Philippines Airlines Case Essay

Philippines airlines started its history on knock against 15, 1941 on a small twin-engine Beech Model 18 flying 212 of pure skies from manilla paper to Baguio with a full load of five passengers. Upon the outbreak of the pacific war, befriends two aircraft were pressed into service with the US army post Corps. Post-war operations began on February 14, 1946 with five ex-military Douglas DC-35. In July, the airline chartered DC-4s to conceptualize Ameri feces service men home to Oakland, making chum salmon the starting airline to cross the Pacific. Regular DC-4s service to San Francisco began in December 1946. In May 1947, PAL opened a route to Europe. By 1952, the world(prenominal) route network covered two-thirds of the wold, and the government became the majority stockholder. At present, PAL uses the most advance technology in the local airline industry. adept centers were constructed to perform landed estate handling for other airlines and contract work for the states and Philippine Military services. Computerized reservations systems link most PAL sales outlets 103 in the Philippines and 56 worldwide. The PAL Data Center at the Manila Domestic airport is the core of the most extensive computer system in the Philippines today. A massive refleeting program was introduced to be able to cope with the standards of the industry. Indeed, this program paved the way for the problems they argon approach right now.ClosurePhilippine Airlines (PAL) is facing its worst crisis. Foremost in the companys mind is how can it possibly overcome problems created by the economic turmoil that has been bagging the Asian region since July 1997- a situation few quarters were able to predict. What do they do in times of decreasing demand for air travel, suffering revenues, increasing operational cost, and when credit to cover financial obligations is almost non-existent? The principal(prenominal) reason why PAL suffered financial problems was because of the massive refle eting modernization program, which was funded through loans made from local and international creditors.It has reached a point where it can no longer keep up with its obligations. Then, the labor unrest come into get out because of the need to downsize manpower as a solution to its financial problems. The pilots jilted a scheme to retire 200 colleagues using a training in their CBA which would not give them enough m nonpareiltary benefit that pull up stakes compensate their year of service with the company. The ground employees protested the manner by which the precaution implemented a retrenchment program on their ranks as a result of the 22-day pilots strike. The downsizing was a bitter pill to swallow.Chain of Events precedent to the ClosureJune 1998The 620 PAL pilots went on strike paralyzing PALs operations. 1,800 ground employees were retrenched.July 1998Philippine Air Lines Employee Association (PALEA) went on strike to demand the reinstatement of the retrenched me mbers who they claimed were dismiss by violating their CBA provisions. September 1998Lucio Tan gave out a device to PALEA officers, the credence of which will ensure the survical of PAL. PALEA officers accepted the proposal.Members of PALEA rejected the proposal and demanded a retraction from the officers. Officers retracted on a condition that a referendum is held on the proposals. Referendum to a lower place the sponsorship of DOLE was held. NO votes prevailed. Closure becomes reality.Management side (Interview)The closure was done because the company is on the brink of bankruptcy. It was due to the unforeseen economic crisis. on that point is no problem with the commission and labor. The management then gave a proposal to avoid the closure of the company. Labor side (source from Newspapers)They are afraid that the management can easily fire them without the CBA. They are also worried round the recognition of the labor union even if the CBA is suspended.Another referendum was made and the YES votes prevailed which meat that they agreed to the proposal of Mr. Lucio Tan maybe because of limited options they have. REACTION (Written by a PAL employee)The upheavals in PAL can best describe as Bad Luck. After 57 years in existence, who would have say that management expertise is lacking, maybeinappropriate to the harbinger of the times but never lacking.The labor unions have enjoyed the rights since day one of their foundation but again due to the call of the times, they have near ask for more.Each one has its own reasons for being so the grant of the enterprise come to fore and closure was inevitable.The Yes or No vote. both(prenominal) are evil but we chose the lesser evil- Why Yes?1. Yes means reopening of the airline, a must for national interest as well as psyche workers interest. The industry is vital to national trade and tourism. Its absence could slow down the Philippine preservation further. While its square(a) that there maybe other airl ines, PAL has the edge in facilities, charitable resources, and worldwide recognition. 2. The suspension of CBA can still be questioned in royal court for its legality and can be pursued by the union. 3. There are labor laws to protect the workers.Effects of the Closure in the EconomyThe economy then was in recession so the people did not enumerate air travel. Many PAL workers went home jobless. GNP drops because of low productivity. furrow opportunities were cancelled or delayed due to lack of Air Transportation.Re-opening sidekick opened its door when all the problems were partially solved. Owner Lucio Tan infused neat to the wingless airline, which was not enough for its continued survival. Selling of some assets were considered to manufacture creditors. It lessened flight destinations to be able to lower operation cost. A possible management turnover might happen for the survival.Rehabilitation programThe computer programme was mainly to infuse capital to PAL airlines. P ossible investors were invited for the infusion of the capital. Selling percentage of ownership were also considered. Foreign investors such as Cathay Pacific, Northwest were thinking of possible investment to the said airline. A $150 million capital infusion was planned but the Securities and convert Commission (SEC) did not approve it last December 1998. Selling of shares  expense $11.916 million in abacus international, one of the biggest international computer reservation systems in the world was considered to raise cash for operations. A new rehabilitation plan worth $200 million is set to be submitted on March 15, 1999 for the approval by the SEC.