PAL to cut workforce by 35 percent

Flag carrier Philippine Airlines (PAL) launched a major employee reduction program on Thursday, joining other carriers in the country and overseas struggling during the COVID-19 pandemic.

PAL employees were told during a company-wide meeting that the airline will shrink its workforce by up to 35 percent—affecting over 2,700 employees—in a process that could stretch until early December this year, Inquirer sources said.

This was seen as a painful but important step as the flag carrier fights to survive after passenger traffic vanished and airline fleets were grounded for extended periods during the rolling COVID-19 lockdowns and travel bans abroad.

Even with domestic flight restrictions being gradually lifted, demand remains weak. The local industry group Air Carriers Association of the Philippines estimated that traffic in September was still below 20 percent of pre-COVID-19 figures.

No viable options

A source said employees understood these were necessary steps to ensure the continued operations of PAL, which became the first commercial airline in Asia when it started flights in 1941.

The job cuts were first revealed last month by PAL’s management led by president Gilbert Santa Maria, or GSM.

“Majority if not all think that GSM is doing a great job in navigating PAL through the stormy waters of this pandemic,” a source said.

Retirement or retrenchment

PAL was planning an early retirement and retrenchment program covering 20 percent to 40 percent of over 7,800 employees, including those working under Air Philippines Corp., also known as PAL Express.

Thousands of ground-based employees, pilots and cabin crew will be affected, a source said.

The job cuts are set to be PALs’ second this year. It follows manpower reductions made by local rivals AirAsia Philippines and Cebu Pacific.

During the September meeting, PAL management also said there was no guarantee the layoffs would be the last.

This was due to the weak business environment and the billions of pesos in recurring costs running an airline—much of it tied to aircraft maintenance and lease payments.

Flight cancellations due to COVID-19 add further strain on finances because of passenger refunds.

P16B in refunds

In PAL’s case, refund requests hit as much as P15.9 billion, of which 80 percent has been processed and returned to customers, the flag carrier said on Sept. 21.

Given the business downturn, PAL owner and billionaire Lucio Tan infused added capital of over P6 billion into operator PAL Holdings Inc. in the first semester of 2020 alone to keep the airline afloat.

PAL is also in talks with creditors and aircraft lessors to return planes given expectations the industry will need several years to recover.

Amid the pandemic, PAL Holdings saw losses from January to June breach P20 billion versus a P3.3-billion loss in the first half of 2019.

The layoffs come amid the late arrival of aid via the Bayanihan to Recover as One Act. An industry source told the Inquirer the airlines were not banking on significant help from the law given its delayed passage and smaller-than-expected financial assistance budget.