DOLE upholds PAL’s right to ‘spin-off’

In a statement, PAL spokesperson Cielo Villaluna said DOLE's decision on the Motion for Reconsideration filed by the PAL Employees Association (PALEA) introduced some modifications to the earlier ruling penned by Acting Secretary Romeo Lagman last June. "It [the decision] gave additional separation pay and other benefits to the PAL workers who will be affected by the spin off. However, PAL has yet to compute the financial impact of these modifications to thecompensation package that each separated employee will receive," she said.

Villaluna explained the spin-off means that the flag carrier will sell its three non-core units affecting some 2,600 rank and file workers. "Most airlines in the world, and almost all carriers in Asia, are now using third parties to supply and render non-core services. In PAL's case, it is implementing the spin-off to cut costs and ensure the airline's continued survival," she said.

From the start, Villaluna stressed, the PAL management has maintained that the planned spin off was done in good faith and justified by management's prerogative to reorganize its corporate structure for the viability of its operations.

She said the PAL union had been aware of the planned spin off since 1998, but it was deferred as PAL chairman Dr. Lucio Tan tried to make PAL profitable amidst the difficult operating environment. So far only PAL's Maintenance and Engineering department was spun off and bought by Lufthansa Technik Philippines in 2000.

She explained that a host of factors that include massive US$312-million losses in the last two years due to the global recession, volatile fuel prices, the US Federal Aviation Administration's downgrade of the Philippines' aviation safety rating to Category 2, cut throat competition with low cost carriers and other issues, forced PAL to find and implement radical ways to survive.

"Despite the implementation of major cost control strategies and cash generation initiatives, PAL was still way short of its goal to keep the company afloat. Hence, PAL crafted a comprehensive plan which includes restructuring and spin off as key initiatives for survival," she said.

Unlike state-owned airlines that enjoy subsidies and bailouts in times of difficulty, PAL is entirely on its own. "As a purely private enterprise, PAL receives no financial assistance - not even concessional loans -- from the Philippine government," she added.

"As correctly pointed out by Sec. Baldoz's decision, 'if there is no spin off, PAL will close down and 7,500 workers will be displaced without separation pay,' not to mention its adverse effects on PAL's shareholders, the riding public and public interest," Villaluna said.

She assured those to be affected by the spin off that they will receive separation pay and other benefits apart from the opportunity to work with the new service providers if they so desire. "Workers in other industries are not as lucky," she said.

With the DOLE's favorable decision, Villaluna said PAL must now focus on the tough challenge of implementing the restructuring program and returning to profitability amid a difficult operating environment.