Philippine Airlines has filed for Chapter 11 bankruptcy in the United States to pursue a lender-backed restructuring plan that aims to help the loss-making company get back on its feet following a pandemic-induced crash.
The flag carrier’s proposed restructuring, which is subject to approval by a court in the southern district of New York, includes an agreement with majority of aircraft lessors and lenders to reduce debt payments by over $2 billion and slash its fleet size by 25%, the company said in a statement on Saturday.
The Chapter 11 filing, which allows a company to continue operations while it restructures its finances, was a product of discussions with key shareholders, PAL said in a statement adding the plan will not affect passengers and employees. The company will also complete a parallel filing for recognition in the Philippines under the Financial Insolvency and Rehabilitation (FRIA) Act of 2010.
“We welcome this major breakthrough, an overall agreement that enables PAL to remain the flag carrier of the Philippines and the premier global airline of the country,” in a statement released by Lucio Tan, company president and CEO.
To stay liquid during the recovery process, PAL said existing shareholders and local banks agreed to infuse $505 million in new debt and equity financing to the company. The carrier said it will gradually increase domestic and international flights to match any improvements in market demand.
Once the bankruptcy protection is over, PAL will borrow $150 million from foreign investors to facilitate post-restructuring activities
As it stands, Philippine Airlines will continue to operate flights in the normal course of business in accordance with safety regulations, and the company expects to continue to meet its current financial obligations throughout this process.
