PAL Wins Chapter 11

 Exit Protection Before Year Ends

18 December 2021

Flag carrier Philippine Airlines Inc. (PAL has won court approval for its reorganization plan, paving the way for the carrier to exit bankruptcy before the end of the year.

The US Bankruptcy Court of the Southern District of New York has approved its Plan of Reorganization proposal for a prearranged restructuring under the U.S. Chapter 11 process, pre-terminating its long term leases on aircraft and engines along the way to cut $2 billion in debts, and has received overwhelming creditor support throughout the process.

U.S. Bankruptcy Judge Shelley Chapman said Friday that she would approve the Chapter 11 plan after unsecured creditors voted to back the proposal. The reorganization didn’t face any major opposition from debt holders.

“This case is a model for what can be accomplished in Chapter 11,” Chapman said. “You’ve achieved overwhelming consensus.”

“Today’s court approval represents a critical moment in our journey to emerge as a stronger airline. We are thankful for our loyal customers, dedicated employees, and the support of our shareholders and partners and government, which has enabled us to move efficiently through the process and reach this milestone,” said Gilbert F. Santa Maria, PAL President & Chief Operating Officer.

“We have a few more procedural steps to take before we can complete the Chapter 11 process, after which we will focus intensely on serving the public, navigating the continuing challenges of the pandemic and economic recovery, and sustaining the links that connect our archipelago.” He adds.

The consensual Plan was accepted by 100% of the votes cast, which were from PAL’s primary aircraft lessors and lenders, original equipment manufacturers and maintenance, repair, and overhaul service providers, and certain funded debt lenders. 

The Rehabilitation Plan provides for over US$2.0 billion in permanent balance sheet reductions from existing creditors, allows PAL to consensually contract fleet capacity by 25%, improves PAL’s critical operational agreements and includes US$505 million investment in long-term equity and debt financing from PAL’s majority shareholder.

PAL continues to operate 32 international flights across the globe, and 29 growing domestic destinations from its hubs in Manila, Cebu and Davao.

The airline expects to restore more routes and increase flight frequencies in the Philippines as travel restrictions ease and borders reopen. 

PAL has managed to reopen 60% of its domestic market as local government eases travel restrictions across the country, and about 45% of its international destination pre-pandemic level as overseas travel remains restricted by the government.