PHILIPPINE AIRLINES READY TO FILE FOR BANKRUPTCY

According to local media reports, Philippine Airlines Inc. Company (PAL) has begun negotiations with creditors on restructuring and plans to file a bankruptcy petition under the US bankruptcy law. The company had been working on plans for financial recovery, considering the possibility of restructuring, the Philippine air carrier announced back in November 2020.

According to the released data, PAL has reported incurred losses since the first quarter of 2017. Almost 29 billion pesos ($ 607 million) of them came in the first nine months of last year. The company's reports for past years indicate that the carrier has $ 5 billion in liabilities to creditors.

Before the pandemic, the tourism industry in the Philippines contributed about 13% of country’s GDP.

It employed about 13.5% of the workforce. After COVID-19 erupted in the country, the number of people arriving from abroad fell by 82% (to less than 1.5 million in 2020). 

In February 2021, the representatives of airline confirmed that PAL is implementing an “enterprise-wide headcount reduction program”. The company announced the reduction of 2.3 thousand employees, which is approximately 30% of the total working staff of the airline. This was done by mid-March. 

In early May, information that PAL may turn to bankruptcy protection plans by the end of the month by filing an application in accordance with Chapter 11 of the US bankruptcy code was published by the Cirium research firm, which is engaged in data analytics in the aviation market.

The company referred to inside information obtained from the informed sources.

We should remind our readers that Chapter 11 restructuring is the so-called “soft” form of bankruptcy, which is therefore called reorganization. It does not imply liquidation of the company, allowing you to restructure debts and continue working. Cirium sources previously reported that the company has already started working with Norton Rose Fulbright legal agency, bringing it in as an advisor. The New York-based firm Seabury Capital was hired as a financial consultant

The airline, founded in 1941, is one of the oldest in Asia with a fleet of 61 aircraft. The organization belongs to the holding of the same name, the main beneficiary of which is the tycoon Lucio Tan.

A number of experts believe that one of the ways of restructuring could be the transfer of modern Airbus and Boeing airliners to other carriers.

On May 16, 2021, the PAL president announced that the company has the largest fleet in the Philippines, but the new liners turned out to be too expensive, which is why the president demanded non-trivial crisis response measures from a company with an 80-year history.