Leadership by Example

Tycoon's son to get the first Pink Slip out of PAL!

October 1, 2009

If sending a pink slip to one of the airline's Executive is an indication of how deep the financial problem of Philippine Airlines was, nothing can be more pronounced than sending the son of the Philippines wealthiest man out of the company he owns.

Perhaps it is the most compelling evidence of supreme sacrifice like the fabled story of the new testament, in that Lucio Tan so loved PAL that he fired his son out of the airline to help it weather the crisis that plagued any other legacy carrier worldwide, as it struggles to stay afloat amidst period of uncertainty in the international aviation industry.

At yesterday’s stockholders’ meeting of PAL parent PAL Holdings Inc., the management headed by President Jaime Bautista accepted the younger Tan's offer to include his position to the purging block and give Mr. Bautista a "free hand” in restructuring the airline to a more competitive position to survive.

John Tan holds two concurrent Vice-Presidential post within the airline, first as VP for Operations and network management and second as VP for Technical Services Department. He joined other VP's and Managers who availed themselves of PAL’s early retirement program. An early retirement plan is being offered by the company to all its employees with an October 31 deadline.

The young Tan is the highest official from the airline to go together with almost 4,000 rank and file workers from its non-core businesses such as ground operations that includes ramp, passenger and cargo handling as well as catering in a bid to further trim costs, says Jaime Bautista during the same meeting.

According to Bautista the airline has decided to outsource some services to cut cost and they are also reducing services to some international destinations. "The situation we are facing is very serious..." said Bautista adding that initiatives has to be implemented "to further reduce costs and also increase revenues."

Already, the airline has shed seven percent of its workforce because of the reduction in capacity by seven percent. Flight capacities for US, Canada and Australia have already been cut by five to seven percent, Bautista said.

And because of the reduction in capacity, there is a need to reduce manpower. PAL has asked its employees’ unions to avail of the early retirement, after which rationalization of manpower will follow.

The airline has also tapped new traffic schemes and introduced new redeployment plans for under-performing flight frequencies onto other routes. It is also deferring all non-essential capital spending, suspended all non-essential programs, and cut fixed operating expenses. But they are completing the final stages of the $50-million refurbishment program of its current fleet of B744s.

Bautista also announced that they are eyeing new destinations either through charters or regular scheduled operations in Europe or the Middle East but doesn't disclosed exactly where they will head next. Additional frequencies were however revealed. "The slowing demand from our traditional markets like Japan, Korea and the United States because of the recession is making us rethink our revenue generating strategies. We would be increasing the frequency to some of our service areas like Kalibo and China," said Mr. Bautista. Kalibo for example would have an increase to seven flights a day from the previous five.

The only good news there is that while PAL’s international passenger traffic is down, its domestic passenger volume has increased. “Domestic traffic has not been very much affected and this we attribute to the efforts of the Tourism department to improve tourist arrivals to the country,” he pointed out. However, the international passenger traffic accounts for about 65-70 percent of PAL's total revenues.

He said that while revenues are expected to be down for the current fiscal year and the airline is projecting to realize a loss, passenger traffic for the combined international and domestic businesses is expected to slightly increase from last year’s 8.95 million passengers to around nine million.

Bautista said further that the company is now "in the second quarter of what appears to be an extremely difficult year... This current fiscal year still shows no signs of recovery," he adds.