Metro Manila (CNN Philippines, October 1) — Philippine Airlines has secured a US court approval to access a funding boost amounting to $505 million, further reviving hopes for the flag carrier’s recovery.
As part of its US Chapter 11 bankruptcy filing, PAL said it was granted full access to the multimillion-dollar debtor-in-possession (DIP) loan facility needed to operate business as usual, while undergoing a restructuring plan.
“This important step confirms that our recovery process is on track as we continue to work hard on securing a fully consensual reorganization plan in an efficient manner,” Gilbert Santa Maria, PAL president and chief operating officer, was quoted as saying in a statement Friday.
The DIP financing comprises a loan facility in the amount of $250 million—$20 million of which had been previously approved by the bankruptcy court—and another multi-draw term loan in the amount of $255 million.
“With approval to fully access our DIP financing, PAL has the additional liquidity needed to meet our current and future obligations and to continue operating as usual,” said Nilo Thaddeus Rodriguez, PAL chief financial officer.
“PAL will emerge a leaner and more competitive airline thanks to our hardworking employees, the resolute commitment of our majority shareholder and the strong support from our stakeholders and creditors,” Rodriguez added.
Earlier in September, PAL finally pursued the filing for the US Chapter 11 bankruptcy in New York.
Under the restructuring plan, the Tan-led airline seeks to slash $2 billion in borrowings, cut its operating fleet capacity by 25%, and raise $655 million in new financing.
Filing for Chapter 11 bankruptcy in the US will allow PAL to “stay in the rehabilitation process in the shortest possible time” compared to the years-long receivership program it had to deal with in 1999, Rodriguez said in an earlier virtual briefing.
The group is bullish it will exit the Chapter 11 process by the end of the year.
However, the airline does not expect to easily hit its pre-pandemic size as travel demand is expected to bounce back only until 2024 or 2025, PAL chief strategy officer Dexter C. Lee said.
Reaching pre-pandemic revenues may happen “closer to the back half of the decade,” Lee added.
PAL assured the public that its passenger and cargo flights will continue during the rehabilitation program. The move to file for bankruptcy protection—which includes reducing its fleet volume—will not lead to layoffs, Santa Maria said.
