Philippine Airlines Inc (PAL) expects to emerge from Chapter 11 bankruptcy before the end of the year, with a leaner fleet and fewer destinations, as a recovery in travel demand is not likely in the next few years, company president Gilbert Santa Maria said yesterday.
Majority owned by billionaire Lucio Tan (陳永栽), the carrier filed for Chapter 11 bankruptcy in New York on Friday with a lender-supported plan to help it recover after the COVID-19 pandemic devastated global travel.
It aims to cut US$2 billion in borrowings, will get US$505 million in equity and debt financing from existing shareholders and banks, as well as US$150 million of debt financing from new investors.
Philippine Airlines would trim its fleet to 70 planes from more than 90, with a “good number” of wide-body aircraft to be returned, Santa Maria told a news conference.
“The remaining fleet will be more than adequate to see our demand through until recovery,” which is not likely until 2025, he said.
No further job cuts are expected after the company reduced its workforce by 30 percent in March.
Airbus SE agreed to postpone deliveries of 13 narrow-body planes with an option to cancel some beyond 2026, Philippine Airlines chief financial officer Nilo Thaddeus Rodriguez said.
Singapore-based aircraft lessor Avation PLC welcomed the restructuring announcement, saying that it would support the process and has agreed on terms for Philippine Airlines to retain a Boeing Co 777-300ER.
“A successful restructuring will ensure that Avation’s aircraft will remain with PAL and that Avation will recommence collecting cash rent on the aircraft for the first time since mid-2020,” the London-listed company said in a statement.
“These permanent actions will enable Philippine Airlines to emerge from Chapter 11 in a few months with fresh capital, lower debt and a competitive cost structure,” Rodriguez said in a video posted on YouTube and aired before the news conference.
The Tan family firmly supports the restructuring process and vows to complete the carrier’s recovery, PAL director Lucio Tan III said in the same video message, reading a statement from his grandfather Lucio Tan.
The fleet reduction would mainly involve Airbus SE A350s, A330s and Boeing Co 777 aircraft, said Brendan Sobie, consultant at Sobie Aviation, who expects that the airline would remove premium economy seats.
Philippine Airlines is likely to focus on the domestic market as well as west coast North America, a traditionally profitable long-haul route, and North and Southeast Asia, Sobie wrote in an e-mail.
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