On September 4, Philippine Airlines (PAL) stated that it had filed a pre-packaged Chapter 11 reorganization petition in US federal bankruptcy court in order to restructure its operations and help it survive the COVID-19 pandemic.
The New York bankruptcy filing includes an arrangement with creditors, lessors, suppliers, and its majority shareholder that will allow it to continue operating during the court process.
The accord, which is still subject to court approval, includes at least $2 billion in payment reductions and permits the airline to reduce the size of its fleet by 25%.
The airline also intends to raise US$505 million in long-term stock and debt funding from the airline’s primary stakeholder, billionaire, and company chairman Lucio Tan, as well as US$150 million in additional loans from new investors.
The corporation has been preparing for the restructure since late last year, as the COVID-19 pandemic has cost the aviation industry hundreds of billions of euros and thousands of jobs.
“We welcome this major breakthrough, an overall agreement that allows PAL to remain the Philippines’ flag carrier and the country’s premier global airline, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the rest of the world,” Tan said in a statement.
Philippine Airlines has also announced that it is finishing a parallel corporate rehabilitation petition in the Philippines. The airline stated that its Manila-listed parent PAL Holdings, which has been suspended from trading since June, and affiliate Air Philippines are not part of the bankruptcy process.
The difficulties faced by PAL Holdings, the parent firm of Philippine Airlines, precede the epidemic. It has been losing money since the first quarter of 2017. Last year, the corporation reported a record loss of US$1.4 billion.