FLAG carrier Philippine Airlines (PAL) is implementing the second phase of its restructuring program to further reduce effects of the prolonged global economic downturn on its operations.
Effective at the close of business hours on May 31, 2010, PAL will spin off its non-core units — inflight catering services; airport services, including ground handling, cargo terminal/cargo handling and ramp handling; and call center reservations.
In a statement, PAL said it was pushed to such a decision due to factors beyond its control over recent years such as the “unabated liberalization of the industry to the detriment of local players like PAL;+the worldwide economic recession that led to a crippling slowdown in passenger traffic; record-high oil prices in 2008-2009 and the continuing increase in the price of aviation fuel, which account for nearly half of PAL’s operating expenses;+the downgrade of the Philippine aviation sector to Category II by the US that prevents PAL from using new long-range aircraft or increasing flights to the US; and+the subsequent blacklisting of Philippine carriers by the European Union, ruining the reputation of even those airlines with outstanding safety records, such as PAL.”
“PAL did its best to adjust to the harsh operating environment by restructuring its operations,” the airline said in the statement.
“It implemented a series of cost-cutting initiatives, including a manpower rationalization program in September 2009 that affected more than 400 executives and administrative employees. Management also approached several potential investors, and even the Philippine government, for assistance, but none were forthcoming.”
The carrier said it is pursing the spin-off in accordance with labor laws and the collective bargaining agreement between PAL and the Philippine Airlines Employees Association.
The flag carrier assured its customers there will no disruption in operations during the restructuring as all domestic and international flights are being operated according to published departure and arrival times.
PAL also said its offices and facilities in the Philippines and overseas will remain open to serve customers and all its accredited travel agents will continue to sell and honor PAL tickets.
Meanwhile, PAL cargo sales manager Jerry Calaluan told PortCalls he would reserve comment on the restructuring as he has yet to receive full details from higher authorities.
PAL’s financial situation has deteriorated over the years, with the company sustaining over $350 million (more than P15 billion) in losses during the last two fiscal years.
Under the 25-year operations and management contract, shippers may expect a 10-15% reduction in port tariff and rates. The PPA, on the other hand, stands to earn P6.8 billion.
