Greeva Garg –
Published on: September 4, 2021, at 11:55 IST
The Philippine Airlines (PAL) has filed for long-anticipated bankruptcy protection in a United States (US) Court paving the way for a crucial restructuring to help the flag carrier to survive after the pandemic devastated global travel.
On September 3, Philippine Airlines announced, “We have decided to take a voluntary decision to undergo financial restructuring under the US Chapter 11 process. This step is part of a set of major agreements PAL has reached with substantially all of its stakeholders, and with one objective, to build a stronger Philippine Airlines so that we can serve our customers better and continue our mission as a full-service airline and flag carrier of the Philippines.”
Filing for Chapter 11 essentially means that a corporation is asking for more time to restore its financial health as it plans to pay back its debts.
The Company aims to cut $2 billion in borrowings through a proposed restructuring plan, which will allow the carrier to reduce its fleet capacity by 25%, which needs the Court approval.
“The restructuring plan allows the airline 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,” Lucio Tan, the Chairman and Chief Executive officer of PAL stated.
Philippine Airlines will accumulate its budget by getting $505 million from equity and debt financing from its majority shareholder, as well as $150 million of debt financing from new investors.
The airline after its recovery will gradually mark its comeback for domestic as well as international flights.
In the meantime, the airline will continue to operate its passenger and cargo flights based on demand and travel restrictions.
The pandemic has forced airlines to suspend flights, lay off employees and seek financial help. In June PT Garuda Indonesia’s President said, “The carrier was considering options including restructuring debt and renegotiating contracts with aircraft lessors.”
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