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25 August 2011
PAL starts spin-off/outsourcing, sends notices to workers
Philippine Airlines (PAL) today (25 August 2011) said it has commenced implementation of its spin off/outsourcing program by sending individual separation letters to about 2,600 workers from the airline’s catering, airport services and call center reservations units.

In a press briefing shortly after PAL’s annual stockholders’ meeting, PAL president and COO Jaime Bautista said the letters notified affected PAL workers that their employment with the flag carrier is only up to the close of their respective duty hours on September 30. Those who signified intention to join the service providers will start official duty the next day, October 1, 2011.

Bautista said the airline also sent notices to the  regional offices of the Department of Labor and Employment (DOLE) in Manila and Cebu.

“The spin off/outsourcing is a painful but necessary decision to ensure PAL’s viability and long term survival. We assure affected workers that they will all 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,” Bautista said.

PAL will spend about P2.5 billion for the severance package. Based on the October 29, 2010 ruling of Labor Secretary Rosalinda Baldoz, PAL workers affected by the spin off/outsourcing will receive the following: separation pay in the amount of 125 percent of their monthly basic 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 before the Office of the President, DOLE’s ruling was affirmed but slightly modified by increasing the gratuity pay by another P50,000 per worker.

In addition, PAL is offering a one-year extension of medical and hospitalization benefits and guaranteed pay for one year of whatever salary is granted by the service providers to those who choose to be employed by PAL’s new contractors.

PAL told its workers that its service providers – Sky Kitchen (catering), Sky Logistics (airport services) and SPi Global (call center reservations) – would contact them in the coming days. They have until September 9, 2011 to express their intention to be absorbed by the three firms tapped by PAL.

The airline said it has begun conducting town hall-style meetings to help enlighten and answer workers' questions about the spin off/outsourcing program.

Side by side with preparations for the spin off/outsourcing, the airline management has also put in place contingency plans to ensure continued service and passenger convenience.

So far, PAL said it has received information that several workers already signified their intention to avail of the package and cross over to the service outfits.

The flag carrier commenced implementation of the spin off/outsourcing plan after the Office of the President, through Executive Secretary Paquito Ochoa, Jr., rendered last August 11 a resolution denying the motion for reconsideration of the Philippine Airlines Employees Association (PALEA) questioning the earlier decision of Sec. Baldoz upholding PAL management’s prerogative to spin off non-core units.

PAL’s spin-off/outsourcing program was first recognized as legal and valid by acting Labor Secretary Romeo Lagman on June 15, 2010, and affirmed by Sec. Baldoz on October 29, 2010.

The spin off program is a chief component of PAL’s survival plan launched in early 2010 after it lost US$312 million for its 2008 and 2009 fiscal years. While it posted modest profits of US$72.5 million in 2010, it is again back in the red after recording US$10.6 million losses for the first quarter of its current fiscal year due to unstable fuel prices, the devastating earthquake/tsunami in Japan and the lingering conflict in the Middle East and North Africa. The flag carrier also continues to suffer from the protracted Category 2 rating of Philippine civil aviation regulators, the European Union blacklist against Philippine carriers, cut throat competition and a host of other external factors.

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