Philippine Airlines to Cut More Than 100 Jobs, Limit Spending

In an effort to sustain profitability, Philippine Airlines has announced that it will be laying off as many as 117 domestic ground crew beginning in November. In addition, the airline plans to cut costs further in other areas and limit spending in the coming year.

Copyright Photo: Angelo Agcamaran/PPSG

According to the carrier, "Philippine Airlines will disengage from non-core services such as our ground-handling activities in domestic stations, which can be turned over to qualified third-party service providers."

Employees laid off as a result of the new outsourcing scheme will be paid severance benefits up to 125% of their monthly salary for every year employed by the carrier. Gratuity pay of P100,000 will also be issued to each employee. However, Philippine Airlines did not specify how much the carrier intends to save as a result of the outsourcing program.

Philippine Airlines employed 2,386 ground crew and 2,512 flight crew at the end of 2014. The carrier recently reported a net income of P5.86 billion in the first half of 2015 after withstanding increased competition, labour unrest, rising costs, and a weak local currency.

The announcement represents the final stage of the Philippine Airlines outsourcing program, which saw the early retirement of 2,600 personnel over the last few years as in-flight catering, airport services, and call-center operations were outsourced to third-party providers.

At a recent shareholders meeting, the company revealed that it intends to "continue restructuring its cost base to drive down unit costs and remain competitive." Although the carrier recently achieved profitability, it is not taking any chances after enduring nearly P15 billion in losses over the previous two years.

Much of the carrier's turn around can be attributed to the retirement of old aircraft and a massive reduction in global fuel prices. In addition to the outsourcing scheme, Philippine Airlines plans to halt all capital expenditures with the exception of those critical to operations. Reductions in "non-essential" in-flight amenities are also expected as well as new flying techniques to minimise fuel consumption. The national flag carrier also recently improved its online flight booking engine in an effort to attract more online bookings and drive passengers away from travel agents, which carry commissions.

According to Jaime Bautista, President of Philippine Airlines, planned capital expenditures over the next year are primarily for ground equipment, rotable and repairable parts, and a spare engine for the Boeing 777 aircraft. 

In a demonstration of solidarity with its employees, it was also revealed that Philippine Airlines will reduce the token compensation of its top four management executives led by chairman Lucio Tan from P3.4 million to P1.7 million this year.

In spite of the outsourcing program, Philippine Airlines is on the hunt for more cabin crew, Chinese interpreters, aircraft technicians, account executives, and even a meteorologist. The national flag carrier has increased its number of employees as it continues to serve more passengers on an annual basis. PAL recently reported a seat load factor of 71.36 percent, which is a modest increase from the 69.93 percent previously reported.

The story at Philippine Airlines' chief rival, Cebu Pacific, is quite different where the nation's largest budget carrier enjoyed an 84% seat load factor. PAL's share of the domestic market shrunk to 30.5% in 2014 against the commanding 60.8% held by Cebu Pacific. In addition to its market leading position, Cebu Pacific also enjoys a non-unionized working environment. Unlike Philippine Airlines, Cebu Pacific employs two foreign executives, which previously served as airline executives in Australia, to serve on the board as advisers.