MANILA, 17 May 2021: Philippine Airlines is embarking on a painful restructuring exercise to reduce cash burn and stave off creditors, possibly by seeking court protection under Chapter 11 bankruptcy rules.
PAL released a statement last week in response to reports that appeared on the aviation industry website FlightGlobal claiming it was planning to file for Chapter 11 bankruptcy protection in the US by the end of this month.
Flight Global claimed that three people with knowledge of the matter told airline industry data provider Cirium the move to a Chapter 11 procedures would give it breathing space from creditor demands while it restructured financially. Rumours have been rife since last November that PAL would start proceedings.
Meanwhile, the PAL statement picked up by local media in Manila stopped short of providing details of a restructuring plan It was quoted ABS-CBN News saying: “As the work is ongoing, we will make the necessary disclosures at the proper time, once details are finalized.”
PAL Holdings Inc disclosed in November last year losses of P28.85 billion during the first three quarters of 2020 due to global Covid-19 lockdowns. But losses pre-dated Covid, with the airline reporting a P10.31 billion loss in 2019 and P4.33 billion in 2018.
Chapter 11 protection allows PAL to continue operations while it reorganizes by creating a practical business recovery plan that guarantees payments for creditors based on a timeline approved by the court.
Meanwhile, the other major airline in the Philippines, Cebu Pacific, posted a net loss of P22.2 billion in 2020 but claimed last Tuesday it had raised over P40 billion to continue operations and prepare for recovery.