I’ve always been a PAL (Philippine Airlines) watcher. Any development, specifically on this issue, perks me up. More so with quite a number of queries I received on my wall asking for updates regarding the financial restructuring-cum-rehabilitation of the flag carrier.
The latest word going around the business corridor is delay. Yes, there will be a slight delay in the filing of Chapter 11 petition before the New York court. Again? Hold your horses and don’t be judgmental. The management is not to be blamed because it’s largely due to tons of paperwork that needed to be finalized.
One tedious course of action PAL management had done in all the months of preparation was back-channeling with help of Seabury and SGV. Since last November when words went around the business community about its plan to go Chapter 11, the airline’s top brass went into bilateral negotiations to determine who among the creditors concur with the restructuring of its $.53 billion liabilities.
This has to be done in order for PAL to show to the Court the matrix of concurrence or disagreement among the list of creditors and suppliers of the flag-carrier. Should the majority of the creditors give their stamp of approval, it then becomes easier for the Court to decide or declare the terms of the restructuring of the obligations, which will be accepted by all. Likewise, creditors will have to agree on the amount of “haircut” on its exposure.
Pari-passu, then, sets in. All the creditors will be on equal footing, including those who balked during the back channeling. PAL, in turn, will not be bothered by any collection demand while it’s in the process of fixing and fine tuning its operations.
“It’s almost at the point of completing the documentary requirements,” shared a source. On a scale of one to 10, 10 being the highest, “it’s more than 90 percent done.”
The liquidity position of PAL is likewise in its finalization stage. Latest is that the flag-carrier will have a head start of $500 million, $250 million will be raised from the market – Philippine National Bank, Bank of the Philippine Islands, China Bank, and Asia United Bank – with the other half coming from the cigarette tycoon, himself, Lucio “Kapitan” Tan.
Fleet reduction is another salient feature of the restructuring and rehabilitation program. Return is an essential part of the rehabilitation framework. It’s a cost-saving measure, which is very appropriate at this time when travel remains a bit restricted. During Mr. Jimmy Bautista’s time, PAL’s fleet was at 90. Though the existing fleet had been reduced to around 70, PAL is still believed to be in “over capacity” with travel still at its bare minimum.
Lufthansa Technik Philippines (LTP), a supplier and service provider, is on top of this. LTP, which has reportedly doubled the issuance of pink slips to its workforce from the original 300 as announced in April, is the joint venture firm between Lufthansa Technik AG of Germany and MacroAsia Corp. also owned and controlled by El Kapitan.
However, its aircraft maintenance department remains intact. Personnel in this department work full time, five days a week and on three shifts. In fact, it’s currently full of activity, sprucing-up aircrafts that had been identified to be returned under the lease agreement.
Lined up for return are half of the flag-carrier’s Airbus 330 fleet of 15, Boeing 777 and seven of its A350s. The A330 fleet services Asia, Honolulu and Guam. It’s deployed as well in domestic routes with high passenger traffic like Cebu, Davao, Puerto Princesa and General Santos City. The A350, on the other hand, is a long-range, wide-body jet. Boeing 777s are deployed to New York, Vancouver, Toronto and London.
When everything is set, a special board meeting will be called to approve the rehab-restructuring plan. Since we only have two days before this month ends, it's safe to assume that the filing will have to be pushed back sometime this June.
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