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MANILA, Philippines – Philippine Airlines has signed a loan agreement with Credit Suisse for $50 million that it needs to fund its controversial P2.5-billion outsourcing program, set to take effect on October 1 amid protests by the labor union.
Besides Credit Suisse, airline officials said other PAL creditors support the spin off program that PAL has justified as necessary for the flag carrier’s stability---that is, to rationalize its structure and make it leaner and more competitive down the road.
PAL chief finance officer Jose Gabriel Olives said on Thursday proceeds of the loan will go to pay the separation and other transition benefits of some 2,400 affected workers.
“The agreement [with the bank] has been signed. All affected workers from PAL’s catering, ground handling and call center reservations units can rest assured that they will be paid in full by October 2011 as promised,” Olives added.
Management earlier set aside the following package for those affected by the outsourcing/spinoff: separation pay in the amount of 125 percent of their monthly basic salary for every year of service; P50,000 gratuity pay [a sum later increased by P50,000 after the DOLE ruling was appealed to the Office of the President]; 100 percent commutable-to-cash vacation and sick leaves; and trip pass benefits.
The airlines also committed to extend for a year the medical and hospitalization benefits, and guaranteed pay for one year of whatever salary the service providers will give to those employed by PAL’s new contractors.
Amid continuing protests by the Philippine Airlines Employees Association (PALEA), the spin off/outsourcing will push through as scheduled, officials had said. “Of course, management will maintain the status quo if the Court of Appeals issues a restraining order,” Olives said, adding that the airlines had not received any order “preventing us from carrying out the spin off/outsourcing which has been upheld as valid by the Department of Labor and Employment and the Office of the President.”
Three service providers – SkyKitchen Philippines, Inc. (catering), SkyLogistics Philippines, Inc. (ground handling) and SPi Global (call center) – are now processing the applications of PAL personnel who accepted job offers from these outfits, which earlier indicated they will absorb all employees affected by the spin off/ outsourcing. Workers interested in such offer were given until September 7 to indicate their intention to work for these companies starting October 1.
Besides noting that spin-off and outsourcing is a worldwide trend among airlines that in past years have grappled with soaring aviation fuel costs and the impact of the 2008-2009 global crisis, PAL had also claimed that the outsourcing/spinoff is crucial to its survival plan.
The survival plan was launched in early 2010 after PAL lost a combined $312 million for its 2008 and 2009 fiscal years.
It posted profits of $72.5 million in 2010, but then again posted $10.6-million losses for the first quarter of its current fiscal year on account of unstable fuel prices, the three-disaster impact in Japan and the continuing unrest in in the Middle East and North Africa (MENA region).
Philippine authorities’ failure to climb out of the Category 2 rating imposed by the United States, the European Union blacklist of Philippine carriers, have also been hurting PAL’s bottomline, officials said.
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