Battered by a protracted Covid-triggered lockdown and travel restrictions, Philippine Airlines has filed for bankruptcy in New York as it begins to reorganize amid the pandemic crisis.
PAL today announced today that it has entered into a series of agreements with its lenders, lessors, and aircraft and engine suppliers, as well as its majority shareholder to allow the company to restructure its finances and emerge as a leaner and better-capitalized airline.
“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," said Dr. Lucio C. Tan, PAL chairman and CEO.
"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,” he added.
Airline officials said flights will continue uninterrupted, while the company awaits the court's approval of the restructuring plan .
PAL said the plan provides over $2 billion in permanent balance sheet reductions from existing creditors and allows the airline to consensually contract fleet capacity by 25 percent and includes $505 million in long-term equity and debt financing from PAL’s majority shareholder and $150 million of additional debt financing from new investors. As part of the agreements with key stakeholders, PAL has voluntarily filed for a pre-arranged restructuring under the U.S. Chapter 11 process in the southern district of New York to implement the consensual restructuring plan.
PAL will also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation Act of 2010.
“Following the recent celebration of our 80th anniversary, we move forward with renewed confidence, as today’s actions enable us to continue serving our customers and the Philippine economy long into the future,” said Gilbert F. Santa Maria, PAL president & CEO.
The Philippines, which is the hardest hit by Covid 19 in Asia, extended Covid-19 restrictions in the capital region until Sept. 7 as the government tries to balance the need to contain the pandemic with boosting the economy.
The Philippine health ministry reported a record 19,441 new coronavirus cases on Aug 28. In a bulletin, it said confirmed cases rose to more than 1.93 million, while deaths rose by 167 to 33,008.