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Philippine Airlines prepares for huge severance bill

MANILA, November 3, 2010 (AFP) – Philippines Airlines said Wednesday that it expects to be hit with a bill of almost 60 million dollars in severance payments to staff when it farms out ground crew work.

The flag carrier wants to outsource its in-flight catering, airport services, and call-centre reservations divisions, at the cost of 2,600 jobs, in a bid to reduce its long-terms costs.

But the government’s labor department has ruled that the firm must guarantee the staff being laid off will get a fair package while also making sure they will be absorbed by which ever company takes over.

PAL president and chief executive Jaime Bautista said it would take out loans to meet the 2.5 billion-peso (58.7 million-dollar) enhanced severance packages, which were approved by the government.

“Given its recent losses and current financial position, PAL would be hard-put to raise 2.5 billion pesos but this is a bitter pill we have to swallow,” Bautista said in a statement.

“Since it has the force and effect of law, we must respect the ruling,” he said, adding that the airline did not expect flight disruptions.

After incurring a combined 312 million dollars in net losses in its two fiscal years to March 2010, Bautista said spinning off the ground services would help the airline save the jobs of the remaining 4,000-plus staff.

He urged the ground crew, whose union has announced plans to sue the airline, to apply for jobs instead at the companies that would acquire the ground services.

However, union leaders are concerned about their salaries and benefits if they are forced to leave PAL.

“Aside from receiving their benefits, all affected workers have the option of applying for positions in the third-party service providers if they so choose,” Bautista said.

The dispute is the latest in a string of setbacks for PAL.

Last month, the government was forced to stop a planned strike by cabin crew who were demanding higher wages and a lifting of a company policy that forces female attendants to retire when they reach 40.

The labor department is set to rule on that case this month after it ordered the two sides to submit to arbitration.

And in August, 25 pilots and first officers on the airline’s short-haul aircraft suddenly resigned for higher paying jobs abroad, forcing the abrupt cancellation of several flights.

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