PAL eyeing exit from Chapter 11 bankruptcy by yearend

Philippine Airlines said Monday it is eyeing an exit from Chapter 11 bankruptcy it filed in the US before the end of the year, but does not expect a return to pre-pandemic level until 2024 or 2025.

PAL president and chief operating officer Gilbert Santa Maria said in a virtual briefing the airline would likely emerge from the Chapter 11 bankruptcy “before the end of the year.”

“In the old process the last time PAL went through rehabilitation, it took 7 or 8 years for PAL to leave the receivership program that was then the practice. That is no longer going to be necessary by filing under the Chapter 11. So once we exit before end of the year, we’re done. We will have a lighter balance sheet. We will have a capital and our costs structure will be a lot lighter. We will be done by end of the year,” he said.

“This is unusual for aviation. We don’t anticipate staying in the Chapter 11 process for very long. We will likely be out before the end of the year,” Santa Maria said.

He said the chance that the US court would not approve its petition “is very, very small.”

PAL voluntarily filed for a pre-arranged restructuring under the U.S. Chapter 11 process in the Southern District of New York on Sept. 3 to implement the consensual restructuring plan.

Under the restructuring plan, PAL will raise $505 million in long-term equity and debt financing from majority shareholders and $150 million in additional debt financing from new investors.

The bailout deal provides more than $2 billion in permanent balance sheet reduction from creditors and a reduction in fleet capacity by 25 percent.

Santa Maria said the airline’s financial advisers invited over 118 investors to participate in its fund raising. “These potential investors are looking at it. There was a general interest in continuing to support PAL,” he said.

Nilo Thaddeus Rodriguez, PAL’s chief finance officer, said the funding would be used for catch up payment to creditors and the rest would finance liquidity requirements.

“Since the process is rather short from the normal traditional process, the liquidity will require PAL earmarks to its continuing recovery and continuing to operate beyond once we emerge from the Chapter 11,” he said.

“As part of the restructuring and based on the view of our strategy planning team, we were really looking at a 5-year horizon from 2020. So, we expect that getting back to 2019 level might go beyond 2025,” Rodriguez said.

He said PAL negotiated with Airbus to postpone the delivery of 13 narrow-body Airbus aircraft, with an option to cancel some orders beyond 2026 to 2030.

Santa Maria said PAL would return 22 aircraft to lessors as the airline was expecting travel demand to recover by 2024 or 2025. PAL will end with 70 aircraft, lower from its original fleet of 92 aircraft.

“We don’t see demand coming back to pre-pandemic level until 2024 or 2025. That point in time, we don’t believe we will be at what our size was—more than $3 billion in revenues by 2025,” said Dexter Lee, PAL ‘s senior vice president and chief strategy and planning head.

“We expect to reach those numbers closer to the back half of the decade. We do have significant plans in terms of adding capacity as demands recover,” he said.

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.

Topics: ​Philippine Airlines , bankruptcy , Gilbert Santa Maria , Dexter Lee
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