Flag carrier Philippine Airlines Inc. (PAL) has filed for bankruptcy in the United States to implement a restructuring plan that involves raising $655 million and over $2 billion debt reduction to continue its operations amid the pandemic.
In a statement over the weekend, Asia’s oldest airline operator, said it has entered into a series of agreements with substantially all of its lenders, lessors and aircraft and engine suppliers as well as its majority shareholder to allow it to restructure and reorganize its finances to navigate the coronavirus crisis and emerge as a leaner and better-capitalized airline.
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.
PAL will also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.
During the Chapter 11 case, PAL will continue to operate flights in the normal course of business in full accordance with safety regulations, and expects to continue to meet its current financial obligations to employees, customers, the government, and its lessors, lenders, suppliers and other creditors.
“We welcome this major breakthrough, an overall agreement that enables PAL to remain the flag carrier of the Philippines and the premier global airline of the country, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the world,” said Dr. Lucio Tan, PAL chairman and chief executive officer.
“We are grateful to our lenders, aviation partners and other creditors for supporting the plan, which empowers PAL to overcome the unprecedented impact of the global pandemic that has significantly disrupted businesses in all sectors, especially aviation, and emerge stronger for the long-term,” Tan added.
PAL has committed to continue business operations throughout the restructuring process.
The airline said it will gradually increase domestic and international flights in line with market recovery.
In the coming weeks, PAL will build up flight frequencies on key regional and long-haul routes while expanding domestic networks from its hubs in Manila and Cebu. The airline said all valid tickets and travel vouchers will be honored and also reaffirms its commitment to fulfill all refund obligations.
“Following the recent celebration of our 80th anniversary, we move forward with renewed confidence, as today’s actions enable us to continue serving our customers and the Philippine economy long into the future. I would also like to recognize the incredible dedication of our employee teams around the world, who have continued to deliver the highest quality of service through these trying times,” said Gilbert Santa Maria, PAL president and chief operating officer.
PAL also assured that travel agencies and other commercial partners will experience no disruption in their interactions.
In the first half this year, PAL was able to trim its comprehensive loss by 18 percent to P18.04 billion from the P22.02 billion losses reported in the same period a year ago, due to lower expenses as it significantly reduced flights brought about 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 last year, 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 operations were severely affected by the worldwide travel restrictions due to the 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. – Myla Iglesias
