PAL readies recovery plan reportedly with debt reprieve
MANILA, Philippines — Loss-making flag carrier Philippine Airlines (PAL) is preparing a massive "restructuring" of its operations that reportedly include rrunning to courts to ask reprieve from paying creditors and keep the airline afloat.
In a Viber message on Wednesday, Finance Secretary Carlos Dominguez III government was informed of PAL’s financial recovery plans, but added the carrier “gave no details on any assistance they may need from us.”
Dominguez’s statement was followed by that from PAL which said a “comprehensive recovery and restructuring plan” is underway, all but confirming plans to request for court intervention. “We will make the necessary disclosures at the proper time, once details are finalized,” the company said.
Strictly speaking, that recovery plan had been ongoing for months since the health crisis disrupted travel plans and prompted ticket refunds. It includes plans to cut 2,700 jobs or roughly 35% of its 7,800 workforce announced last month, as well as a surrender some 20 leased airlines to cut costs.
What’s new, and potentially a drastic step-up in cost-cutting measures, is a Nikkei Asia report that said PAL would ask the court for some form of protection against creditors. The exact pleading, if any, remained unclear, which lawyers said can vary from mere delays in debt payments to actual debt forgiveness that will trigger a return to receivership similar to the airline’s fall during the 1997-1998 Asian financial crisis.
Unlike Southeast Asian countries such as Malaysia and Thailand, the Philippines has rejected bailing out firms brought down to their knees by the pandemic.
PAL’s plan however only demonstrates the pandemic's heavy financial toll on the airline industry, 5 months after the Philippines reopened the economy and with it, some local and international flights. Beyond PAL, budget carrier Cebu Air Inc. is currently out to raise $500 million in new capital to weather the pandemic, while AirAsia let go of around 12% of its workforce.
The Lucio Tan-led firm, for its part, said it would continue to “gradually increase flights” as restrictions slowly get lifted, but with patrons still scared of flying, a sustained rebound remains unlikely.
In the third quarter, PAL Holdings Inc., the airline’s parent, widened its net loss by 53.4% year-on-year to P7.9 billion. Year-to-date net losses ballooned to P28.8 billion, over three times wider than P8.5 billion in losses same period last year.
As of September, PAL Holdings recorded outstanding lease liabilities and long-term debts amounting to P198.3 billion, financial statements showed.
On Wednesday, shares in PAL Holdings slumped 4.30% to close at P7.35 each.
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