Flag carrier Philippine Airlines Inc. (PAL) is expected to emerge from the Chapter 11 bankruptcy process and corporate rehabilitation by yearend with new capital and a lighter cost structure.
In a virtual press briefing, Gilbert Santa Maria, PAL president, said the court will approve its reorganization and recovery plan in the next few months.
The plan includes fundraising and debt reduction to allow the airline to exit from the Chapter 11 process.
“Once we exit before the end of the year, we’re done, we will have a lighter balance sheet, we have new capital and our cost structure will be a lot lighter so we will be done before the end of the year,” Santa Maria said.
PAL will also complete filing its corporate rehabilitation for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010 (FRIA) by yearend.
“As soon as we complete the so-called first day hearing in the US, it’s going to happen on Thursday, the court order will be used now for us to file locally under FRIA law, in terms of rehabilitation. That’s why we go through a pre-arranged process, this allows Philippines Airlines to stay within the rehabilitation process in a shortest possible time. We expect to emerge and get our plan approved in the court within this year and that’s the target,” said Nilo Thaddeus Rodriguez, PAL chief financial officer.
The restructuring plan, which is subject to court approval, provides over $2 billion in permanent balance sheet reductions from existing creditors and allows the airline to consensually contract fleet capacity by 25 percent.
This also includes $505 million in long-term equity and debt financing from PAL’s majority shareholder and $150 million of additional debt financing from new investors.
Meanwhile, Santa Maria assured the airline’s restructuring plan will no longer result in additional job cuts despite the 25 percent reduction of its aircraft.
To date, PAL has a total of 92 aircraft and is expected to return 22 more to have a total of 70 in its fleet which is enough to address the demand during the pandemic.
“We will end up with 70 aircraft. The remaining fleet will be more than adequate to see our demand, until volume comes back,” SantaMaria said.
PAL further said it will postpone the delivery of 13 narrow body aircraft which are scheduled to be delivered within the next five years.
“We are able to get the support of Airbus to postpone that delivery, actually give us an option to cancel some of those aircraft beyond 2026 to 2030 depending on how this recovery shapes up,” Sta Maria said.
Meanwhile, PAL is expected to have P3 billion in revenues by 2025.
“We don’t foresee demand coming back to pre-pandemic level until 2024-2025 and that point in time… to have more than P3 billion in revenue by 2025, we expect to reach those numbers closer to the back half of the decade,” PAL said.
In the first half this year, PAL managed to trim its comprehensive loss by 18 percent to P18.04 billion, from the P22.02 billion losses reported in the same period last year, due to lower expenses attributed to the significant reduction of flights brought by the severe impact of the pandemic.
Consolidated revenues for the first half of 2021 declined 51 percent to P18.04 billion from P36.82 billion a year ago, due to the effect of the pandemic which started in mid-March of 2020.
Last year, PAL’s net loss ballooned to P73 billion from P10.2 billion in the previous year, as its operations were severely affected by the worldwide travel restrictions due to the COVID-19 pandemic.
As of end 2020, the airline operates with 97 aircraft and a total of 6,238 workers, of which 3,661 are pilots and cabin crew.
