Struggling flag-carrier Philippine Airlines (PAL) will not get any financial help from government financial institutions anytime soon, the Department of Finance (DOF) said Thursday, Sept. 9.
During the virtual Senate briefing, Finance Secretary Carlos G. Dominguez III said that government-owned banks deferred plans to extend financing to PAL following the filing of bankruptcy protection in the United States.
Dominguez, who oversees state-owned lenders, said that Land Bank of the Philippines and Development Bank (DBP) were in discussion with PAL and Cebu Pacific, two of the country’s largest airliners, for possible financing since March 2020.
According to Dominguez, Cebu Pacific within a year put in a deal that conformed with the government’s “principles,” among them is an assurance that the state will not end owning the airline, among others.
For this reason, the DOF chief said that Land Bank and DBP participated in the private sector-led financing package for Cebu Pacific amounting to P16 billion.
“Although we are not the biggest financiers , we are the keystone of finance. You know the keystone in an arch is the stone without which nothing happens,” he explained.
But in the case of PAL, Dominguez said the airline company “took a different path.”
“They took a path of filing for bankruptcy first,” Dominguez said. “In that case, aside from the conditions I set up for Cebu Pacific, the additional condition is that we will have to wait for the result of the bankruptcy proceedings.”
“I do not want Land Bank and DBP to go in and finance a company that is filing for bankruptcy and we don't know how it will turn out. You know, bankruptcy courts do not necessarily always follow what we want,” he added.
On Sept. 4, PAL pushed through with the bankruptcy protection filing in New York, a move aimed at allowing “the company to successfully restructure and reorganize its finances to navigate the COVID-19 crisis and emerge as a leaner and better-capitalized airline.”
Dominguez said one of the two government banks recently been provided with the bankruptcy filing submitted by PAL to a US court.
“We are reviewing it, and we are following this very carefully,” said Dominguez. “If at the end, it looks like it will be a prudent investment for the taxpayers money, yes, we will participate."