In partial fulfillments of the requirement in Production management

A case study about

PAL vs PALeas

Submitted to: Mr. Rodolfo Antonio

Submitted by: Jay Cliff M. Mutia

Introduction In the past decade of Philippine history our country is lack of equipment and transportation in agriculture. Transporting goods from one place to another is very helpful in the economy of having transportation from air and land. Thats how Philippine Airlines (PAL) come up an idea on how to transport goods or people from time to time in the most fastest and easy way. Time past, PAL become the most leading air transporter in ASIA, through the help of government which provides them legal support and invests in PAL as paving the way for the airline's nationalization. Until now PAL are consistent in serving not only Filipino people but also to other races. Provide good services and convenient transaction for their customers. Year 2011 PAL come up an issue regarding to their staff and workers through outsourcing that will lead to disagreed of those regular employee and workers in PAL. PALEA which is the union within PAL protested against the management of PAL for their rights as a regular employee and workers. Both sides are arguing in the issue, PAL concerns is to save their company for bankruptcy thats why PAL decides to outsource personnel, but these decision is against the law of government. These issues until now are being protested against both sides of parties, in this study we determine what should be the decision.

Background History February 1941, Philippine Airlines is founded by a group of businessmen led by Andres Soriano, one of the country's leading industrialists. March 1941 a month after being incorporated by a group of Filipino businessmen, Philippine Airlines takes to the skies with a twin-engine, five-seater Beech Model 18 aircraft from Nielsen airfield in Makati to Baguio. September 1941 the Philippine government invests in PAL, paving the way for the airline's nationalization. Until PAL continue in his legacy of serving people and a flag carrier of the Philippine country. In the year 2011 PAL encountered financial crisis that will led to a decision of replacing their staff and workers by an outsource personnel to avoid bankruptcy.

Statement of the Problem We all know that PAL encounter a financial crisis for their company, in order to survive and reduce their lost they need to outsource personnel to lessen their expenses regarding benefits and compensation to their employee and workers. But the problems come up both side parties.

What was the PAL management decision to the issue?

What was PAL do, in order to continue their operation perhaps of strike?

What was the action of government about the issue?

What is the distinction between outsourcing than direct hiring?

What is the decision and action of PALEA to PAL management? What is the effect of this issue to the Philippine economy?

Importance of the Study

This study is to determine what is the decision of the government between PAL management and PALEA member. What is also the decision of PAL management and how does PAL manage the flow of their services perhaps of allegation and strikes against them.

Hypothesis

Base on opinion and interview through radio and television regarding the issue of PAL against PALEA, PAL management disregard the agreement of PALEA, government has no action for the issue but they were concern for the PAL economic problem that will affect all business industries here in Philippines. Especially in transporting to other country. PAL management pursue the decision of acquiring outsource personnel.

Significant of the Study

In this statement signifies the statement in hypothesis that PAL management will pursue their decision against PALEA Philippine Airlines (PAL) today (02 October 2011) said there's no turning back on the airline's outsourcing program as it turned down its former employees' offer to return to work in exchange for keeping them in their old posts.

http://www.philippineairlines.com/news/no_turning_back.jsp

Methodology

The method of the study is based on research through internet and Supreme Court decision regarding the issue.

Definition of terms: Collective bargaining agreement

Written,

legally

enforceable contract for

specified period(usually one

year), between

the management of an

organization and

its employees represented by an independent trade union. It sets down and defines conditions of employment (wages, working hours and conditions, overtime payments, holidays, vacations, benefits, and procedures for dispute resolution. Also called labor agreement, union agreement, or union contract.

The Study
We all know that PAL has a great role in the Philippines, aside of being a flag carrier of the country; it has a contribution in improving the economic status of our nation. According to the statistics that out of 100% of flight record in domestic and international flight, more than 50% of its flight is international rather than domestic flight. Here is some data that proves the flight of PAL.

