The
Philippine State, Society
& Economy, 1998-2001
Oct 13, 98
Trade Union Struggle in PAL:
Lessons and Challenges
By Bagong Alyansang Makabayan (BAYAN)
The recent event at Philippine Air Lines (PAL) is not a simple labor row, not
just a case
of mismanagement nor government incompetence. Rather, it is a dramatic tale of
how the
government's privatization and liberalization programs have allowed the
unprecedented
plunder of the national flag carrier and the gross violation of workers' rights
by big
comprador and foreign capitalists.
It is the story of Lucio Tan's insidious move to milk the national flag
carrier, bust the
unions and reposition himself for even bigger profits. Of the Ramos and Estrada
governments that not only looked the other way, but actively participated and
even
benefited from Tan's evil schemes. And of psuedo union leaders and opportunists
who
collaborated with Tan and betrayed the Filipino working class.
It is also a story of the PAL workers' noble fight to protect their jobs, wages
and trade
union rights.
The following is Bayan's view on the events that transpired in PAL, its
lessons, and its
consequences on the labor movement and the progressive movement as a whole.
Privatization: paving the way for PAL's plunder
In 1992, the Ramos regime's privatization program allowed beer and cigarette
magnate Lucio
Tan to secretly take control of PAL through his 40% stake in PR Holdings, which
had a
controlling share in the national flag carrier. After a year, Tan increased his
stake in
PR Holdings to 50.03% by buying the shares of Andres Soriano. He then kicked
out Antonio
Cojuangco as PAL Chairman and in 1994 eventually took over the position.
In March 1995, the dissolution of PR Holdings left Tan with only a 33% equity
in PAL. But
in 1996, the Ramos government allowed him to put in P5 billion in the ailing
company, in
the process giving him half of the government's 46.30% stake in the airline and
giving him
majority ownership (56.63%) of PAL.
In effect, the controversial 1996 deal allowed Tan to buy 463 million shares of
PAL worth
P14/share at a measly P5/share (or P2.315 billion - a staggering 64% discount)
and
actually own the national flag carrier.
But did Tan actually put in his own money in PAL? No. He was just a conduit for
foreign
banks and capitalist-speculators. Majority of his so-called investments were
actually
loans from foreign and local banks, including government financial institutions
(GFIs).
Part of his $4 billion refleeting program, for example, was funded by an $850
million loan
from foreign creditors and a $230 million loand from local banks, including his
own Allied
Bank.
The sale was questioned by eight senators who pointed out the danger of handing
over such
a strategic national asset to the hands of one man. The senators also said the
sale meant
the surrender of the preemptive rights of GFIs over its PAL shares. The
senators were
especially concerned that in case Tan mismanaged the airline, the government
and the
people would stand to loose billions. The Ramos Administration merely dismissed
such
legitimate fears.
Tan makes PAL a milking cow
From day one, it was clear that Lucio Tan was out to milk PAL of everything it
was worth,
even at the expense of the company itself and its workers. Among his first
orders of
business was to cut up PAL into "separate business units" (SBUs), much like
what he did at
his own Fortune Tobaco Corp.
The strategy was quite simple. In the guise of streamlining and restructuring,
the
profitable operations of the company were spinned off into various
subsidiaries, with the
profits later diverted to separate holding companies. In the end, PAL even
found itself
paying for the services it once provided for itself.
The prime targets for PAL's spin-off program were its most profitable divisions
-
catering, ground handling and maintenance - which together were estimated to
account for
5% - 10% of the airline's yearly revenues amounting to anywhere from P167
million to P333
million (based on revenues as of April 30, 1998).
The three divisions serviced 25 other airlines. The ground handling unit held
contracts
with 27 international airlines as of 1997. The catering services division
served five
million meals yearly, and had gathered international recognition as one of the
best.
Thus, by spinning off PAL's most profitable operations to his wholly-owned
companies, Tan
effectively swept the profits from under PAL and grabbed it all to himself.
