Philippine Airlines’ (PAL) publicly-listed parent company saw losses soar nearly 600 percent to a record P71.8 billion in 2020 as the air travel business was decimated by the global health crisis.
PAL Holdings Inc.’s full-year results showed the extent of the damage unleashed by the COVID-19 pandemic and also the remarkable steps PAL took to survive its fourth consecutive year in the red.
PAL said in its 2020 report these included cutting costs and suspending long-term debt payments to lenders since April last year—triggering default provisions.
It also revealed plans by the major stockholder, led by billionaire Lucio Tan, to raise up to P24.25 billion in fresh financing, which might include P12 billion from government and private lenders, and a P6-billion exit facility.
Ultimately, PAL is pinning its recovery hopes on the successful negotiations with creditors and lessors as it confirmed, for the first time, that it was eyeing a “prenegotiated court-rehabilitation in an overseas jurisdiction.”
The Inquirer earlier reported that PAL was planning to pursue a Chapter 11 creditor protection filing in the United States to shield its assets and restructure hundreds of billions of pesos worth of obligations.
Finance Secretary Carlos Dominguez III said that government financial institutions were “awaiting the outcome of the Chapter 11 filing of PAL in the US and its final rehabilitation plan.”
PAL saw losses surge in 2020 from P10.3 billion in the previous year.
Revenues dove 64 percent to P55.26 billion while expenses fell 46 percent to P81 billion amid flight restrictions and the collapse in travel demand.
PAL’s losses eased by 8.4 percent to P8.6 billion in the first quarter of 2021 while revenue fell 74 percent to P8.3 billion.
It cut about 30 percent of its workforce, or more than 2,000 employees, last March.
April Lee-Tan, research head at COL Financial Group Inc., said PAL could recover sooner “if we see vaccinations pick up steam and the number of infections go down on a sustainable basis.”
PAL posted a capital shortfall of P74 billion in 2020, which climbed to nearly P84 billion in the first quarter of this year.
Secured loans and lease liabilities last year hit P32.57 billion and P152 billion, respectively. Short-term liabilities of P196.3 billion were six times the size of its current assets.
PAL’s independent auditor, SyCip Gorres Velayo & Co. (SGV), warned in its attached report that plans to raise funds and carry out restructuring “have yet to be concluded as of this date.” In an unusual move, SGV refused to render an opinion on PAL’s financial statements, stating that it lacked “sufficient appropriate audit evidence to provide a basis for an audit opinion.”
The move prompted the Philippine Stock Exchange to halt trading of PAL’s shares on Thursday. PAL sought to calm investors and customers, saying flights and operations “will not be affected” during the restructuring process. “We are confident that the restructuring will enable PAL to strengthen its capital structure, meet stakeholder obligations and position the company for long-term success,” PAL said in a statement. INQ