Philippine Airlines Union Rejects Offer

Philippine Airlines Inc.’s union voted down a proposed 10-year labor agreement, a decision that might lead to the closure of Asia’s oldest carrier at midnight today.

The Department of Labor and Employment said the union, Philippine Airlines Employees Assn., voted 1,371 to 1,055 to reject the offer to swap a 10-year suspension of collective bargaining rights for a 20% stake in the airline.

The Philippine government said it will “exert all efforts to save” the airline’s domestic routes by arranging a bridge loan for PAL, which handles about 80% of domestic air traffic, that would allow the airline to keep running for three months. PAL handles about 80% of all domestic air traffic.

PAL, meanwhile, is moving ahead with plans to shut down the carrier, saying years of labor turbulence and $2.1 billion in debt have made a recovery from mounting losses impossible.

“The principal consensus was that domestic lines are very important to the economy and the country,” said Jerry Barican, spokesman for President Joseph Estrada. “The economic effects of a closure of these lines will be very strong, very painful. So we are focusing on keeping these lines or alternatives open.”

The union’s rejection of PAL Chairman Lucio Tan’s proposal was a defeat for Estrada, who tried to broker a last-minute agreement. After meeting with union leaders for three hours Monday night, he persuaded them to take the proposal to a secret ballot of its rank-and-file members.

The union last week rejected Tan’s offer to swap a 20% stake in the airline--and three seats on the 15-member board--for a 10-year suspension of its collective bargaining rights.

The assurance of industrial peace was a condition set by PAL’s creditors and potential investors before they would commit to a rehabilitation plan.

Estrada, who has tried to pressure the union into accepting Tan’s take-it-or-leave-it offer, sweetened the proposal by offering PAL employees a fourth board seat held by the government.

PAL executives had said they would consider keeping the carrier aloft if unions agreed to a long-term agreement, and if the government took steps to limit foreign competition.