Philippine Airlines files for bankruptcy protection in US

Philippine Airlines has filed for protection from creditors as it struggles to survive the turmoil of the coronavirus pandemic.    © Getty Images

CLIFF VENZON, Nikkei staff writer | Philippines

MANILA — Philippine Airlines on Saturday said it filed for bankruptcy protection in the U.S., paving the way for a crucial restructuring to help the flag carrier survive the COVID-19 crisis.

The pre-arranged Chapter 11 petition was filed in a New York district court, the company said, following an agreement with creditors, lessors, suppliers and its majority shareholder.

The restructuring plan, subject to court approval, provides Philippine Airlines with over $2 billion in payment reductions and allows the airline to cut its fleet size by 25%.

The airline also plans to raise $505 million in long-term equity and debt financing from the group of billionaire and company chairman Lucio Tan — the airline’s majority shareholder — and $150 million of additional debt from new investors.

The company has been preparing since late last year for the court-backed restructuring amid turmoil in the travel and tourism industries due to the coronavirus pandemic. The company has laid off a third of its work force and pushed backed deliveries of new aircraft.

The airline, partly owned by Japan’s ANA Holdings, said business will continue during the Chapter 11 process.

“We welcome this major breakthrough, an overall agreement that enables PAL to remain the flag carrier of the Philippines and the premier global airline of the country, one that is better equipped to execute strategic initiatives and sustain the Philippines’ vital global air links to the world,” Tan said in a statement.

Philippine Airlines said it is also completing a parallel corporate rehabilitation filing in the Philippines. The airline said its Manila-listed parent PAL Holdings, which has been under trading suspension since June, and affiliate Air Philippines are not part of the bankruptcy protection process.

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