A prime example is the Tan-owned MacroAsia Corp. In 1997, at the height of the
financial
crisis, PAL bought 700 shares of MacroAsia at P686 million, giving it a 70%
stake and
making MacroAsia a subsidiary of the airline. Within months, MacroAsia ate up
half of
PAL's catering services operations, serving as much as 5,500 meals a day. Macro
Asia also
entered into joint ventures with the Singapore Airport Terminal Services Ptc.
Ltd. and
Eurest International B.V of the Compass Group, the largest food management
company in the
world. The subsidiary was called Macro Asia-Eurest Catering Services.
Thus, in a year, MacroAsia managed to rake in a 1,573% increase in its net
profits, rising
from P1.56 million in 1996 to P26 million in 1997.
Then suddenly, on June 9 this year, four days after the pilots' strike, PAL
unloaded its
70% stake in MacroAsia, selling it at the stock market at a 25% discount (worth
P247
million) to, who else, Lucio Tan himself. In other words, PAL bought MicroAsia
as its
subsidiary - a deal responsible for MacroAsia's spectacular growth. But just as
MacroAsia
was gaining big profits, PAL sold its share in the company to Tan at a
discount. So now,
Tan owns MicroAsia and gets the profits formerly made by PAL all to himself.
PAL Senior Vice President Avelino Zapanta revealed that there are, as of now,
five
spin-off companies generating non-ticket revenues: ground handling, catering,
warehousing,
maintenance and the PAL Learning Center.
In the case of the PAL Learning Center, the P1.5 billion facility was
originally
publicized as PAL's. But in reality, the building housing the center is owned
by Tan, with
PAL having to pay a rental fee of P1.775 million a month. This is irregular,
given the
vast empty lots owned by PAL at the Nichols Air Base area.
Aside from spinning off PAL's profit-making divisions, Tan also bled the
company by:
-
Pocketing commissions from PAL's $4 billion refleeting program
involving the purchase of
36 new jets;
-
Using dummy corporations to lease planes to PAL at higher than normal
rates. From August
to December 1997, nine dummy corporations, eight of them with abbreviated
names spelled
P-A-L and sharing the same office address, collected P3.93 billion worth of
aircraft
leases from PAL;
-
Earning ticket commissions worth P4.5 billion;
-
Collecting rental fees for office space at Allied Bank Building;
-
Hiring the services of his own security agency for PAL;
-
Transfering $30 million worth of real mortgaged estate properties to
Allied Bank;
-
Enforcing the exclusive use of Fortune Tobacco and Asia Brewery
Products (e.g. Absolute
bottled water) in PAL offices and flights.
It is no wonder then that since 1994, when Lucio Tan took over PAL's
management, the
airline has lost P14.8 billion. Of this, P8.1 billion was lost in 1998 - the
biggest
single loss in the airline's 57-year history. Total debt stands at P90 billion.
Labor: a target and a scapegoat
PAL workers have always been at the losing end of the insidious profiteering
schemes of
whoever controls the airline. In 1994, the PAL management, citing financial
difficulties,
compelled the pilots' union (the Airline Pilots' Association of the Philippines
or ALPAP)
to abandon demands for a new collective bargaining agreement (CBA). Instead, a
six-year
memorandum of agreement was signed which, among other things, provided for a
wage freeze
till the year 2000.
The situation is worse in the case of the cabin crew union (the Flight
Attendants and
Stewards Association of the Philippines or FASAP), whose members have not
signed a CBA for
the past seven years.
Of the three unions, it is the ground crew union (the PAL Employees Association
or PALEA)
which has managed to bring the Tan-led management to the negotiating table.
The PALEA-led
strike in 1996 resulted in a multimillion CBA package for its members.
But for Lucio Tan, busting the unions had become an imperative. He needed this
to fulfill
his plans to totally spin-off the company's profitable operations, drastically
cut down on
labor costs in order to cover losses due to his rapacious milking operation
and, as a
result, mulct more from PAL.
Thus, on February 1998, Tan announced his plan to downsize PAL. One hundred
five
managerial and administrative staff were immediately laid off. Plans were
revealed to cut
the work force by 40%, or about 5,600 employees.
