Philippine Airlines (PAL) is starting the new year fresh, with new ownership and less debt.
The Filipino national carrier emerged from US bankruptcy protection on 31 December as a reorganised company with over $2.0bn (£1.5bn) in permanent balance sheet reductions from existing creditors. The company is also seeing improvements in critical operational agreements and additional liquidity including a $505m investment in long-term equity and debt financing from the airline’s majority shareholder.
PAL has the option of obtaining up to $150m in additional financing from new investors as well.
Majority ownership of the airline was transferred to bankruptcy lenders, who received 79.5% of the stock in the reorganised company, according to a court document.
Better routes, fewer planes
The airline was able to optimise its routes and restructure its fleet while in bankruptcy,
Following its restructuring, PAL is exiting unprofitable markets and flying only those routes that are, or can be made, profitable, while selectively increasing regional capacity in targeted growth markets.
PAL will return 21 surplus aircraft to lessors and lenders, thereby reducing its pre-bankruptcy fleet of 98 aircraft by 23%, lowering operating lease payments by $1.8bn and shedding $250m of bank debt.
The airline expects to generate operating income of $220m in 2022 and $364m in 2023. Based on the projections and available data, earnings before interest, taxes, depreciation, amortization and restructuring/rent costs (EBITDAR) margins are expected to improve from 2% in 2020 to 7% in 2021 and by as much as 27% in 2025.
Grounded by Covid-19
The carrier filed for Chapter 11 bankruptcy on 3 September 2021 in New York after the prolonged impact of Covid-19 rendered PAL unable to generate sufficient cash to fully meet its financial obligations.
PAL halted all commercial operations on 17 March 2020, resulting in the loss of $2bn in previously forecast revenue for 2020 and $370m of refunds.
The airline furloughed over 30% of its workforce in January 2021 and launched several cash-generating and cost-saving measures to improve liquidity before entering a consensual bankruptcy restructuring plan with primary aircraft lessors and lenders, original equipment manufacturers and maintenance, repair and overhaul service providers, as well as certain funded debt lenders.
Philippine Airlines was the only party included in the bankruptcy filing. The air carrier’s parent PAL Holdings and PAL Holdings subsidiary Air Philippines, known as PAL Express, did not file for bankruptcy.
Source: Civil Aviation Authority – Qatar