Philippine Airlines—controlled by billionaire Lucio Tan—has exited from bankruptcy proceedings after a U.S. court approved its restructuring plan to slash debts by more than $2 billion, positioning the flag carrier for a recovery from pandemic-induced losses.
PAL, which has been piling on losses in the last five years, has said it expects to return to the black next year with the implementation of the restructuring plan and gradual easing of travel restrictions.
The airline completed its financial restructuring—which was supported by creditors as well as suppliers including Airbus—within four months after the airline filed for bankruptcy protection in New York in September, PAL said in a statement on Friday. Besides the debt reduction, the company also raised $505 million in fresh equity and loans from Tan.
PAL Holdings is proposing to increase its authorized capital to 30 billion pesos ($324 million) from 13.5 billion pesos to facilitate the fresh equity injection from Tan, PAL’s parent company said in a separate regulatory filing on Friday. PAL also has the option to tap $150 million in additional financing from new investors.
Apart from the airline’s recapitalization, the carrier has streamlined its operations by cutting the size of its fleet by as much as 25% as part of the company’s reorganization. PAL aims to reinvest in its operations going forward to strengthen its position is the Philippines’ sole full-service carrier with the largest international network that serves four continents.
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“There are immense challenges ahead, but we look forward to tackling them as a reinvigorated Philippine Airlines, better positioned for strategic growth to continue serving our customers,” Gilbert F. Santa Maria, PAL president and chief operating officer, said in a statement.
Airlines were among the hardest hit by the pandemic in the past two years as governments around the world imposed lockdowns and restricted cross-border travel to curb the spread of Covid-19. The International Air Transport Association estimates airlines around the world will lose about $52 billion this year after incurring about $138 billion in losses last year.
Tan—who emerged as PAL’s controlling shareholder in 1995 when he was appointed chairman—regained control of PAL in in 2014 after buying San Miguel Corp.’s controlling interest in the airline. With a net worth of $1.9 billion, Tan, was ranked No. 12 on the list of the Philippines’s 50 Richest that was published in September. His business empire spans tobacco, spirits, banking and property.