The first to be dealt a blow was ALPAP. The management had insisted on its
right to retire
pilots who had exceeded 20 years of service or 20,000 hours of flying time.
This would
have led to the retrenchment of at least 230 pilots. ALPAP resisted, then went
on strike
in June 5, 1998 over job security and safety issues. The next day, 29 ALPAP
officers were
fired. On June 7, all 600 pilots were fired.
After a week, on June 15, termination papers were served to 3,600 ground
employees and
1,400 cabin crew, prompting PALEA to strike, quite belatedly, on July 22. A
settlement
agreement - brokered by opportunists and psuedo trade union leaders - was
reached on July
26 with PALEA agreeing to a reduction of the ground crew by 1,800.
Meanwhile, FASAP filed an illegal dismissal class suit at the National Labor
Relations
Commission (NLRC). The NLRC has asked PAL to reinstate the 1,400 cabin crew but
PAL
management has refused.
All the while, the Department of Labor and Employment (DOLE) and Pres. Joseph
Estrada were
supporting Tan and calling on the PAL employees to agree to everything that the
PAL
management demanded.
In the guise of trying to "save PAL," Tan, with the personal backing of Pres.
Estrada
himself, "offered" PALEA members a 20% stake in the company worth P300,000 per
employee,
equivalent to three seats in the PAL board of directors. In exchange, the union
would
waive its right to strike and to negotiate collectively for 10 years. At first,
majority
(14) of the PALEA board of directors accepted the offer, but later reversed its
decision
due to the membership's clamor for a rejection. In response, Tan illegaly
closed down the
57-year old airline on September 23. It opened more than a week later, after
union leaders
agreed to a referendum where they were given two "options:" agree to the Tan
proposal or
be terminated from the job. With a gun pointed to their heads, the workers were
forced to
vote yes to the agreement.
The PAL-PALEA agreement is a dangerous, precedent-setting agreeement. For the
first time
in the history of the Philippine labor movement, workers were forced, through a
government-sponsored referendum, to gave up their fundamental and
Constitutional right to
collective bargaining and right to strike. Such was the result of joint efforts
among the
PAL management, PALEA's yellow union leaders and the Ramos regime to supposedly
save the
ailing airline.
The agreement stems from the erroneous and deceptive view that the PAL workers
were the
ones who caused the company's downfall. According to the PAL management, the
1994, 1996
and 1998 strikes, including the union's "hardline" positions, caused
irreparable financial
losses for the company and scared off potential investors, making the airline
unviable and
subject to closure.
Ironically, PAL's payroll for all its 14,000 employees amount to only P400
million a
month, equivalent to 10-12% of total expenses.
But using this clearly erroneous line of reasoning, the PAL management, the
DOLE and the
President himself are forcing PAL employees to "sacrifice" not only their
economic
benefits but even their basic trade union and human rights. Worse, according to
the
Kilusang Mayo Uno (KMU) is the push towards "corporatism or business unionism
- a fascist
scheme developed by capitalists especially in the depression years seeking to
suppress
workers' dissent by making them 'co-owners' of business and as political
stooges of the
government."
Clearly, events surrounding the labor issue at PAL smacks of the connivance
between
foreign and bourgeoise-comprador capital, the fascist State and yellow union
leaders to
exploit and suppress the working class in the name of money and more money.
Government culpability
Lucio Tan couldn't have plundered PAL if both the Ramos and Estrada regimes
didn't allow
him to do so. Due to both governments' thrust to privatize public firms and
utilities and
liberalize the economy, Tan was given the chance to wreck havoc on the airline
by making
it his personal milking cow.
The bargain basement sale to Tan of half of the government's stake in PAL in
1996 was, in
the first place, highly disadvantageous to the government and the taxpayers.
The deal cost
GFIs P4.167 billion in lost income.
