Labor and Employment’s ruling was affirmed but slightly modified with an increase in the gratuity pay of another P50,000 per worker. Employees have up to Sept. 9 to accept the package.

PAL expects to save between $10 million and $15 million a year from the outsourcing plan.

Workers to appeal

The PAL Employees Association (Palea), which represents the workers to be displaced, said it would file a motion in the Court of Appeals on Friday to stop the outsourcing plan.

The union’s position is that until the courts shall have ruled with finality, the airline should not implement the spinoff.

“The union will exercise and exhaust all available remedies,” said Palea president Gerry Rivera. “If management (implements the outsourcing), we will construe that as a… direct challenge to the strength of the union.”

He declined to say if Palea would go on strike, as it had tried to do earlier this year, but said, “We will explore all our options.”

PAL’s Bautista warned Palea members against participating in a work stoppage. “They might be joining an illegal strike and they can be terminated because of that. They will lose all their retirement benefits,” he said.

He stressed that the outsourcing plan would bring some relief to the company and give it the financial flexibility to improve operations and compete in the crowded air travel market.

New planes

In a letter to shareholders on Thursday, Bautista said the company was planning to replace several of its aging aircraft with more efficient planes.

“To stay competitive, our fleet of Boeing 747s, Airbus 340-300s, A330-300s and A320-200s need to be replaced with newer technology and more fuel efficient aircraft over the next few years as they reach the end of their economic lives,” he said.

He said most planes in the company’s fleet of 36 were acquired in the early to mid-1990s. “Among local carriers, PAL has the widest network, a competitive advantage that we need to leverage and reinforce,” he said.

He said having more efficient planes would allow the company to offer lower fares and attract more passengers.