Philippine Airlines has officially filed for Chapter 11 bankruptcy in the U.S. and has simultaneously executed a supporting filing under the Financial Rehabilitation and Insolvency Act in the Philippines. The twin filings are meant to ensure that the flag carrier will continue operating as it restructures its debt and obligations with its creditors.
The announcement was made in a video posted on its website.
“This now sets in motion a number of positive and important actions,” Nilo Thaddeus Rodriguez, PAL’s SVP, chief financial officer, and compliance officer said. "For one, the airline will continue business as usual operations, while finalizing its network, fleet and and organization. It will also formalize agreements reached with its lenders, lessors, key aircraft and engine suppliers that is expected to pare down its debt by at least $2 billion.
The filings will also mean reducing its fleet by 25 percent by returning several wide and narrow-body aircraft and permanently reducing lease payments for retained aircraft.
The company will also secure debtor-in-possesion financing of $505 million to execute its recovery plan. The facility will then convert into equity and long-term debt for the company’s eventual exit from Chapter 11, which PAL expects will be within “a short period of time.”
The company expects to obtain another $150 million in funding upon its exit from Chapter 11.
“These permanent actions will enable Philippine Airlines to emerge from Chapter 11 in a few months with fresh capital, lower debt, and a competitive cost structure, giving us a sturdy foundation to sustained profitability,” Rodriguez said. “As travel demand recovers in the coming years, Philippine Airlines will be in a position to grow and innovate to serve you better.
The company assured customers and passengers that there will be no disruptions in service throughout the restructuring process.
“All current and future tickets will be honored including travel vouchers, and you may continue to browse, book, and purchase tickets from our website, contact centers and partner travel agents,” Dexter Lee, SVP for Strategy and Planning said.
The airline also said it will maintain its current flight schedules and and gradually increase its domestic and international destinations and flight frequencies as travel and demand returns.
Reports that PAL would file for bankruptcy first surfaced in May this year.
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