A sad day at Philippine Airlines

There was a lot of crying on Friday inside Philippine Airlines’ sprawling office along Macapagal Avenue in Pasay as the Lucio Tan-owned carrier implemented a painful retrenchment and business restructuring program.

It was a necessary move, PAL said in its announcement. Around 300 people were affected, of which some 200 were retrenched while 100 opted to retire early. Those who are at least 50 years old and have been with the company for at least 20 years were qualified to avail of the early retirement package.

PAL employees knew about the retrenchment weeks before but they didn’t know who would be included. Since then, insiders said, the mood in the head office had been tense, anxious and stressful but employees couldn’t do much about it except to wait in bated breath for the final announcement.

That day came on Friday. 

One by one, affected employees were visited by personnel from Human Resources in their respective offices and brought to a notification area where they were handed the pink slip, insiders said. 

PAL said it was a necessary measure to increase revenue and reduce costs.  The streamlining will strengthen the company in the wake of losses sustained in 2019, aggravated by the ongoing travel restrictions and flight suspensions to areas affected by the new coronavirus, or COVID-19, it said.

Affected employees would receive appropriate separation benefits, PAL also said.

Headwinds

PAL’s move to downsize was inevitable. It was bound to happen with or without the coronavirus.

The flag carrier has been in the red the past two years — P4.33 billion in 2018 and P7.3 billion in 2017, and now the situation has been aggravated by the negative impact of the virus. 

A senior Cabinet official trying to help PAL is even peddling the airline to tycoons who can be PAL’s White Knight. 

Other airlines badly hit too

But PAL is not alone. Several other airlines have also been badly hit by COVID-19. 

Cathay Pacific, for instance, has asked its 27,000 employees to go on voluntary unpaid leave for three weeks between March and June. 

Last January, Lance Gokongwei, Cebu Air president and CEO, said the country’s largest budget carrier could see a drop in profits as travelers postpone trips to China as a result of the deadly coronavirus.

“If this lasts for six months, there could be a P3- to P4-billion swing on profit,” he said at the time.

Cebu Air posted a net income of P3.9 billion in 2018 from P7.9 billion the previous year.

The PAL saga

But PAL’s case is peculiar. It has been flying on shaky ground since last year, no thanks to its internal problems and the difficult business environment. 

Aside from the financial losses, soaring costs of jet fuel, rising interest rates and tougher competition the past years, PAL also had a shake-up of sorts.

Many veterans and long-time employees have left the company following the retirement of Jaime Bautista, a long time lieutenant of Kapitan. PAL named Gilbert Santa Maria as Bautista’s successor.

Even some of PAL’s board members have left. 

In December, I broke the story that two of the most prominent members of PAL’s board of directors — Amando Tetangco Jr. and Estelito Mendoza — resigned. 

Tetangco is the two-termer former governor of the Bangko Sentral ng Pilipinas who has been widely recognized as one of the world’s best central bankers. Mendoza, meanwhile, is a long time lieutenant of the taipan and is touted as one of the country’s best legal minds.

The last thing PAL needed was an epidemic that would dry up travel activities. 

But it’s happening and now PAL had to take the necessary measures. Last Friday’s announcement marks yet another chapter in the carrier’s continuing saga. 

Some of those retrenched felt that their inclusion in the list isn’t surprising given that they were identified with the Bautista-led team, but an insider said those retrenched were simply part of offices with redundant functions.

Adapt or die

There won’t be another round of massive downsizing for now but streamlining of processes would continue, Santa Maria said.

He said PAL could die without these measures.

“At this time, no further reductions on this scale have been planned but we shall now continuously streamline processes and seek efficiencies everywhere that we can. PAL will now have to adapt more rapidly in the market place. Or die,” Santa Maria said in a letter to employees on Friday.

For now, PAL workers have no choice but to help keep the airline afloat and not force its hands to lay off more. 

Thankfully, the airline’s moneymakers are still doing well and not yet very much affected by the outbreak. These are its direct transpacific flights to Los Angeles, San Francisco, New York and Toronto from Manila.

But, clearly, PAL is facing one of its most difficult times.

As Santa Maria said in his letter: “Our skies have not been blue and tranquil and free from turbulence... With God’s grace we shall yet see this through, for the sake of those who depend on Philippine Airlines.” 

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com.