US bankruptcy court approves PAL's recovery plan

MANILA, Philippines — A US court approved on Saturday Philippine Airlines’ “recovery plan” which would see over $2 billion of its debts forgiven and its fleet size reduced by a quarter, bringing the loss-making carrier close to the end of a creditor-backed bankruptcy process.

The court in New York cleared PAL’s reorganization plan after it received “overwhelming” support from the airline’s lenders, aircraft lessors, equipment manufacturers and service providers, the company said in a statement. The plan was “accepted by 100% of the votes cast,” PAL said.

The court approval marked a major development in PAL’s recovery from hefty losses that predate the pandemic. The acceptance of the reorganization plan means over $2.0 billion of obligations would be permanently removed from PAL’s debt pile while its fleet of aircraft would be slashed by 25%.

The rehabilitation plan also includes access to $505-million debt-and-equity funding that the airline needs to stay liquid during the reorganization. Taipan Lucio Tan is alone in raising this money that his airline needs to survive.

This strategy is a key component of PAL’s Chapter 11 plea filed last September 3. PAL expects to emerge from its court-supervised Chapter 11 process before the end of 2021

“Today’s court approval represents a critical moment in our journey to emerge as a stronger airline,” Gilbert Santa Maria, the national carrier’s president and chief executive, said.

“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,” Santa Maria added.

PAL sees “improved” profitability and liquidity by the end of 2025. The airline continues to operate flights to 32 international and 29 domestic destinations from its hubs in Manila, Cebu and Davao.