Philippine Airlines eyes layoffs next month to survive crisis

MANILA, Philippines – Flag carrier Philippine Airlines (PAL) is mulling deep job cuts across the board in a bid to survive the COVID-19 pandemic while it waits for government support that has been slow to arrive.

PAL is looking at more drastic measures to reduce costs as demand remains weak and travel restrictions in the country and overseas continue six months since the Philippine government imposed strict lockdown measures.

The layoffs are set to be PALs’ second this year and follow similar reductions made by local rivals AirAsia Philippines and Cebu Pacific.

Their situation mirrors the plight of global carriers navigating a health crisis that has unleashed significant damage to the aviation sector, prompting some governments to bail out their airlines.

Inquirer sources with knowledge of the matter said employees were informed of the planned retrenchment and voluntary retirement program during a town hall meeting last Wednesday.

Dubbed Project Gamma—a Greek symbol and a term used by investment professionals to describe risk scenarios— the job cuts could range anywhere from 20 percent to 40 percent across Philippine Airlines and PAL Express starting October 2020.

The PAL Group has over 6,000 employees.

The sources emphasized the figures have yet to be finalized. For example, the company may decide on extended leaves for some employees instead of retrenchment.

PAL spokesperson Cielo Villaluna did not confirm, deny or provide any details on the planned manpower reduction. The Philippine Star reported on Monday that PAL would cut 35 percent of its workforce next month.

PAL employees understood these steps were being taken to ensure the survival of the flag carrier, which became the first commercial airline in Asia when it started flights in 1941.
“PAL won’t close but it’s downsizing,” one source said, citing the crucial role airlines play in terms of public service and economic growth.

Because of huge fixed costs in running an airline—much of it tied to aircraft maintenance and lease payments—there was also no guarantee the planned layoffs would be the last.

This will depend on the pace of recovery, the source said.

Through the Air Carriers Association the Philippines (Acap), the local airline industry has made several pleas for government help, mainly in the form of emergency loans and state guarantees to help them conserve cash.

As early as March, Acap reached out to administration officials and lawmakers for assistance, calling the COVID-19 pandemic an “existential threat” to the industry.

Those issues are expected to be addressed under the recently-passed Bayanihan to Recover as One Act. It awaits the signature of President Duterte.

Since the 1990s, PAL has been under the control of taipan Lucio Tan, who has pumped in over P6 billion into PAL’s operating company, PAL Holdings Inc., during the first semester of 2020 alone to keep the airline afloat.

Because of the pandemic, PAL said losses from January to June breached P20 billion versus a P3.3 billion loss in the first half of 2019.

PAL Holdings was betting on a financial turnaround in 2020 after years of losses.

Backed by partner ANA Holdings of Japan, which took a 9.5 percent stake in the group last year, PAL was hoping to launch new routes and expand market share under a management team led by president Gilbert Santa Maria.

Those plans were foiled by the pandemic and recovery in aviation could now take years, according to the International Air Transport Association.

Other cost-cutting measures this year included slashing non-core expenditures and pushing back the delivery of some new aircraft to 2025, PAL said in its recent financial report.

Despite the crisis, PAL carried out crucial flights, mainly to serve stranded Filipinos in the Philippines and overseas.

It also deployed plans for cargo operations, which included the transport of food, medicines and personal protective gear.

Once the Bayanihan to Recover as One Act is implemented, it will allow the Department of Transportation and other government bodies to assist “critically-impacted business in the transportation industry.”

This can take the form of cash or loan subsidies, grants for fuel and regulatory fees and the substitution of travel vouchers for ticket refunds. [ac]