Philippine Airlines (PAL) announced on 4 September that it had filed a pre-packaged Chapter 11 reorganisation petition in US federal bankruptcy court to restructure its operations and help it survive the COVID-19 pandemic. The bankruptcy petition, filed in New York, includes an agreement with creditors, lessors, suppliers and its majority shareholder that will allow it to continue operating during the court process. The agreement, which is still subject to court approval, includes at least US$2 billion in payment reductions and allows the airline to cut its fleet size by 25 percent.
The airline also plans to raise US$505 million in long-term equity and debt financing from the group of billionaire and company chairman Lucio Tan, the airline’s majority shareholder, and US$150 million of additional debt from new investors. The company has been preparing since late last year for the restructuring as the COVID-19 pandemic has cost the aviation industry hundreds of billions of dollars and tens of thousands of jobs.
“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,” Tan said in a statement.
Philippine Airlines said it is also completing a parallel corporate rehabilitation filing in the Philippines. The airline said its Manila-listed parent PAL Holdings, which has been under trading suspension since June, and affiliate Air Philippines are not part of the bankruptcy protection process. The challenges for PAL Holdings, the holding company of Philippine Airlines, predate the pandemic. It has reported losses since the first quarter of 2017. The company suffered a record US$1.4 billion loss last year.
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