Analysis In this table shows the number of PAL flights in domestic and the number of international flight which tells us that they operate internationally purposes. Through PAL more investor or tourist invests and visit here in our country. They represent the country through their services and operations.
https://www.mabuhaymiles.com/Images/PDF%20%20Redemption%20Chart%20as%20of%20Feb%2020 11_tcm42-25811.pdf

Figure 1:

Figure 2

Airline Cebu Pacific Philippine Airlines Zest Air Air Philippines Seair

Frequency share 44.6% 34.0% 11.7% 4.1% 5.5%

Capacity share 47.3% 38.3% 9.2% 3.9% 1.1%

Domestic routes 50 37 18 7 7

Source: OAG Max Online for w/c 6 July 2009

http://www.anna.aero/2009/07/24/manila-dominates-philippines-traffic-as-cebu-pacific-and-philippineairlines-vie-for-domestic-dominance/

Analysis This table pertains to the domestic flight of Airlines here in the Philippines, which the PAL has only 37 routes out of 100 routes it means that the remaining were on international flight of PAL.

PAL management decision

Philippine Airlines (PAL) today (02 October 2011) said there's no turning back on the airline's outsourcing program as it turned down its former employees' offer to return to work in exchange for keeping them in their old posts. PAL President and COO Jaime Bautista said the flag carrier -- with its new service providers and corps of volunteers -- is determined to see the airline through the difficult transition phase. "PAL is slowly returning to normalcy, thanks to the selfless dedication of our admin volunteers and the help of our service providers, "Bautista said. He assured PAL passengers that from the current 70 percent, the airline's flights will be back to pre-strike levels in the next few weeks. Bautista said theres no doubt on everyones

mind that the concerted refusal of PALEA members to perform their official duties in the early morning of September 27 is a strike. They refuse to check in passengers, load cargo and cater food functions which they are paid to perform while on official duty yet, they insist it is merely a form of protest and not a strike. Thats the kind of double-speak PALEA leaders have been dishing out since Day One of the debate on the spin off/outsourcing plan, he said. Bautista said the PALEA members refusal to work forced management to cancel flights for more than 16 hours Tuesday which caused untold suffering to more than 14,000 PAL passengers. This doesnt include the millions of dollars PAL lost as a result of PALEAs illegal acts, he added.
http://www.philippineairlines.com/news/no_turning_back.jsp

Government actions regarding spin-off/outsourcing of PAL management

The National Labor Relations Commission (NLRC) has junked charges of unfair labor practice filed by the PAL Employees Association (PALEA) against Philippine Airlines (PAL) for its alleged refusal to commence collective bargaining negotiations with the union early this year. In a 14-page resolution received by PAL on September 29, NLRCs Special Second Division ruled that the flag carrier was not guilty of unfair labor practice as PALEA failed to prove by substantial evidence its allegation that the airline violated its duty to bargain collectively. NLRC, the labor relations arm of the Department of Labor and Employment (DOLE), upheld PALs stand that the issue on spin-off/outsourcing should be resolved first before it proceeds to collective bargaining. PAL submitted to NLRC on March 28, 2011 its CBA (collective bargaining agreement) counterproposal that only includes rank-and-file workers to be left behind after the outsourcing plan. Employees to be separated as a result of the airlines restructuring program were excluded. NLRC Presiding Commissioner Raul T. Aquino said the outsourcing issue must be resolved apart from the CBA dispute and may not, therefore, be considered a stumbling block to the continuation or completion of negotiations. The Commission said PALEAs insistence to include

