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Philippine National Airlines seeks to cut US$2 billion in debt to survive
Philippine Airlines said on Saturday that it is filing for bankruptcy in the United States to reduce its debt by $2 billion as it tries to survive in an industry devastated by the coronavirus pandemic.
Philippine National Airlines said the document will allow it to restructure contracts and reduce debt by at least US$2 billion, while at the same time obtaining US$655 million in new capital when it exits Chapter 11 procedures.
PAL will also reduce its fleet size by 25% and renegotiate contracts to reduce lease payments.
“Philippine Airlines will continue to operate as usual while completing the reorganization of our network, fleet and organization,” Senior Vice President and Chief Financial Officer Nilo Thaddeus Rodriguez said in a video message.
As part of the agreements reached with suppliers, lenders and lessors, Rodriguez stated that PAL will receive US$505 million to implement the recovery plan. This money will later be converted into airline equity and long-term debt.
Rodriguez said that after the restructuring process is completed “within a few months”, it will also receive another $150 million in debt financing.
Philippine Airlines President Gilbert Santa Maria said in the same video that due to pandemic restrictions, the number of Philippine air travel dropped from approximately 30 million in 2019 to 7 million last year, a decrease of 75%.
The airline cancelled more than 80,000 flights, lost $2 billion in revenue, and laid off 2,300 employees.
Its main shareholder injected more than 130 million U.S. dollars in emergency liquidity and sold a non-strategic asset for more than 70 million U.S. dollars.
Santa Maria said that Philippine Airlines now operates 21% of pre-pandemic flights to 70% of its usual destinations.
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