Philippine Airlines Inc. has filed for Chapter 11 bankruptcy in the Southern District of New York, allowing it to restructure and reorganize its finances as the COVID-19 crisis continues to affect the travel industry.
The filing was done following a series of agreements with substantially all of the company’s lenders, lessors, and aircraft and engine suppliers, as well as its majority shareholder.
According to Investopedia, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets, and for that reason is known as “reorganization” bankruptcy. A business in the midst of filing Chapter 11 may continue to operate.
The restructuring plan, which is subject to court approval, provides over USD 2.0 Billion in permanent balance sheet reductions from existing creditors and allows the airline to consensually contract fleet capacity by 25%, and includes USD 505 Million in long-term equity and debt financing from PAL’s majority shareholder and USD 150 Million of additional debt financing from new investors.
PAL will also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation (FRIA) Act of 2010.
PAL will continue to operate flights in the normal course of business in accordance with safety regulations, and the company expects to continue to meet its current financial obligations throughout this process 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, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the world. 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,” said Dr. Lucio C. Tan, PAL Chairman and CEO.
“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. I would also like to recognize the incredible dedication of our employee teams around the world, who have continued to deliver the highest quality of service through these trying times,” added Gilbert F. Santa Maria, PAL President & Chief Operating Officer.
PAL emphasizes that it is committed to maintaining business continuity throughout the restructuring process – especially with respect to employees, customers, suppliers, commercial partners, and local communities – and anticipates receiving the requisite approvals from the U.S. Court to facilitate the following:
• PAL continues to gradually increase domestic and international flights in line with market recovery. In 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.
• All passenger and cargo flights will continue to operate, subject to demand and travel restrictions.
• All valid tickets and travel vouchers will be honored.
• PAL reaffirms its commitment to fulfill all refund obligations.
• Mabuhay Miles and benefits will be honored.
• 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.
• PAL continues to operate special all-cargo flights to transport vaccines, medical supplies and sustain critical supply chains.
• PAL continues to work with the Philippine government to mount flights to bring Overseas Filipino Workers (OFWs) home after having repatriated the majority of displaced Filipinos during the course of the global pandemic.
• PAL continues to innovate and enhance customer experience by working with the government and IATA on streamlined rules for travel, including travel passes and vaccine “passports” while maintaining the highest standards of passenger safety through this pandemic.
source: Business Wire
A note from our team: Philippine Airlines continues to serve our valued customers as we embark on a key stage of our recovery with the support of our stakeholders and the commitment of our personnel.
For more information, please visit https://t.co/qyz7aCKmVf. pic.twitter.com/fveK7HCXqS
— Philippine Airlines (@flyPAL) September 4, 2021