Despite P73 billion losses due to the “extraordinary impact” of the pandemic in 2021, Philippine Airlines had been granted by the US Bankruptcy Court of the Southern District of New York access to funds of initially $20 million to help it recover its operations so it can pay creditors.
Despite P73 billion losses in 2020 from the “extraordinary impact” of the pandemic, there is hope for Philippine Airlines to turn its operations around with the grant recently by the US Bankruptcy Court of Southern District of New York to a $20 million loan facility as part of its Chapter 11 filing, said PAL Holdings on Monday.
The Bankruptcy Court authorized PAL to borrow or access the DIP (Debtor-in-possession) loan facility of up to an interim aggregate principal amount of $20 million, PAL Holdings said in a disclosure to the stock exchange.
"After a thorough review and assessment of the Motion filed, the Court granted authority to PAL to access the DIP Loan facility as reported herein," PAL’s statement said.
"The Court recognized that the Debtor PAL requires immediate access to the DIP Loan Proceeds in order to maintain its assets, to pay employees, and to fund its operations," it added.
Not shutting down
The flag carrier earlier filed Chapter 11 bankruptcy protection in the US.
Chapter 11 does not mean the airline is shutting down but instead, it will be allowed to operate and to pay creditors over a certain period of time.
Despite the Chapter 11 filing and its ongoing restructuring, PAL said it would be "business as usual" for employees, flights, customers, suppliers, and other affiliates.
Restructuring
PAL last Saturday announced its financial restructuring plan under the United States bankruptcy code's Chapter 11, as the Covid-19 pandemic weighed down on its operations due to travel bans and restrictions across the world.
In a video statement, PAL President and COO Gilbert Santa Maria said the move aimed to create a "permanent solution" that would enable the company to guarantee its future.
Chapter 11 allows the company to reorganize to keep its business alive and pay creditors over a period of time, he said.
"With this goal in mind, we have voluntarily filed for restructuring under a pre-arranged Chapter 11 in the US while simultaneously executing a support filing under the Financial Rehabilitation and Insolvency Act in the Philippines," Santa Maria said as he explained that PAL has many US-based creditors.
Nilo Rodriguez, PAL's chief financial and compliance officer, explained that the Chapter 11 filing would also allow the airline to "restructure contracts" mostly controlled by foreign laws.
The decision will also pave the way for "positive actions," he said, as the market tries to recover from the pandemic.
"We are thus able to ensure the execution of all such agreements under a well-established legal process that is universally accepted and can be completed expeditiously," Rodriguez added.
"The restructuring will enable PAL to emerge with fresh capital, lower debt and a sturdier financial foundation for the future," a separate statement read.
Filing under Chapter 11 will also help PAL obtain an additional $150 million in debt funding, Rodriguez said.
He added that the airline would formalize agreements with lenders, lessors, and key aircraft and engine suppliers that would bring down debt by at least $2 billion.
The Lucio Tan-led flag carrier said it would implement a 25-percent reduction in its fleet by returning "several wide-body and narrow-body aircraft."
PAL will also reduce lease payments in the remaining aircraft "through modified lease contracts."
Recovery plan
1. Business-as-usual operations will continue and flights will not be affected.
2. PAL will also continue accepting future tickets and previous travel vouchers.
3. Mabuhay Miles members can still earn and redeem miles or points from merchant partners.
4. All passenger and cargo flights will continue to operate subject to travel restrictions.
5. Passengers can still book and browse tickets through their website, mobile application, ticket offices, contact centers, and partner travel agents.
"We will maintain our current flight schedules and gradually increase our domestic and international destinations, and flight frequencies as travel demand returns," April Lee Tan, first vice president of COL Financial, said as she explained that the Chapter 11 filing was "good news" as it would allow PAL to turn itself around without creditors trying to go after its assets.
PAL also puts emphasis on meeting its financial obligations with partners and stakeholders throughout the process, which is why they would continue refunding tickets and applications "still under process."
PAL Chairman and CEO Lucio Tan said the airline would "maintain its position as a premier global airline," which would emerge better to help the country.
"PAL will continue to serve its valued customers and the Philippine economy, now and long into the future," said Tan.
Tags: #PhilippineAirlines, #restructuring, #bankruptcy, #airtravel, #Covid19