the outsourcing issue in the labor dispute and its uncompromising attitude caused the breakdown of negotiations. The submission of PALs counter-proposal on March 28, 2011 is a positive indication of its intention to bargain collectively, and if there was any delay in the negotiation it was due to the unions hardline position to include the issue on "outsourcing/spin-off" in the negotiation notwithstanding the favorable rulings of the DOLE and the Office of the President. At any rate, we find that the labor dispute on outsourcing is beyond the realm of CBA negotiations as it has its own legal course to take, the Commission added. This developed as Malacanang has rejected a possible dialogue with PALEA on its row with PAL management. Presidential spokesperson Edwin Lacierda said the Palace has not received a formal request from PALEA for a dialogue. But he underscored that PALEA should be discussing the matter with the Department of Labor and Employment since Labor Secretary Rosalinda Baldoz is the alter ego of the President. Lacierda also said that there might be no need for a dialogue with the President as the Office of the President (OP) has already decided on the issue, wherein it affirmed DOLEs earlier decision to push through with the outsourcing. (With a report from Madel Sabater)
http://www.mb.com.ph/articles/336620/nlrc-junks-paleas-unfairlabor-case

Analysis In this statement that NLRC decided to junk the petition of PALEA to PAL in Collective bargaining agreement. Government action is favorable to the PAL management which pertain to upheld or resolve first the spin-off/outsourcing before to bargain in PALEA.

PALEA decision and Action of non approving the CBA

The protest action by members of the PAL Employees Association (PALEA) on Tuesday slashed by as much as 80 percent the cargo and passenger revenues of the flag carrier, an official of Philippine Airlines said Thursday. PAL lost 80 percent of its daily revenues between $4 million and $5 million, Cielo Villaluna, PAL spokesperson, told GMA News Online in an interview. The protest actions by PALEA members will definitely have an impact on our bottom line," she said. In peso terms, the PAL official estimated the daily revenues at P160 million. We lost 80 percent of this amount because of the paralysis that occurred practically the whole day of September 27," she said. Villaluna estimated that by Wednesday, with PAL management slowly restoring its operations that was disrupted by a sit-down strike of PALEA members, the revenue loss was pared down to 60 percent. As of Thursday, PAL was able to restore close to 50 percent of our total flight frequencies We were able to decongested Terminal 2, our home base, [by moving some] of the flights from Terminal 2 to Terminal 3," she added. PAL is now preparing to file administrative charges for abandonment of post and dereliction of duty against those involved in the sit down strike. It is not only administrative," Villaluna said, because they have hampered our operations." She explained that the airport is a critical government facility [for public conveyance]." The PAL spokesperson was referring to the move of Malacaang to sue PALEA members for economic sabotage.
http://www.gmanews.tv/story/233782/business/palea-strike-to-impact-on-flag-carriers-bottom-linepal-official-says

Results The Philippine Airlines Employees Association (PALEA) is set to hold a work stoppage at Philippine Airlines (PAL) as 95% voted yes in the strike poll conducted last Wednesday. Some 70% of PALEA members turned out for the strike vote and a mere 4% voted no.

The massive vote for a strike is an expression of protest at the 13-year long suspension of the collective bargaining agreement (CBA) and the planned contractualization amidst PALs $1.6

billion yearly profit. Our demand for new CBA negotiations has remained unheeded for the past five months thus we are forced to go on strike. A strike can still be stopped if PAL stops breaking promises and instead opens negotiations without any preconditions, stated Gerry Rivera, PALEA president and vice chair of Partido ng Manggagawa (PM).
http://partidongmanggagawa2001.blogspot.com/2011/03/palea-all-set-for-strike-as-95-vote-yes.html

Figure 2

Figure 3

Analysis After NLRC junk the petition of PALEA to PAL management, they protest and sabotage the operation of PAL that results to the cancellation of flights of PAL client and customers, PAL lost PAL lost 80 percent of its daily revenues between $4 million and $5 million.

SPIN-OFF/OUTSOURCING ADVANTAGES Staffing Flexibility Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you're done. Continuity & Risk Management Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company. Develop Internal Staff A large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set.
http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm

Analysis Spin-off/outsourcing advantages describe and explain why PAL management decides to outsource rather than to negotiate to PALEA, in order to survive the PAL they need to outsource personnel and workers to lessen their expenses. Through outsourcing PAL management will no longer have a commitment to their staff instead it is the agency