Mon, Sep 13, 2021
United States Is A Favorite Haven For International Airlines Seeking Protection
Philippine Airlines filed for Chapter 11 bankruptcy with a lender-supported plan to help the carrier recover after the COVID-19 pandemic.
The company will get $505 million in equity and debt financing from its majority shareholder, in addition to $150 million from new investors to contribute to debt financing. The goal is to cut $2 billion in borrowings through a proposed restructuring plan, which will need court approval, allowing the carrier to reduce its fleet capacity by 25%.
The Chapter 11 filing allows the company to operate while it begins its journey to restructure. The filing comes after the airline negotiated for months with stakeholders.
Lucio Tan, the carrier's billionaire owner, was satisfied with the results and called the filing a “major breakthrough” for the company. The restructuring plan allows the airline “to overcome the unprecedented impact of the global pandemic that has significantly disrupted businesses in all sectors, especially aviation, and emerge stronger for the long-term,” Tan, who’s the chairman and chief executive officer, said in a statement.
Philippine Airlines is the latest international airline carrier to reorganize in the United States, under US bankruptcy code. By using Chapter 11, the company will subject its reorganization plan to the final decision of a U.S. judge. The filing took place in New York.
The US is rising in popularity due to the law in the states being favorable to a company. Other companies who sought protection in the US due to issues stemming from COVID, include Latam Airlines, Aeromexico and Avianca Holdings.
The airline will continue to operate its passenger and cargo flights based on demand and travel restrictions. The company expects to add domestic and international flights as the market recovers.
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