We were all nervous and yet excited for what’s to come after Philippine Airlines filed for chapter 11 bankruptcy protection. Optimistic because this is PAL’s gateway to restructuring after the pandemic has caused them to bleed further. Nervous because the chapter 11 filing still needed approval. Today, we can now breathe a little after a New York bankruptcy has approved the filing and will allow PAL to access financing for the chapter 11 proceedings.
Judge Shelley Chapman of the U.S. Bankruptcy Court in New York approved to let Philippine Airlines draw up to $20 million from a $505 million loan facility led by the carrier’s controlling shareholder, Buona Sorte Holdings Inc.
At the same time, this will allow PAL to continue its normal operations. Contrary to rumors and gossips, PAL will also increase capacity in some international and domestic routes once quarantine restrictions have been eased.
Benefits of a Chapter 11
With the New York bankruptcy court’s approval, here are the benefits of Chapter 11 bankruptcy protection in general terms:
- Suspends all collection activities of creditors.
- Foreclosures are suspended.
- Suspends judgement against the company.
- Can continue to operate without the need to liquidate assets or to shutdown to satisfy debt.
- The company directly reports to the court, no trustee.
- Restructuring debt Some of the notable companies that have filed for Chapter 11 are General Motors, Kmart, Marvel, Converse, Delta Airlines, American Airlines, etc.
PAL intends to return contracted widebody planes and remove $2.1 billion in debts. They also plan to work on a new business plan that would enable PAL to book an operating income of $220 million next year and $364 million in 2023. Hopefully and if things go as planned, PAL should be able to exit chapter 11 before the year ends.
They will also continue with some of their route expansion and remove unprofitable markets. PAL continues to “test the waters” in some such a London.
Whatever it is though, the approval is also a huge milestone in PAL’s rehabilitation towards being a profitable carrier again.
