Last week, Philippine Airlines (PAL) filed for Chapter 11 bankruptcy in a U.S. Court.
The move was seen as a bid to save the company after the COVID-19 pandemic severely impacted business, affecting flight capacities and operations worldwide. PAL released a statement that said they came to a voluntary decision to undergo “financial restructuring.”
The financial restructuring targets a $2 billion cut in borrowings and would entail receiving $505 million in equity and debt financing from its majority shareholder, with an additional $150 million of debt financing from new investors. They will also reduce fleet capacity by 25%.
“After 80 years of flying the Philippine flag, we recognize that our nation will look up to PAL to sustain the links and connections that unite our island country and bring life to our communities and economy,” the airline said in a statement.
“We pledge to work harder to earn your continuing support, to deliver buong pusong alaga (wholehearted care) and provide a beacon of hope to Filipinos and travelers from all over the world.”
Chapter 11 permits a company to continue to its operations while it restructures and reorganizes its finances. According to PAL, the plan would allow the company to produce “fresh capital, lower debt, and a sturdier financial foundation for the future.”
The decision, however, is still subject to approval from a U.S. judge.
Lucio Tan, the airline’s chairman and CEO, expressed his gratitude towards supporters of the restructuring plan. “We are grateful to our lenders, aviation partners and other creditors for supporting the plan, which empowers PAL 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,” he said.
While once a strong forerunner in the aviation scene, PAL has battled against financial burden long before the COVID-19 pandemic disrupted the travel business.
The airline company reported losses as early as the first quarter 2017, clocking in negatives for every following year. In 2020, their losses amounted to a record amount of 73 billion pesos.