LEGACY carrier Philippine Airlines (PAL) may now draw an initial $20 million from $505-million debtor-in-possession financing, according to the US Bankruptcy Court for the Southern District of New York.
Gilbert F. Santa Maria, the president and COO of PAL, said the court has approved “all first day motions,” which allows the company to efficiently pay its suppliers, trade creditors, and employees “in the ordinary course of business.”
“This is a significant step in our recovery plan and supports our ongoing operations to continue serving our valued customers and connecting the Philippines with the world. The combination of our substantial creditor support and the Court’s approvals enables us to progress toward an expedited emergence and full recovery,” he said.
The airline will use the initial funding to “honor and maintain all customer programs, including valid tickets and travel vouchers, Mabuhay Miles and benefits, and refund obligations, subject to PAL’s usual terms and conditions of use.”
It will also be used to finance a portion of of PAL’s operations requirements such as catering, fuel, and employee salaries.
Santa Maria also gave assurances that PAL will continue to operate flights “in the normal course of business in accordance with safety regulations, and the company expects to continue to meet all its current financial obligations throughout the Chapter 11 process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.”
Filed last week, PAL sought for Chapter 11 Bankruptcy Protection in New York under a pre-arranged route, wherein it gathered the approval of all its creditors, lenders, and lessors to restructure its debt.
The restructuring plan will enable PAL to reduce its debt of over $2 billion from lessors, lenders, and creditors through the infusion of $505 million of new debt and equity from existing shareholders and domestic banks as well as $150 million of additional debt from global private investors for “post-restructuring activities.”
The New York court has yet to approve the whole Chapter 11 plea.
During its rehabilitation, PAL will continue to operate its passenger and cargo businesses. It is also increasing frequencies of regional and long-haul routes, as well as domestic routes from its hubs in Manila and Cebu.
Cargo flights will also remain unhampered, especially those that require the transportation of vaccines, medical supplies, and those that are critical to sustain the supply chain.
PAL is also in the process of reducing its fleet to 70 planes.
The company expects to complete the whole restructuring process within the year.
“As travel demand increases and restrictions ease, we continue to increase domestic and international flights, while maintaining the safety and health of our passengers and employees,” Santa Maria said.