Lufthansa vs. PAL
In October of 2009, the German flag carrier Lufthansa told investors during a meeting that it was confronted with considerable risks in regard to its income targets even as it was bringing in revenue somewhat higher than the same period in the previous year, 2008.
A number of factors led to the airline’s current plight. Management cannot be blamed for its predicament but the executives of Lufthansa point to external factors as the cause of its blight.
The roots of the problem were traced to fresh oil price increases and weak passenger demand. Lufthansa shares of stocks went down by 5.5 %, closing at Euro 10.37 from its original price. The flag carrier of Germany was certain they can clarify the problem with their report of an almost hostile environment.
The German airline predicted the problem to subsist in that year. Other airlines like United Kingdom’s BMI British Midland and Austrian Airlines that Lufthansa availed were only going to bring in break even or negative earnings in the coming months.
In the United States, the prospects did not look rosier. Several U.S. airlines, the American Airlines (AAL) and US Airways (USAW) tried drastic measures to plug costs in the face of the shortfalls in travel and tourism demands. AAL was scheduled close down its maintenance facility in Kansas and downgrade its stations around the country leading to the lay-offs of no less than 700 workers.
USAW forms part of Lufthansa’s Star Alliance of international carriers – supposedly to suspend or totally discontinue regular routes between Philadelphia and five landing destinations in Europe, causing the retrenchment of more or less 1,000 personnel.
To compound its problems further, in July 2011, Lufthansa was rebuked having a hostile policy in terms of granting Accessibility to special passengers like disabled persons. Even the United Nations itself, was antagonized by the airline when it refused to allow on board UN’s Special Rapporteur on Disability, Shuaib Chalklen April 4, 2011 who has flown unaccompanied for the last 15 years. Chalklen tried in vain to board SWISS flight LX 353 on a routine one hour and 40 minute journey from London UK to Geneva, Switzerland. SWISS is owned by Lufthansa.
European Commission reports that the airline limited the number of special passengers or Persons of Reduced Mobility (PRMs) allowed to travel on any given flight.
There are other pressing problems besetting the airline. On the other hand, a similar case is that of the Philippine flag carrier Philippine Air Lines (PAL).
The airline’s ledgers had been in the red for quite some time now – at one time it suffered a loss of 90 billion. PAL’s high operating costs against its downsliding income due to world economic recession, international travel and exports slump are at a record low. According to allevii’s blog, PAL’s own predicament began as early as 1998 and fairly recently during the events of 2008.
PAL downsized its organization and resolved to out-task its operations, reduce its fleet and lay off workers.
Given its detractors, like Lufthansa what options will PAL have? PAL inevitably has to survive and do all these, but at what cost? Right now, it faces several cases from the Regional Courts, right up to the Supreme Court.
Unlike Lufthansa however, PAL does not seem to have the full support of the government. The political party of the Presidential Political Adviser, has come out openly in support of the retrenched employees of the airline in a Privilege Speech at Congress. The adviser’s party also accused PAL of economic sabotage. On the other hand, the adviser’s boss, the chief executive is trying to do a balancing act by dishing out statements in support of PAL.
In comparison, while Lufthansa is wavering in its economic posture and is threatened with harsher realities during the coming European Union’s economic crisis, it has everything it needs to be able to weather the storm. It can even face the United Nations squarely in the face and give it hell. Whereas, PAL, appears to be the whipping boy of nearly everyone, the political adviser of the incumbent president among them. Can it wage a confrontation with even a lowly trade organization of ASEAN? I wonder. Are we hoping for better things to come for the Philippine’s national flag carrier?
Implications for Philippine economy
If Europe suffers economic shortfalls, Philippine business and the entire economy will terribly be affected, despite the fact that the economy is boosted by OFW remittances and exports at the present. If a European crisis starts kicking, even our exports will suffer a painful slowdown. GDP markers will shoot down as a result.
Remittances will already be affected by the trend in the Middle East of hiring locals instead of foreign workers. To the uninitiated, a lot of poor Saudis live below the marginal subsistence line in their land. A compassionate Saudi government for instance, cannot afford to let its own people live in inhuman conditions. Thus the new emergent policy of easing out foreign workers and placing locals in their stead. Such move could affect the myriad of Filipino workers now in the Middle East, most especially if the other MidEast countries follow suit.
This inevitably does not augur well for the administration of Pres. Benigno Aquino. With a slew of internal problems now troubling and soon to hit the Philippines like multiple whammies, with its business feeling the pain of an unresponsive and penny pinching regime, there is nowhere for the country to go but down.
Any cosmeticizing by the Malacanang Palace cannot save the day.
Europe’s future very bleak
Greece fiscal future is not good. This bodes not too well for the future of Europe’s economy. Unmitigated borrowings by Greece has left if mired in sovereign debt that pushed the Greek economy into a downward spin.
The downfall of Greece will cause a weakening of the Euro. In the event that the Euro suffers devaluation, all other economies around the world will feel the punch and a global recession is bound to occur between this year up to the next. With more serious devastating calamities hitting the planet, the problems will compound for all of us.
The U.S. which is already feeling the crunch, will not be able to escape the slump and downturn.
The Shepherd Lions Gathering 