Philippine Airlines Inc. (PAL) has secured the US court approval to start its recovery plan that will reduce its debt to over $2 billion, streamline its fleet and allow it to acquire additional liquidity to support long-term growth amid the pandemic.
PAL said the US Bankruptcy Court of the Southern District of New York has approved its Plan of Reorganization to significantly reduce debt, streamline its fleet and raise additional funds.
The consensual Plan was accepted by 100 percent of the votes cast, which were from PAL’s primary aircraft lessors and lenders, original equipment manufacturers and maintenance, repair and overhaul service providers, as well as certain funded debt lenders.
The recovery plan provides for over $2 billion in permanent balance sheet reductions from existing creditors, allows PAL to consensually contract fleet capacity by 25 percent, improves PAL’s critical operational agreements and includes $505 million investment in long-term equity and debt financing from its majority shareholder.
PAL said it expects to emerge from its court-supervised Chapter 11 process before the end of 2021.
“We have a few more procedural steps to take before we can complete the Chapter 11 process, after which we will focus intensely on serving the public, navigating the continuing challenges of the pandemic and economic recovery, and sustaining the links that connect our archipelago,” PAL said.
Following the implementation of the Plan, PAL said it will be better positioned to capture travel demand and serve the needs of global citizens, actively contributing to the Philippine economy.
“Today’s court approval represents a critical moment in our journey to emerge as a stronger airline. We are thankful for our loyal customers, dedicated employees, and the support of our shareholders and partners and government, which has enabled us to move efficiently through the process and reach this milestone,” Gilbert Santa Maria, PAL president and chief operating officer, said in a statement over the weekend.
PAL continues to operate flights to 32 international and 29 domestic destinations from its hubs in Manila, Cebu and Davao.
The Philippine flag carrier expects to restore more routes and increase flight frequencies as travel restrictions ease and borders reopen.
This month, PAL noted an improvement in average passenger load factor in both domestic and international flights as travelers rush home to rejoin their families
PAL’s load factor stood at 80 percent to 85 percent this month across all high-density routes in its domestic operation. International flights remain limited due to the travel cap.
With this, PAL said its average passenger load factor is currently at 70 percent. For flights arriving in Manila, passenger load factor averages 75 percent.
