The next steps for PAL amid financial struggles

Aviation Updates Philippines –In the past weeks, numerous reports from local and international media detailed Philippine Airlines’ concrete plans to survive financial troubles amid the COVID19 pandemic. The reports mentioned the filing of Chapter 11 Bankruptcy Protection in United States courts and the gradual return of leased aircraft to its lessors to cut costs.

Photo from Patrick Dariagan

According to Nikkei Asia, the airline is poised to seek bankruptcy protection for restructuring and survival. They also reported the return of 20 leased aircraft to relieve the financial burden amounting to at least $1 billion and raise $505 million for the post-restructuring liquidity process. 

But the airline did not disclose the type of aircraft to be returned. The airline currently leases 48 aircraft, including its workhorse widebody aircraft: Boeing 777-300ER, Airbus A350-900, and A330-300. 

Japan’s ANA Holdings is looking to raise $505 million through “debtor in possession”. PAL controlling shareholder and tycoon Lucio Tan would raise $255 million and another $250 million from private and government banks. The Department of Finance Secretary Carlos Dominguez said they have been informed about the airlines’ plans; however, there were no specific details divulged yet on the kind of assistance the flag carrier needs.

In a separate report from local media, the Philippine Star said PAL is eyeing to file Chapter 11 Bankruptcy Protection by January 2021. The airline will be business as usual: “PAL will continue to operate and fly during restructuring. There will be no impact on passengers – full continuity, no disruption,” the flag carrier said in a town hall meeting, according to PhilStar.

PAL’s management, led by its President Gilbert Santa Maria, hopes the airline will exit Chapter 11 by March 2021, in time for its 80th anniversary.

This is not the first time the airline entered court-assisted restructuring. In 1999, the airline entered receivership due to the Asian Financial Crisis. Filing Chapter 11 will save the airline from more expenses and reduce debts can survive the pandemic’s gigantic effect in the aviation industry.