Philippine Airlines has said it has emerged from bankruptcy after a US court approved its plan to slash up to $2 billion in debt and obtain additional capital.
The national carrier of the Philippines had filed for bankruptcy in the United States in September, seeking relief from creditors as it tried to survive the devastation unleashed on the airline industry by the coronavirus pandemic.
Its court-approved reorganization plan includes a $2 billion debt reduction and additional liquidity of $505 million from its main shareholder, PAL said in a statement Friday.
It also has the option to obtain up to $150 million in additional financing from new investors.
“PAL has streamlined operations with a reorganized fleet and is now better capitalized for future growth,” the airline added.
Air travel in the Philippines collapsed by more than 75 percent in 2020 due to travel restrictions imposed to contain the coronavirus, according to government data.
From 60 million domestic and international passengers in 2019, traffic plunged to just over 13 million in 2020.
PAL said in September it had canceled more than 80,000 flights, wiping out $2 billion in revenue, and letting go of more than 2,000 employees.
As borders reopen and travel restrictions ease, the airline said it will resume regular flights, including to cities in mainland China and Australia.
A Chapter 11 bankruptcy filing allows a business debtor to reorganize its debts while staying in operation.
In September last year, the flag carrier filed a voluntary petition for a prearranged restructuring under the US Chapter 11 process.
Under its arrangements with creditors, the flag carrier will secure some $505 million for its recovery plan upon its exit from the process—the first tranche will be a $250-million facility debt to be pared down in the next five years, and the second tranche worth $255 million will be converted into equity.
PAL said it emerged from the Chapter 11 proceedings “as a more efficient airline with a strengthened balance sheet, reaffirming its continuing role as the Philippines’ sole full-service airline with the largest international network.”
The airline said it successfully completed its financial restructuring within four months, in contrast to other airlines that remain in the
Chapter 11 process more than a year after filing in 2020.
The flag carrier thanked its creditors and shareholders for the strong support as well as the cooperation of its industry partners and the
collective efforts of PAL employees around the world who sustained flights on multiple international and domestic routes throughout the
restructuring period.
PAL said it has streamlined operations with a reorganized fleet and is now better capitalized for future growth.
The airline said its consensual restructuring plan was accepted by 100% of the votes cast by its primary aircraft lessors and lenders, original equipment manufacturers and maintenance, repair, and overhaul service providers, and certain funded debt lenders.
“Philippine Airlines stands ready to help grow back the Philippines’ local and international air travel markets in ways that renew the tourism industry, serve the needs of global citizens including overseas Filipinos, and contribute actively to the recovery of the Philippine economy,” said PAL director Lucio Tan III, quoting PAL chairman and CEO Lucio Tan.
“Our mission as the flag carrier matters more than ever, and we are thankful for the chance to rebound from the pandemic and continue to
fulfill this mission as best as we can,” Tan said.
“This is a celebratory moment for PAL, for all our partners and stakeholders, and for our personnel who sacrificed much while working
successfully to keep the airline flying,” said Gilbert Santa Maria, PAL president and chief operating officer.