The Chapter 11 announcement that Philippine Airlines Inc. (PAL) made on Saturday gave mixed views to the public. In reality, the chapter 11 filing is the beginning of the restructuring of PAL. They will be able to operate normally while undergoing rehabilitation, reorganization, and the restructuring of their debts. As such, PAL will need to undergo major changes.
Saying goodbye to a quarter of its aircraft
As a result of the chapter 11 filing, PAL is compelled to reduce the aircraft in the fleet due to overcapacity. From 92 to 70 aircraft (which includes subsidiary PAL Express), a quarter is expected to be reduced. Many of the leased aircraft are expected to be returned.
Saying goodbye to the plane that has been your home in the sky must be difficult, but there are no other choices left for now. There is a need to save the business. In May 2021, the airline discussed returning a minimum of two Airbus A350 and four Boeing 777 to their leasing companies.
Deferring aircraft deliveries
PAL has a pending order of 13 A321neos from Airbus. However, deliveries of the remaining aircraft are set to be deferred. Currently, PAL has 8 A321neos on the fleet.
“We were able to get the support of Airbus to postpone those deliveries and give us an option to cancel some of those aircraft beyond 2026 to 2030 … depending on how this recovery shapes up” Nilo Thaddeus Rodriguez, PAL Chief financial officer added.
PAL will have its breakthrough
Gilbert Santa Maria said that the expected time to finish Chapter 11’s restructuring process is by the end of the year but he does not expect revenues to return to pre-pandemic until 2025. He assured however that PAL will have its breakthrough, “We are a traditional carrier. We are going to reinforce our core business, improve our brand, improve our marketing and recover that way.”With his positive thoughts, he hoped that with the slimmer fleet, to cope better with the reduced demand.
COVID-19 pandemic has been placing uncertainty on people and businesses. Will the quarter drop continue? Are we expecting some more aircraft orders to be canceled or are we now waving to the increase of unemployment rate in the aviation industry? The assurance rate of coming back big is close enough to impossible. The decision of what comes next after tomorrow lies in the decision we make today.
