MANILA, Philippines — Philippine Airlines (PAL) was moving closer to filing Chapter 11 creditor protection in the United States, joining other global carriers in safeguarding assets during the severe business downturn caused by the COVID-19 pandemic.
Citing data from Cirium, online aviation news and information website FlightGlobal reported that PAL was seeking a restructuring agreement with creditors ahead of filing Chapter 11 proceedings potentially by the end of May.
PAL did not immediately reply to a request for comment on Wednesday.
Earlier reports indicated that PAL had some $5 billion in total liabilities—including its outstanding obligations to foreign aircraft suppliers.
The flag carrier owned by taipan Lucio Tan has been eyeing a Chapter 11 filing in New York since late 2020.
Tapped by other global airlines, the move would provide PAL with breathing space while it restructures obligations to creditors and aircraft lessors. More importantly, it would shield PAL from lawsuits and protect its assets while recovery plans are being implemented.
FlightGlobal reported that PAL was first seeking support from the majority of its creditors.
Joseph Roxas, president of Eagle Equites Inc., said on Wednesday the filing of Chapter 11 proceedings would buy PAL additional time while air travel remained mainly grounded by the pandemic.
PAL, which counts Japan’s ANA Holdings as a minority shareholder, would also need to raise fresh capital to support operations, Roxas explained. But this could prove challenging as the aviation industry reels from the pandemic and the government imposed travel restrictions amid a new wave of COVID-19 infections.
“Banks have all been hit by nonperforming loans during this time. And no matter how you see interest rates, you still need to see good credit ratings to be able to lend your money out,” Roxas said.
PAL has yet to detail plans to raise fresh funds beyond cash injections made by Tan’s private companies in 2020.
Similar to competitors, PAL has scaled back operations and implemented deep job cuts to survive the global health crisis.The Philippines has also lagged behind neighbors in the region that have significantly restored their domestic operations.
Given its large international network, PAL suffered further from government guidelines limiting the arrival of international passengers to 1,500 per day in Manila’s Ninoy Aquino International Airport.