Contractualization, A Way of Compensating Human Resources in the Philippine Airlines?

The Philippine Airlines, Inc. is known as the flag carrier of the country, an epitome of glamour, class and prestige of the country in the world. But recently, the reputation of the carrier has been put into shame and disappointments caused by cancellation of flights due to several failure in operations and labor disputes. Last August 1, 2010, Philippine Airlines announced that it will have to cancel some of its flights permanently after a number of pilots walked out to take higher-paid jobs abroad.Because of this, four of the national carrier's 160 daily trips will be discontinued unless the 25 pilots return to work as the airline is demanding, saying they have not honoured their contracts. Another issue that worsened the situation is when its affected employees held demonstration and disrupted operations to show their objection about the outsourcing plan of PAL. According to PAL Management: As part of its restructuring efforts in response to cut-throat competition in the global airline industry, your flag carrier Philippine Airlines (PAL) will spin off/outsource three noncore units (airport services, in-flight catering services and call center reservations operations) effective October 1, 2011. The program will affect close to 2,400 PAL workers who are assured of a generous separation package and job offers from party service providers. In the last decade, PAL and other international carriers have been adversely affected by global economic upheavals, acts of terrorism, excessive liberalization, pandemics, stiff competition from mega carriers and the emergence of budget carriers. To adjust to these new realities, airlines worldwide adopted new business models to survive. Most, if not all airlines, adjusted through cost cutting and outsourcing non-core functions. To remain competitive and ensure long-term survival, PAL was forced by circumstances to adopt leading airline practices, especially in view of the following: First, PAL lost $312 million in two fiscal years (2008 & 2009).While PAL reported modest profits of $72.5 million in 2010, PAL again posted a loss of $10.6 million for Q1 of its current fiscal year (April-June 2011) due to a)weak demand as a result of lingering world economic condition b)high fuel prices c)effects of the devastating natural calamity in Japan d) economic effects of social/political unrest in the Middle East and North Africa.

Another is the adverse effects of the US FAA Category 2 downgrading of the country's civil aviation regulators which limits PALs operations to and from the United States. The blacklisting of European Union on all Philippine carriers from flying anywhere in Europe.Lastly, the cut throat competition due to budget carriers and state-sponsored open skies policy. PAL needs to restructure operations to survive on the long-term and save the jobs of its 5,000 remaining employees, stressed. Bautista, PAL President. Our detractors see the loss of jobs for 2,600 PAL Employees Association (PALEA) members but turn a blind eye on the 5,000 office personnel, cabin crew and pilots that PAL is trying to save, he pointed out. The law is on our side. Were not implementing the outsourcing program on mere whim or caprice but on the basis of legal orders from the Department of Labor and Employment and the Office of the President. Were saving the airline from financial ruin, Bautista reiterated. But Gerry Rivera, PALEA President refuted the statements from PAL Management. From his Press Statement last August 17,2010. The scourge of labor contractualization lies at the root of the labor dispute at Philippine Airlines. The contracting out of jobs of the ground personnel will lead to the massive layoff of some 3,000 PAL employees. Regular employees will be retired from PAL only to be rehired as contractual workers in companies owned by Lucio Tans Kamag-anak Inc. These companies will be money-earning service providers to PAL and so we end up doing the same work as before but for cheaper pay, less benefits and no security of tenure he said.He also stated Job security is also the demand of the PAL pilots and flight crew. Thus PAL management is faced with a three-front war with its airline pilots, flight crew and ground personnel because of its drive to demolish job security, replace regular employees with contractual workers and bust the remaining unions in the company Rivera also accused PAL keeps on repeating the lie that it is losing money and so the workers will have to be the burden of its rehabilitation. Of course PAL will be in the red because the sources of revenues, even its assets, have been transferred to sister companies like Macro Asia and Air Philippines. PALs maintenance and engineering department was shifted to Macro Asia and so expenses are charged to the former but the income is reflected in the latter. PAL ground personnel in the outlying stations services Air Philippines so the costs are borne by the former but latter keeps thesavings. Our job is our life and if necessary we will strike to defend our livelihood for the sake of our families Rivera, exclaimed.