PAL parent on 'final stages' of restructuring as loss mounts to P73 billion

MANILA, Philippines (Update 1, June 18, 2021 10:06 a.m.) — PAL Holdings Inc., the listed operator of flag carrier Philippine Airlines, widened its losses to a record P73 billion in 2020, as the pandemic brings the entire aviation industry on its knees.

The results, reported by the company to the stock exchange on Thursday, was larger by 653.2% year-on-year, marking the fourth consecutive year in the red. It would likely be a long haul to recovery after net losses amounted to P8.6 billion in the first quarter, albeit 8.4% narrower on an annual basis.

 “The Group’s liquidity situation became more critical in 2020 and 2021 due to severely weak passenger sales and revenue as an adverse effect of the COVID-19 pandemic,” PAL Holdings said.

Broken down, consolidated revenues nosedived by 64% on-year to P55.26 billion in 2020 following back-to-back flight cancellations as a result of the pandemic.

The massive revenue crash was enough to offset gains from lower expenses. Figures showed the company managed to reduce expenses by 46% year-on-year to P81.8 billion as anemic flight operations bring down costs of fuel, aircraft and traffic servicing, passenger service, and maintenance.

PAL Holdings said it is now on the “final stages” of its restructuring plan to survive the pandemic. Few details are known about the company’s recovery game plan, but multiple reports say the strategy includes a Chapter 11 filing in the US, a form of bankruptcy that seeks creditor protection while the restructuring program is ongoing. The company is also reportedly downsizing its fleet by returning some planes to lessors in order to conserve cash and “match the projected reduced market demand in the short term.”

At the same time, employees made sacrifices to keep the company afloat, including taking hefty pay cuts and being laid off. In mid-March, Philippine Airlines started cutting 2,300 jobs, or approximately 30% of its headcount, which the company described as an “extremely difficult and painful decision.”

“Philippine Airlines will have a long way to go for recovery,” PAL Holdings said. "PAL’s flights and operations will not be affected in any restructuring."

Trading of shares in PAL Holdings was halted on Thursday morning after independent auditing firm SyCip Gorres Velayo & Co. noted it did not give an audit opinion on the company’s financial results due to lack of “appropriate audit evidence.” The local bourse said trading of the company’s shares would resume once it finds that PAL Holdings was compliant with rules.

Editor's note: Story amended to correct the year-on-year increase in PAL Holdings' net loss to 653.2%, not 150% as previously reported.