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In partial fulfillments of the requirement in Production management

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A case study about

PAL vs PALea’s 

Submitted to:

Mr. Rodolfo Antonio

Submitted by:

Jay Cliff M. Mutia

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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. That’s 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 that’s

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.

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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.

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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.

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Definition of terms:

Collective bargaining agreement - Written, legally enforceable contract for a

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. 

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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:

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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’. That’s 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 doesn’t include the millions of dollars PAL lost as a result of PALEA’s 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, NLRC’s 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

PAL’s 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) counter-

proposal that only includes rank-and-file workers to be left behind after the outsourcing plan.

Employees to be separated as a result of the airline’s 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 PALEA’s insistence to include

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the outsourcing issue in the labor dispute and its “uncompromising attitude” caused the

breakdown of negotiations.

“The submission of PAL’s 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

union’s 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 DOLE’s 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.

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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 moveof Malacañang to sue PALEA members for economic sabotage.

http://www.gmanews.tv/story/233782/business/palea-strike-to-impact-on-flag-carriers-bottom-line-

 pal-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 PAL’s $1.6

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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.

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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