CA affirms PAL’s outsourcing strategy

MANILA, Philippines – The decision of legacy carrier Philippine Airlines (PAL) to outsource business units and dismiss 2,600 workers in 2010 was affirmed by the Court of Appeals.

This after the Court of Appeals’ special 8th division junked the PAL Employees Association’s (PALEA) motion for reconsideration questioning the airline’s strategy.

In a ruling promulgated last March 13, the appellate court said PAL’s decision to reduce its workforce was done in good faith “for the advancement of the company’s interest” and not for the purpose of defeating or circumventing the rights of employees.

The CA said outsourcing of services was a “growing global trend” that the industry should accept, if not embrace.

The court cited a press release by DOLE secretary Rosalinda Baldoz that said “outsourcing is already with us,” defending her decision to allow PAL’s spin-off.

“Citing a global trend, she pointed out that outsourcing was already an accepted business practice even in the United States,” the CA stated in the promulgation.

Spin-off, financial loss

PAL, then controlled by the group of tycoon Lucio Tan, decided in 2009 to cut its workforce by dissolving 3 non-core units: call center reservations, airport services, and in-flight catering.

PAL then hired 3rd party contractors where some of the affected employees were absorbed. About 1,406 PALEA members accepted PAL’s early retirement package.

PALEA’s motion for reconsideration sought to overturn decisions by the Department of Labor and Employment (DOLE) and the Office of the President that both sided with PAL.

“We agree when the SOLE (Secretary of Labor and Employment) held that the permanent outsourcing of non-core operations of PAL is part of the company’s exercise of its right to reorganize its business structure to enable it to thrive and grow in a highly competitive airline industry,” the CA said.

PAL had said the spin-off of services was necessary. It cited the P690 million net loss it incurred for the fiscal year ending March 2010 just months before the job cuts were ordered.

“While we commiserate with the plight of all employees affected by PAL’s outsourcing, we cannot, however, blindly uphold with absoluteness their plea to reject the outsourcing… especially when we find nothing capricious and arbitrary on the part of the OP when it affirmed the ruling of DOLE,” the appellate court added.

Under San Miguel

In April 2012, diversified conglomerate San Miguel Corp. acquired a 49% stake in PAL and agreed to jointly control the airline with Tan’s group.

PAL president and chief operating officer Ramon S. Ang earlier said the ongoing re-fleeting program involving the acquisition of fuel efficient aircraft as well as the planned additional long-haul flights amid the impending lifting of the ban on local airlines to fly to the United States and Europe, would help PAL return to profitability in 2014.

The airline’s parent firm PAL Holdings Inc. trimmed its losses by 24% to P2.74 billion in the first 9 months of its fiscal year from P3.59 billion as total revenues climbed by 2.4% to P55.68 billion from P54.38 billion on the back of higher revenues from its passenger and cargo businesses.

“By next year, PAL will earn money,” Ang said as the airline expects to slash its losses by half this 2013 as the new aircraft would help cut fuel and maintenance cost of the airlines that account for 50% of operating costs by as much as 40%. – Rappler.com