Is Philippine Airlines Filing for Chapter 11 Bankruptcy in the U.S.?
Philippine Airlines (PAL) is close to filing for Chapter 11 bankruptcy in the U.S., multiple news sources have reported since last week.
A story by travel and aviation data services provider Cirium, published on FlightGlobal, quoted sources as saying the flag carrier may conduct the filing by the end of May.
“They are going to file before the end of May as long as they have the requisite support from creditors in terms of the majority they need to get it through and the prearranged fashion they’re going for,” Cirium quoted one of the sources.
Reports that PAL would seek court protection to pay off its mounting debts surfaced late last year. In a November 2020 report, Nikkei Asia said PAL officials revealed the plan during a townhall meeting. In a statement to the Philippine Stock Exchange, PAL said it would continue to study the best options for the airline and have not made definite decision on the matter.
The Philippine Star also reported in December 2020 that PAL would file for Chapter 11 bankruptcy in the U.S., joining other airlines severely impacted by the global downturn caused by pandemic.
Filing for Chapter 11 bankruptcy essentially means that a company will be granted a break from paying off its obligations to its creditors. It’s also a way for the company to come up with a solid reorganization plan to bring it back to financial health. It is common for some companies to emerge from bankruptcy filing in a much stronger position than before.
According to FlightGlobal’s records, at least 19 lessors are exposed to PAL for 49 aircraft.
“We’re not able to provide any details or confirmation on the type or scope of any planned restructuring at this point,” PAL told Cirium in response to the report. “Our management and stakeholders continue to work on the comprehensive restructuring and we will make the needed disclosures at the proper time, once details are finalised.
“What we can say is that we continue to build up our operations gradually on both international and domestic routes,” PAL added. “The surge in Covid cases and related travel restrictions have been a setback, forcing us to cancel numerous international flights in the past two months, but we hope to get back to incremental expansion as the outbreak abates and our authorities revoke some of the restrictions.”
COVID-19 decimated the travel industry and airlines have been some of the worst hit. PAL posted net losses of over $600 million (P28.7 billion) from January to September 2020. Revenues, meanwhile, was only at 45 billion, down nearly 62 percent from P118 billion it posted in the same period in 2019.
The losses have wiped out the series of capital infusions the company’s chairman and controlling shareholder Lucio Tan has made since last year.
The airline laid off over 2,000 of its employees or about 35 percent of its workforce as of early 2021.
PAL has survived many crises throughout its eight-decade-long history. In 1999, the company was placed under receivership due mostly to the Asian financial crisis.