PAL Files For Chapter 11 Bankruptcy

Philippine Airlines (PAL) has reached an agreement with lessors and creditors for over $2 billion in payment reductions, as it files for Chapter 11 bankruptcy in New York, according to flightglobal in a piece written by Greg Waldron.

Photo Insert: PAL’s iconic “sunrise” tailfin is seen in Muscat, the capital of Oman.

The agreement covers lenders, lessors, airframers, and engine suppliers, as well as its majority shareholder, says the carrier.

The move will allow for the restructuring of the company and the reorganization of its finances.

“The restructuring plan, which is subject to court approval, provides over S$2.0 billion in permanent balance sheet reductions from existing creditors and allows the airline to consensually contract fleet capacity by 25% and includes S$505 million in long-term equity and debt financing from PAL’s majority shareholder and S$150 million of additional debt financing from new investors,” says PAL.

The restructuring only covers Philippine Airlines, not parent PAL Holdings or PAL Express. In addition to filing for Chapter 11 bankruptcy in New York, the airline is also filing for recognition under the auspices of the Philippines’ Financial Insolvency and Rehabilitation Act.

The airline adds that it will continue to operate flights as normal.

“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, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the world,” says Dr. Lucio C Tan, PAL Chairman and chief executive.

“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.”

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