As the pandemic continues to affect the aviation industry while numerous travel restrictions are still in place, the national flag carrier and Asia’s oldest airline Philippine Airlines on Saturday announced heavier restructuring efforts to regroup the bleeding airline.
PAL filed for Chapter 11 Bankruptcy Protection in United States Bankruptcy Court in the Southern District of New York. The Chapter 11 filing aims to restructure the airline, cut its debt, defer payments and have fresh capital to recover and return to profitability. The airline will also make parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010 or FRIA.
Once it garners court approval, the restructuring plan will provide over $2.0 billion in permanent balance sheet reductions, which will allow PAL to cut its fleet by 25 percent, and additional funding of $655 million: $505 million in long-term equity and debt financing from PAL’s majority shareholder, and $150 million of additional debt financing from new investors.
AUP reported last month that the airline returned two Airbus A350 and A321. According to sources and as confirmed by the airline’s announcement, PAL will return more aircraft to their lessors, including Boeing 777-300ER, Airbus A330-300, and Airbus A321 aircraft.
Amid the financial restructuring, the flag carrier reassures flights and services will continue: “PAL will continue to operate flights in the normal course of business in accordance with safety regulations, and the Company expects to continue to meet its current financial obligations throughout this process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.”
Pending approvals from the U.S. Court, PAL will continue to ramp up flights to domestic and international destinations parallel to the industry’s recovery outlook, as well as to mount flights to repatriation and vaccine delivery missions. The carrier will also still honor valid tickets, travel vouchers, Mabuhay Miles, and refund obligations.
“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. 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,” PAL Chairman and CEO Dr. Lucio Tan said
“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,” added PAL President & Chief Operating Officer Gilbert F. Santa Maria.
Philippine Airlines Inc. is the only entity included in the Chapter 11 filing; PAL Holdings, Inc. and Air Philippines Corporation (PAL Express) are not included.
A website dedicated to PAL’s recovery and restructuring efforts, PALrecovery.com, was also launched during the announcement for public access.
Leave a comment