Tan Blames PAL Employees for Departure, ANA Partnership Lacks Synergy

The search for investors to assume Lucio Tan's 51% stake in Philippine Airlines continues. Rumours and speculation thrived on the internet as San Miguel Corporation announced that it was in discussions with Tokyo based All Nippon Airways regarding a possible investment in Philippine Airlines. 

lucio tan pal
Copyright Photo: Darren Whiteside/Reuters/Corbis
While names of prospective investors have not been kept in total secrecy, what has remained a mystery is why Tan is selling his majority share of the airline at a time when prospects for Philippine Airlines seem to be improving. At the 20th Anniversary of the Bangko Sentral ng Pilipinas Celebration last month, Tan told reporters that he is blaming workers for his departure. "The union is the reason why I am selling my 51% stake in Philippine Airlines to local and foreign investors," Tan said. 

Philippine Airlines has been plagued by strikes from various employee groups including pilots, flight attendants, and ground crew since the airline decided to lay off 2,600 employees in 2010. Last April, the airline signed a memorandum of agreement with the Flight Attendants and Stewards Association of the Philippines to ratify the 2010-2015 Collective Bargaining Agreement. But labour problems continue to trouble the airline with other unions. 

The PAL Employees Association suggested that the airline would be better off without the business tycoon and that the association welcomes his departure. In an interview with Rappler, Gerry Rivera, the Association President, said that it's time for PAL to fly to greater heights without Lucio Tan on board. He blamed the labor disputes between the airline and its 3 unions on Tan's "bad business management" rather than affirming that labour struggles were the source of PAL's problems. "Their business paradigm of outsourcing the company's profit centers in the hands of unskilled workforce shows lack of knowledge and skills in the airline business," said Rivera. "Their philosophy of profit-first over quality service drove away PAL's valued customers."

The PAL Employees Union which represents 646 members is demanding that they be reinstated to their regular work. The union criticized Tan for suggesting that the workers were to blame for the carrier's challenges. "It is grossly unfair to the loyal and dedicated workers of Philippine Airlines to pass the blame on them for what the airline has become," Rivera added. 

Meanwhile, aviation critics are scrutinizing a possible partnership between Philippine Airlines and All Nippon Airways of Japan suggesting that such a relationship would result in limited synergy. According to the Centre for Asia-Pacific Aviation, the Japanese carrier is flush with cash and is seeking a suitor worthy of investment.

ana philippine airlines
Copyright Photo: Angelo Agcamaran/PPSG
To make a prospective deal worthwhile for the Japanese carrier, there would need to be interest in penetrating the budget market in the Philippines. Unfortunately, that market is intensely competitive and low yielding. "In recent times, Cebu Pacific has been the only profitable carrier," CAPA said. "To capture some of this market, ANA could theoretically look to use Philippines Airlines. But PAL would be a complicated choice as the carrier contentiously abandoned its LCC strategy to focus on the full-service segment." CAPA added that PAL's low cost and long-haul strategies are not yet the right fit and ANA is yet to prove itself as an effective trainer to bring matters into shape. 

1 comment:

  1. How I wish Lufthansa becomes the white knight for PAL. Despite the Piatco fiasco, LH technik has been successful with their venture in the Philippines and by now is familiar with the cultural and political environment. Both Germany and the Philippines can benefit from closer economic cooperation. Imagine FRA as the gateway to Europe! PR and LH can easily fill a daily nonstop A340 and from there transfer them to the LH network all over Europe and Africa. The synergy would be great!


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