'Business as usual': PAL says Chapter 11 bankruptcy filing won't affect flights, workers

ABS-CBN News

Posted at Sep 06 2021 02:37 PM

A Philippine Airlines plane is seen at the background as a man uses his phone at the arrival area of the Ninoy Aquino International Airport (NAIA) Terminal 1 in Pasay City on May 24, 2021. Jonathan Cellona, ABS-CBN News
A Philippine Airlines plane is seen at the background as a man uses his phone at the arrival area of the Ninoy Aquino International Airport (NAIA) Terminal 1 in Pasay City on May 24, 2021. Jonathan Cellona, ABS-CBN News

MANILA - Philippine Airlines’ employees and passengers will not be affected by the company’s restructuring after its filing for Chapter 11 bankruptcy protection in the United States, the company said on Monday.

PAL, Asia’s oldest airline, said “it is business as usual” for the company's employees, customers, suppliers, commercial partners, and local communities.

All valid tickets and travel vouchers, Mabuhay Miles, travel benefits for retired employees, and refund obligations will continue to be honored, PAL said. 

Unlike other forms of bankruptcy, a Chapter 11 filing does not mean that PAL is shutting down, but instead will be allowed to keep operating and pay creditors over a period of time. 

PAL Holdings, the operator of the airline, said the flag carrier has entered into a series of agreements that will allow it to restructure and reorganize its finances.

The airline made the agreements “with substantially all of the Company’s lenders, lessors, and aircraft and engine suppliers, as well as its majority shareholder,” PAL Holdings said in its disclosure to the stock market. 

Despite the restructuring, PAL said it expects to get approvals from the US Courts to gradually increase domestic and international flights in line with market recovery. 

PAL will build up flight frequencies on key regional and long-haul routes while expanding domestic networks from its hubs in Manila and Cebu, the airline said.

The airline also expects Court approval to continue all passenger and cargo flights, subject to demand and travel restrictions.

Travel agencies and other commercial partners will experience no disruption in their interactions with PAL, the company added. 

“Ongoing suppliers and trade creditors will be paid in the ordinary course for goods and services delivered throughout this process.”

The airline said it will also continue delivering vaccines and transporting overseas Filipinos. 

Airlines were hit hard by the pandemic as travel demand cratered with border closures and lockdowns. 

PAL incurred a net loss of P73 billion in 2020.

However, even before the pandemic started, PAL was already in the red, with a net loss of P10.3 billion in 2019, and P4.3 billion in 2018. 

PAL said its restructuring plan, which is subject to court approval, provides over $2 billion in permanent balance sheet reductions from existing creditors. It also includes $505 million in long-term equity and debt financing from PAL’s majority shareholder and $150 Million of additional debt financing from new investors.

This will also allow the airline to reduce its fleet by 25 percent.

PAL said it expects to exit from Chapter 11 “in a few months.”

April Lee Tan, first vice president of COL Financial, said the Chapter 11 filing was "good news" as it would allow PAL to turn itself around without creditors trying to go after its assets. 

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