Philippine Airlines goes bankrupt in the US as it files for Chapter 11

Philippine Airlines announced last weekend that it is facing hardships and needs to undergo restructuring. For this, the airline filed for Chapter 11 bankruptcy in the U.S. so it can reorganize its financial affairs and restructure the business after being severely hit by the COVID-19 pandemic.

According to Reuters, Philippine Airlines submitted a restructuring plan to the Southern District of New York and it is waiting for the court’s approval. If its request is granted, the air carrier will be able to lessen its fleet capacity by 25% and reach the goal of cutting $2 billion in installment credits.

It was added that the restructuring plans also state a $505 million in long-term debt equity and debt financing from PAL’s shareholders and company chairman, Lucio Tan. The company further said that another $150 million funding for debt financing will be sourced from new investors.

Then again, it was clarified that its parent company, PAL Holdings as well as its subsidiary, PAL Express, are not listed in the Chapter 11 bankruptcy. They are not included and the airline is the sole subject in the filing. The pre-arranged Chapter 11 petition was filed after agreement with creditors, suppliers, lessors, and the majority of its shareholders.

Asia Nikkei reported that Philippine Airlines has been preparing for the restructuring process with the support of the court since late last year. It started the preparations amid the unrest in the travel and tourism business that was frozen for some time due to the effects of the coronavirus crisis worldwide.

“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 officer, Dr. Lucio C. Tan, said in a press release regarding the agreement with key stakeholders to position the airline for long-term growth and profitability. “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.”