Several airlines filed for Chapter 11 bankruptcy around the time of the pandemic, including Avianca (and LATAM) Now you can add another airline.
Philippine Airlines files Chapter 11 bankruptcy protection
Philippine Airlines (PAL), has announced that it will undergo a financial restructuring as part of the US Chapter 11 process. Yesterday, a petition was filed at New York's district court. This was rumored for several months. It is interesting to finally see it happen, especially considering that the pandemic has been 18+ months.
Chapter 11 is a legally recognized process that allows the airline to obtain fresh capital, lower debt and better financial stability. The airline reached an agreement that includes shareholders, creditors, lessors and suppliers. This should make it more sustainable in the long-term.
PAL hopes to reduce its fleet by as much as 25% and to eliminate $2 billion of existing debt with this restructuring. The airline also hopes to raise $505 millions in equity and debt financing, as well as $150 million from new investors.
Philippine Airlines A321 business class
What does this all mean for Philippine Airlines' future?
According to its description, Philippine Airlines hopes that it will continue to serve its customers and fulfill its mission as a flag carrier and full-service airline in the Philippines.
It should continue to be business as usual at PAL for customers and employees.
As soon as the demand is higher and restrictions are lifted, the airline will continue to exist.
Tickets credits will remain valid
Mabuhay Miles loyalty program continues to offer passengers the opportunity to redeem and earn miles
As has been the case with other airlines who have filed for Chapter 11 for their operations, nothing significant should be changed on the front-end at the moment.
Before the pandemic, Philippine Airlines had hoped to become a five-star airline. Although I was able to fly the Philippine Airlines flagship Airbus A350, it was a great experience. However, the airline has much to do.
PAL was in financial trouble even before the pandemic and has been losing money since then. Inefficient, lacking partnerships and with a poor route network to serve connecting traffic outside the Philippines, PAL was a failure.
While the coronavirus pandemic did indeed make the issues of the carriers worse, it is clear that there were some changes that needed to be made even before the pandemic.
Philippine Airlines A350 business class
Bottom line
Philippine Airlines filed for bankruptcy before US courts. This will allow the airline to restructure its operations, including the reduction of its fleet and the reduction in debt. It also allows for new funding. This is something that has been in place for months. It's not surprising, considering that PAL was losing a lot even before the pandemic.
I believe the airline will be able to emerge from bankruptcy without too much impact on passengers.
Are you shocked to learn that Philippine Airlines filed for bankruptcy?
