PAL Wins Approval from Bankruptcy Court

 Authorizes Airline To Draw Financing Funds

10 September 2021

Flag carrier Philippine Airlines Inc. (PAL) has won approval Thursday from a New York bankruptcy judge to access financing for its chapter 11 proceedings, the first step in an effort to relieve the national carrier of roughly $2.1 billion in financial obligations.

Judge Shelley Chapman of the U.S. Bankruptcy Court in New York granted approval to let Philippine Airlines draw up to $20 million from a $505 million loan facility led by the carrier’s controlling shareholder, Buona Sorte Holdings Inc.

PAL intends to return contracted widebody planes and remove $2.1 billion in debts together with a new business plan that would enable the embattled national carrier to book an operating income of $220 million next year and $364 million in 2023, according to PAL chief financial officer Nilo Thaddeus Rodriguez said. 

“By 2022, PAL expects to exit its recovery phase as operating activities generate more consistent positive monthly cash flow,” added Rodriguez.

Its new business plan includes more flights to China, and South Asia, boost in US West Coast flights, and possible exit from unprofitable markets of New York, Toronto, and London Heathrow.

It will also implement a so-called power-by-the-hour scheme for remaining planes, allowing PAL to better manage cash flow since it would pay a fixed cost based on the number of hours an aircraft is used.