PAL files bankruptcy in New York, commits to cut fleet, raise $655M in new financing
In this photo taken on September 13, 2016, shows Philippine Airlines planes are parked at the international airport of Manila. (Photo by TED ALJIBE / AFP)
MANILA, Philippines — Philippine Airlines (PAL) pushed through with a long-anticipated bankruptcy protection filing in the United States, committing to slash its fleet size by 25 percent and raising $655 million (P32.6 billion) in funding mainly from owner Lucio Tan and lenders.
PAL said on Saturday this would “allow the company to successfully restructure and reorganize its finances to navigate the COVID-19 crisis and emerge as a leaner and better-capitalized airline.”
The flag carrier added that flights operations would be unaffected as it filed Chapter 11 creditor protecting proceedings in the Southern District of New York.
It would also make a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.
The Chapter 11 plea deal still required the approval of the US court.
PAL, which has a fleet of 95 aircraft, said the agreement involved over $2 billion in payment reductions from majority of its lessors, lenders and other creditors.
PAL, owned by Tan with Japan’s ANA Holdings as minority shareholder, said another $505 million infusion via equity and debt will come from its majority stockholder.
Lastly, the airline is securing $150 million in additional debt financing from “global private investors” for post-restructuring activities.
PAL stated that, during this period, all valid tickets, vouchers, refund applications and Mabuhay Miles to be honored.
The flag carrier, the oldest in the region, joins other global airlines that have also turned to a Chapter 11 filing to survive the global health crisis.
This was meant to allow PAL to carry out its restructuring while protecting its assets from any lawsuits that could derail its recovery.
The airline has been struggling financially with the pandemic amplifying its business woes.
With the arrival of the global health crisis last year, parent firm PAL Holdings Inc. lost P71.8 billion, marking its fourth consecutive year in the red.
PAL said losses in the first semester of 2021 went down by 21 percent to P16.55 billion as it slashed operating cots, including cutting a third of its workforce.
In the statement, Tan said the Chapter 11 deal will allow 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,” he added.
