Philippine Airlines Inc. (PAL) has filed for bankruptcy in the US and will do a parallel filing in the Philippines as part of its restructuring plan to slash over $2.0 billion off its debts, the flag carrier this morning (September 4) announced.
PAL's major stockholders, along with "substantially all" lenders, lessors, aircraft and engine suppliers, agreed to the restructuring plan, which is still subject to court approval.
A $505 million long-term equity and debt financing from PAL’s majority shareholder, plus $150 Million additional debt financing from new investors are included in the plan, which also allows the flag carrier to consensually trim off its fleet capacity by 25 percent.
PAL 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, the airline said in this morning's statement.
PAL will also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation (FRIA) Act of 2010.
Philippine Airlines Inc. is the only party included in the Chapter 11 filing.
PAL Holdings Inc., which is listed on the Philippine Stock Exchange, and Air Philippines Corporation, known as PAL Express, are not included in the Chapter 11 filing.
Nevertheless, it will be business as usual for PAL during restructuring.
PAL will continue to operate all passenger and cargo flights, subject to demand and travel restrictions.
All valid tickets, vouchers, refund applications, Mabuhay Miles and valid travel benefits for retired employees will be honored.
Ongoing suppliers and trade creditors will be paid in the ordinary course for goods and services delivered throughout this process.
Travel agencies and other commercial partners will experience no disruption in their interactions with PAL.
Furthermore, PAL will continue gradually increasing domestic and international flights in line with market recovery.
In the coming weeks, PAL will build up flight frequencies on key regional and long-haul routes while expanding domestic networks from its hubs in Manila and Cebu.
Throughout the restructuring process, the flag carrier expects to continue meeting its current financial obligations to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.
“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," remarked 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.
“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,” says Gilbert F. Santa Maria, PAL President & Chief Operating Officer.