Even as it was obvious that Tan was deliberately crashing the airline, the
government did
not lift a finger to protect even the remaining 23.15% interest of the public
in PAL. And
when, in response to the management's union busting, the pilots' unions struck,
Pres.
Estrada immediately branded the action as illegal.
Throughout the labor-management standoff and until now, the Estrada regime has
been
patently pro-Tan and anti-labor. Despite his "Erap para sa mahirap" slogan, the
President
himself was convincing the unions to accept the planned lay-off of 5,000
employees.
Furthermore, it was the DOLE and Malacaņang that brokered and worked for the
approval of
Tan's final offer by the unions.
And when Tan decided to close the company with impunity, the government again
revealed its
true colors by allowing such an act of econmic sabotage which caused billions
in lost
incomes nationwide. Instead of taking over what was clearly a strategic public
utility and
averting a national disaster, the government simply shrugged its shoulders and
let Tan
blackmail his workers and the entire country.
The "closure" was, in essence, a Tan-Estrada ploy, a masterstroke aimed at
bringing the
PAL workers to their knees. Faced with what was a clear violation of the
Constitution and
the bill of rights, the President callously commented that "you can't eat a
CBA."
Obviously, the President could not turn his back on Tan, who was the number one
financier
- reportedly sinking as much as P40 million - of his presidential campaign. And
obviously,
the President could not afford to "scare off" foreign investors who are the
backbone of
his hand me down poverty-alleviation strategy. For the Estrada administration,
it is more
important to keep people like Tan and his foreign partners happy even at the
expense of
the people.
Lessons and challenges
The government's privatization and liberalization programs lie at the root of
PAL's
troubles. By allowing big bourgeois-comprador Lucio Tan to own the national
flag carrier
and later milk it for all its worth, the government, in fact, is equally guilty
in the
flag carrier's woes.
But the government's culpability goes even deeper. In this case, it was obvious
that the
Estrada regime did not only provide Tan and his foreign partner/creditors an
opening, but
in fact worked with them in plundering the flag carrier and in violating the
economic and
political rights of the PAL workers. It's privatization and liberalization
policy now
allow foreign creditors and investors to seize a bigger part, and dictate the
operation,
of the national flag carrier. The latest news is that giant Cathay Pacific is
set to own
40% of PAL.
Worse, the obsessive privatization of strategic utilities and public firms is
now being
done wholesale, with equally wholesale consequences. The PAL experience shows
that
privatization is not the antidote to government inefficiency. It just shifts
the
plundering to the private sector. Of what good is the privatization of Petron
when oil
prices continue to skyrocket? Or of the MWSS when all that the tap excretes is
rust-laced
water, if at all, and the rates go up, as they eventually will in 1999?
Equally culpable were the opportunists and yellow labor leaders who served as
brokers to
the grand sellout of the PAL workers' rights. Former SANLAKAS Chairperson RC
Constantino
Jr., BMP Chairperson Felimon Lagman, his brother former Cong. Edcel Lagman,
PALEA Pres.
Alex Barrientos and a number of PALEA board members all, at one part or the
other, helped
in bringing about the sellout of the PAL workers.
The danger now is that the incidents at PAL have set an ugly precedent in
labor-management relations. In fact, it was in response to the PAL strike that
Pres.
Estrada endorsed a proposed congressional bill banning strikes in public
utilities and
strategic firms.
The PAL fiasco also sets a bad precedent in the way the government deals with
past and
present presidential cronies, and how government should intervene in the
private sector.
The signal is that these people are now allowed to hold the entire country
hostage for
their personal interests, and that due to the government's thrust towards
privatization,
it can't do anything about the insidious and disastrous practices being done by
members of
the ruling classes and their foreign partners.
Thus, the events at PAL should serve as a challenge for the progressive
movement and the
Filipino people in general. For one thing, it validates our continuing fight
against the
government's foreign-dictated privatization, liberalization and deregulation
programs.
Second, the connivance of big business, the state and various class
collaborators have
been exposed more to the people. Third, we are taught to be more critical, more
vigilant,
and more militant in protecting the basic interests of the workers and other
people.
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