Philippine Airlines – Asia’s first and oldest commercial airline – is now officially bankrupt.
It fell victim to the pandemic which brought about choking travel restrictions that decimated its revenues, to the extent it was no longer feasible to keep the business going.
Known as PAL worldwide, the Lucio Tan-owned company reportedly filed for Chapter 11 protection in a New York City court paving the way for a similar move here in the Philippines.
The filing for bankruptcy protection in the Southern District of New York will allow PAL to temporarily stave off creditors and embark on a restructuring program and give it more time to pay off its mounting debts.
“On September 3, PAL announced the voluntary decision to undergo financial restructuring under the US Chapter 11 process…part of a set of major agreements with substantially all stakeholders, with one objective: to build a stronger Philippine Airlines so that we can serve our customers better and continue our mission as a full-service airline and flag carrier of the Philippines,” the company said in a statement.
Officials said the restructuring will enable PAL to emerge with fresh capital, lower debt and a sturdier financial foundation.
Under the Chapter 11 process, some $2 billion (about PhP100 billion) in aircraft-related debts and obligations to existing creditors will be freed which can go into PAL’s restructuring program.
The company also committed to raise $505 million in long-term equity and debt financing from its majority stakeholder and an additional $150 million from new investors.
Unlike other big international airlines (such as Singapore Airlines, Thai Airways, Qatar, Emirates, etc.) that are being supported by their respective governments so they don’t become bankrupt during the pandemic crisis, PAL and other domestic carriers have received practically nothing from the government, according to the Air Carriers Association of the Philippines.
Photo: Daily Tribune