Philippine Airlines has announced its intentions to file for bankruptcy in the US. The struggling Manila-based flag carrier will use the Chapter 11 process as an attempt to deal with more than $2 billion of debts. The airline will also make a parallel bankruptcy filing in its home country, as well as implementing a restructuring plan to trim its fleet.
Parallel bankruptcy filings
2021 is Philippine Airlines’ 80th year of operations. However, the carrier has not been able to celebrate eight decades of service in the way that it might have liked, owing to the challenges of the present global health crisis. The pandemic has been a challenge for carriers worldwide, and the airline announced this morning that it would be filing for bankruptcy.
As seen above, the aforementioned bankruptcy filing will take the form of a US Chapter 11 restructuring program. However, the Manila Bulletin reports that Philippine Airlines will also mack a parallel filing back at home. It is hoped that such procedures will help the struggling carrier alleviate its debts, which presently stand at more than $2 billion.
Philippine Airlines gained a majority approval from its stakeholders to initiate the filings. According to Bloomberg, 90% of the carrier’s lenders approved the plan. A website set up by the carrier to outline its proposed recovery explains that Chapter 11 “will enable PAL to emerge with fresh capital, lower debt, and a sturdier financial foundation for the future.”
“The Chapter 11 restructuring now gives us the opportunity to seal in the recovery and get back to a firm financial footing once and for all. We’re hopeful. We’re very encouraged that PAL is undertaking a “pre-arranged” Chapter 11 process where we go in with the strong support of our major creditors and the commitment of our shareholders, unlike most Chapter 11 scenarios.”
Fleet restructuring efforts
Part of the restructuring is set to impact the carrier’s fleet. This was on the cards even before the bankruptcy filings, with Simple Flying reporting in May 2021 that Philippine Airlines was looking to cut the number of Airbus A350s and Boeing 777s that it operates. According to data from ch-aviation.com, the carrier’s present fleet consists of 59 aircraft.
Of these aircraft, just 27 are active, with a majority of 32 presently waiting in the wings. Bloomberg reports that the carrier’s restructured fleet will be 25% smaller. Meanwhile, the airline’s recovery plan has set a target of at least 20 aircraft going forward. It will be interesting to see which aircraft stay, and what this will mean for PAL’s network.
Flights to continue
It is important to note that, despite the serious nature of bankruptcy filings, Philippine Airlines will be able to continue its operations for the time being. It explains:
“We will continue to fly and to serve our customers throughout this process: it is business as usual for us.PAL continues to increase domestic and international flights as travel demand recovers with the easing of travel restrictions, and we will roll out new products and services that help make flying safer and more convenient.”
This is because the nature of Chapter 11 means that companies that have made such bankruptcy filings can continue operating while the proceedings progress. This will help Philippine Airlines to avoid widespread cancellations despite its financial difficulties.
n any case, the carrier, which received a $296 million cash injection last May, will likely come out of its bankruptcy proceedings as a rather smaller and different airline.
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