Flag carrier Philippine Airlines (PAL) is confident that its restructuring program will be approved by authorities as the chance that it will fail is “very, very small,” its chief said on Monday.
During a virtual press briefing, PAL Inc. President Gilbert F. Sta. Maria said the group aims to complete the whole restructuring process within the year, as it has already secured the approval of its creditors, lessors, and lenders to implement the plan.
“The chance that this will fail is very, very small. We have a very high degree of confidence that this will be completed,” he said.
Sta. Maria said the group started negotiating deals with its creditors, lessors, and lenders “a year ago” and has gotten their approval for the corporate restructuring exercise.
This, he said, made things smoother for the United States-based court to process its Chapter 11 Bankruptcy Protection plea. The first hearing for the case is set for September 9.
Sta. Maria admitted that the “negotiations were difficult and intense,” but PAL was able to convince them of its “survivability.”
The restructuring plan needs the New York court’s approval to be executed. The group is bullish that it will receive the court sanction and will be able to subsequently file locally in recognition under the Financial Rehabilitation and Insolvency (FRIA) Act of 2010.
PAL’s new wave of restructuring is significantly faster than its experience in 1999, when the receivership program took almost eight years to finish.
By going the pre-arranged process route, PAL will be able to “stay in the rehabilitation process in the shortest possible time,” PAL CFO Nilo Thaddeus P. Rodriguez said.
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.”
Once the restructuring process has been completed, PAL Holdings Inc. of billionaire Lucio C. Tan will remain as the majority shareholder in PAL.
PAL is also set to reduce its fleet by 25 percent, leaving it with 70 planes, which, according to Sta. Maria is enough to meet the current demand for air travel.
The airline also does not expect to go back to its pre-pandemic levels this year. In fact, the company projects that this could take at least three years to materialize.
“We don’t foresee demand coming back to pre-pandemic levels until 2024 to 2025. At that point in time, we don’t believe we will be at what our size was, which was $3 billion in revenue. We expect to hit that number closer to the back half of the decade,” PAL Chief Strategy Officer Dexter C. Lee said.
During its rehab, 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.
Sta. Maria said PAL will remain strong despite the headwinds, saying that it will not reinvent its business, as other regional carriers had done to survive the pandemic.
“We are a traditional carrier. We’re going to reinforce our business and improve our brand and recover that way,” he said.