Philippine Airlines filed a bankruptcy protection in the United States to restructure and reorganize its finances to navigate the COVID-19 crisis and emerge as a leaner and better-capitalized airline.
The airline unit of tycoon Lucio Tan said it signed a series of agreements with substantially all its lenders, lessors, aircraft and engine suppliers and majority shareholder to allow the restructuring of its debt.
As part of the agreements, PAL voluntarily filed for a pre-arranged restructuring under the U.S. Chapter 11 process in the Southern District of New York to implement the consensual restructuring plan.
The restructuring plan, subject to the court approval, provides over $2 billion in permanent balance sheet reductions from creditors.
It also allows the airline to consensually reduce fleet capacity by 25 percent and includes $505 million in long-term equity and debt financing from PAL’s majority shareholder and $150 million of additional debt financing from new investors.
PAL said it would also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.
“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," PAL chairman and chief executive Dr. Lucio Tan said.
"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 said.
PAL also said it would continue to operate flights in the normal course of business and expects to continue to meet financial obligations throughout the process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.
The airline said all valid tickets and travel vouchers would be honored and committed to fulfill all refund obligations.
PAL earlier reported total comprehensive loss amounting to P18.04 billion in the first half, down 18 percent from P22.02-billion comprehensive loss in the same period last year.
Consolidated revenues in the six-month period declined by 51 percent to P18.04 billion from last year’s P36.82 billion because of the effect of continuing COVID-19 pandemic which started in mid-March of 2020.
Passenger revenue amounted to P11.62 billion in the first half, while cargo revenues amounted to P5.53 billion.
Consolidated operating expenses decreased by 48.6 percent to P26.83 billion from P52.16 billion a year ago because of the significant reduction in the number of flights operated.
Manpower costs declined as a result of PAL’s retrenchment program in mid-March and expenses related to grounded aircraft which were recognized this year under other charges also contributed to the decrease in operating expenses.
PAL announced in February a company-wide workforce reduction program covering about 2,300 employees, or 30 percent of the airline’s workforce.