The Covid-19 pandemic has forced airlines around the world to suspend flights, lay off employees and seek financial help. In the case of Philippine Airlines, the pandemic has also exacerbated its financial woes.
WITH the continuing impact of the Covid-19 to the global travel industry, Philippine Airlines (PAL) has filed for Chapter 11 bankruptcy in New York with a lender-supported plan that aims to help the company recover from the impact.
The company aims to cut $2 billion in borrowings through a proposed restructuring plan, which needs court approval, it said.
PAL will also get $505 million in equity and debt financing from its majority shareholder, as well as $150 million of debt financing from new investors.
The country’s flag carrier said it has support agreements from 90 percent of its lenders.
The restructuring plan will allow the carrier to reduce its fleet capacity by 25 percent, it said.
The “recovery plan” will allow the airline to return at least 20 aircraft, the company’s management said.
PAL also cut 35 percent of its workforce early this year.
Under Chapter 11 bankruptcy, Philippine Airlines can continue to operate while it restructures.
The carrier will also complete a parallel filing for recognition in the Philippines under the insolvency and rehability law, it said in a statement.
The restructuring plan allows the airline “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,” business tycoon Lucio Tan, PAL chairman and chief executive officer, said in a statement.
Philippine Airlines is the latest international carrier to reorganize in the United States, under U.S. bankruptcy code.
By using Chapter 11, the company will subject its reorganization plan to the final decision of a U.S. judge.
The Covid-19 pandemic has forced airlines to suspend flights, lay off employees and seek financial help.
However, the challenges for PAL Holdings Inc., the holding company of Philippine Airlines, predate the pandemic.
It has reported losses since the first quarter of 2017.
The company suffered a record 71.8 billion pesos ($1.4 billion) loss in 2020, compared with a 10.3-billion peso shortfall the year before.
Shares of PAL Holdings have declined 7.6 percent this year, extending a 17-percent fall in 2020.
“After the restructuring, PAL Holdings will still be the major shareholder of PAL,” the management said.
“PAL Holdings is not filing and its status and shareholders will remain the same.”
The airline will continue to operate its passenger and cargo flights based on demand and travel restrictions.
The company also said it expects to gradually add domestic and international flights as the market recovers, it said in the statement.
Tags: #PhilippineAirlines, #airtravel, #bankruptcy, #Covid19