PAL downplays reports it is seeking court protection

No definite decision has been made on the future of privately-owned flag carrier, Philippine Airlines (PR, Manila Ninoy Aquino Int’l), according to its parent company, PAL Holdings. The company, in a disclosure to the Philippines Securities and Exchange Commission on November 25, 2020, responded to a request for clarification on an article in the Nikkei Asia which claimed the airline was poised to seek court protection for its debt restructuring. “Please be informed that we sought clarification from Philippine Airlines (PAL) on the above-quoted article and were informed that there has been no definite decision on the matter. The instruction from the board is to continue to study the best options for the airline as of this time,” PAL Holdings said. “Philippine Airlines management and stakeholders continue to work on a comprehensive recovery and restructuring plan that will enable PAL to emerge financially stronger from the current global crisis,” the airline said in a statement. “We will make the necessary disclosures at the proper time, once details are finalised. In the meantime, we continue to gradually increase our flights operated on most of our international and domestic routes in line with market recovery.” However, news reports said a proposed debt restructuring of PAL was likely to see it file for Chapter 11 bankruptcy protection as soon as United States courts approve the plan, expected as soon as next month. “PAL will likely seek US court protection once it has 67% of its creditors or lessors agreeing to its request for restructuring,” an industry source familiar with the airline’s situation told the Inquirer. “This is to ensure that dissenting creditors follow and don’t throw off the restructuring plan. It’s the usual Chapter 11 filing done by US businesses to ensure business (continuity),” he added. “It will be filed in the US since 75% of creditors are based there and they have specific courts with knowledgeable judges on restructuring,” the source said. PAL’s total liabilities, including its outstanding obligations to aircraft suppliers, stands at almost USD5 billion, making its proposed debt restructuring plan the largest in the Philippines’ history, the report said. However, the airline’s total liabilities were expected to fall to around USD3 billion once its rehabilitation plan was approved by US courts. Nikkei Asia reported PAL’s restructuring plan involved returning 20 of its leased aircraft, cutting 2,700 jobs, and raising USD505 million for post-restructuring liquidity requirements. Of that total, USD255 million was expected to be raised by PAL’s controlling shareholder, business tycoon Lucio Tan, with USD250 million from government and private banks. These plans were reportedly disclosed by airline officials during an online meeting with employees and in a separate meeting with the Philippines Department of Finance (DoF). Management was looking to avoid a scenario in which an administrator would decide the airline’s fate, employees were told. According to the ch-aviation fleets ownership module, PAL’s fleet of 61 planes is made up of a mix of Airbus (AIB, Toulouse Blagnac) and Boeing (BOE, Chicago O’Hare) aircraft. Of the 61, a total of 43 are leased namely two A320-200s, thirteen A321-200s, two A321-200NXs, fourteen A330-300s, six A350-900s, and six B777-300(ER)s.