MANILA (Dispatches) - Philippine Airlines (PAL) has announced the decision to undergo a financial restructuring under the U.S. Chapter 11 process. A petition was filed in New York district court on Friday.
There had been rumors of this being on the horizon for months, so it’s interesting to see it finally happen, especially 18+ months into the pandemic.
For those not familiar, Chapter 11 is a globally recognized legal process that the airline hopes will allow it to get fresh capital, lower debt, and a better financial foundation. The airline has reached an agreement with shareholders, creditors, lessors, and suppliers, which should allow the airline to be more sustainable in the future.
With this restructuring, PAL is hoping to reduce its fleet by up to 25%, and cut $2 billion in existing debt. Furthermore, with this restructuring, the airline hopes to raise $505 million in equity and debt financing from existing shareholders, and an additional $150 million from new investors.
Prior to the pandemic, Philippine Airlines wanted to transform into a five star airline. I had the chance to fly Philippine Airlines’ new flagship Airbus A350 in early 2020, and had a pretty good experience, but the airline still has a ways to go.
The truth is that PAL was struggling financially even pre-pandemic, and has been losing money for years. The airline was inefficient, lacked partnerships, didn’t have a very competitive route network for serving connecting traffic beyond the Philippines, and the process of connecting at Manila Airport was possibly the worst in the world.