Philippine Airlines (PAL) is preparing to return one of its aircraft to the lessor and reduce its fleet amid an ongoing restructuring program, a regulatory filing showed last week.
PAL had sought “advanced clearance” from the Department of Finance (DOF) to return or re-export one of its Airbus A321-231 planes that was earlier brought into the country tax-free.
This was according to a Bureau of Customs memorandum dated July 19, 2021, but posted on its website on Aug. 5 this year.
In an attached letter to the flag carrier, Antonette Tionko, finance undersecretary for revenue operations group, said the department had already cleared the airline’s request, subject to customs laws and regulations.
Tionko also asked PAL to inform the department of the final terms of the return since these “have yet to be finalized.”
“In case the exportation should not proceed, the DOF likewise request that it be notified,” she added in the letter.
PAL earlier announced plans to return aircraft and downsize its fleet under a comprehensive pandemic survival program to restructure debts, cut losses and continue flight operations.
In its annual report, it explained the fleet adjustment was meant to “reduce capacity and match the projected reduced market demand in the short term.” It also planned to discontinue unprofitable international routes.
The PAL Group had 95 planes as of March 2021, including 10 Boeing 777-300ERs and six A350s for ultra-long haul flights and 23 Airbus A321-231s for domestic and regional operations.
According to sources, a key feature of PAL’s restructuring would involve a Chapter 11 creditor protection filing in the United States, however, airline officials have yet to confirm the plan.
PAL parent firm PAL Holdings had confirmed it was in ongoing negotiations with creditors and lessors over its debts and that it was eyeing “pre-negotiated court-rehabilitation in an overseas jurisdiction.”
The Inquirer earlier reported PAL was targeting a Chapter 11 filing in New York on June 29 after several delays, however, the carrier had yet to file a petition.
PAL Holdings had stopped debt payments as early as April last year, defaulting on loan provisions, to preserve cash during the global health crisis.
The company saw losses climb 600 percent to a record P71.8 billion in 2020 while its first quarter 2021 loss eased by 8.4 percent to P8.6 billion. It also recorded a capital shortfall of P74 billion in 2020. This grew 13.5 percent to nearly P84 billion in the first quarter of this year.
PAL Holdings, controlled by billionaire Lucio Tan with Japan’s ANA Holdings as minority shareholder, said it would need to raise additional funding of P24.25 billion from its major stockholder apart from loans from private and government banks.
Tan had already infused into the company P17.2 billion since late 2019 to keep the flag carrier afloat.