Philippine Airlines to abide by decision increasing labour severance package costs

Philippine Airlines (PAL) President and CEO Jaime Bautista stated the carrier recognises and will abide by the decision of the Philippine Department of Labour and Employment (DOLE) over enhanced severance packages for the carrier's plans to spin-off three non-core operating units (Philippine Star, 03-Nov-2010). The carrier plans to sell its in-flight catering, airport services and call centre reservation units, but needs to finance the severance package of close to 2600 workers. PAL employs 7500 staff. The sale was originally estimated to cost PHP200 million (USD47.1 million) but DOLE raised the estimate to PHP2.5 billion (USD58.8 million) due to a ruling requiring enhanced separation benefits and other modifications to financial and non-cash awards. PAL will seek loans from the Philippines Government financial institutions, or turn to other PAL creditors if government financing is not available. The sale of the unit is expected to save PAL PHP500 million to PHP1 billion (USD12 million to USD24 million) p/a.