PHILIPPINE Airlines (PAL) has taken the bitter pill of filing for Chapter 11 bankruptcy in the United States and presented to the US court its restructuring plan.
The airline intends to prune $2 billion in borrowings, cut its operating fleet capacity by one-fourth and raise $655 million in new financing.
The plan will still have to be approved by the court but PAL President Gilbert F. Sta. Maria is hopeful.He said, "The chance that this (restructuring plan) will fail is very, very small.We have a high degree of confidence that this will be completed."
The nation's flag carrier may be struggling to survive the COVID-19 pandemic, which saw the demand for air travel plunge to lowest levels, but the national government is ready to lend a hand.
According to presidential spox Harry Roque, the government is waiving PAL's liabilities such as landing fees and aerodrome fees.
Roque said the airline needed $150 million in its exit financing, and loans are being sourced from foreign banks and financial institutions.However, the government's Land Bank of the Philippines and Development Bank of the Philippines will be able to help in new loans for Chairman Lucio Tan's PAL Holdings, the operator of the airline.
It was clarified that unlike other forms of bankruptcy, a Chapter 11 filing does not mean that PAL is shutting down, but instead will be allowed to keep operating and pay creditors over a period of time.
PAL Holdings said the flag carrier has entered into a series of agreements that will allow it to restructure and reorganize its finances.
The airline made the accords “with substantially all of the Company’s lenders, lessors, and aircraft and engine suppliers, as well as its majority shareholder,” PAL Holdings said in its disclosure to the stock market.
Secretary Roque cited that PALemployees and passengers will not be affected by the company’s restructuring after its filing for Chapter 11 bankruptcy protection in the US.Business goes on for the company's employees, customers, suppliers, commercial partners, and local communities.
All valid tickets and travel vouchers, Mabuhay Miles, travel benefits for retired employees, and refund obligations will continue to be honored, PAL said.
PAL incurred a net loss of P73 billion in 2020, the year the COVID-19 pandemic reared its ugly head over the population and the business community, most especially the travel and tourism industry.
The company had been making big losses, too, before that.
Chapter 11 filing of bankruptcy may be good for the airline for it will hold its creditors at bay, preventing them to go after its assets.
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