PAL says cost cutting necessary for survival

MANILA, Philippines - Philippine Airlines (PAL) said cost cutting measures like crew reduction and its planned spin-off of non-core units are major initiatives to ensure the airline’s survival.

In a statement, PAL spokesperson Cielo Villaluna said funds saved from belt tightening efforts are earmarked for payment of maturing dollar obligations, fuel costs, salaries, aircraft maintenance and other expenses.

To continue operating, she said the flag carrier needs approximately $230 million annually. About half of this must come from cost savings, while the other 50 percent would be raised through cash generation activities like aggressive sales and marketing efforts, she said.

Following huge losses due to the global recession and other factors beyond PAL’s control, Villaluna said all of the airline’s departments are mandated to be more cost-efficient.

She explained that cabin crew reduction is just one of many cost-cutting measures. “The cabin crew union demands that funds saved from manpower reduction should be equally divided among them. But this, unfortunately, is not the aim of the whole exercise. If we heed their call to give them the savings, we may have satisfied crew members today but no airline to speak of in the long term,” she said.

Last July, cabin crew complement in PAL’s Boeing 747 aircraft was reduced to 16 from 18. Villaluna said this is still one higher than the minimum safety requirement of 15 crew members for a B747 as mandated by international safety standards and by the Civil Aviation Authority of the Philippines.

Since the program’s start last July 1, Villaluna said PAL’s cabin services department has not received any complaints about service quality, proof that the airline’s dedicated staff have been able to meet passenger expectations despite the reduced ‘manning’ complement. 

“Contrary to the cabin crew union’s claim, there has been no dimunition of employee rights or benefits. They work a little bit more for the same pay, which simply means more efficiency,” she said.

“Estimated savings from crew reduction as measured by our cabin services is about P70 million a year, not P141 million as claimed by the Flight Attendants’ and Stewards’ Association of the Philippines,” she added. 

Most global airlines are still recovering from the global recession that caused a slowdown in travel. PAL is not alone in trying to cut costs to be more efficient, Villaluna stressed.

Despite better-than-expected passenger traffic in the first semester, she said PAL is still strictly adhering to its survival plan that was crafted after the airline lost more than $312 million in the last two years. “The survival plan became imperative especially after the airline’s equity dipped to just over $1 million in February 2010,” she explained.

“Programs like crew reduction are being implemented as a management prerogative. We informed the crew union beforehand as a matter of professional courtesy,” she said.

Villaluna said another justification for the reduced cabin crew complement is the reconfiguration of PAL’s long-range planes. “In keeping with global trends, most of PAL’s wide-bodied aircraft used for Trans-Pacific flights have been reconfigured to bi-class – with no more First Class section,” she said.