Philippine Airlines—controlled by billionaire Lucio Tan—has won court approval to restructure, paving the way to revive the loss-making flag carrier and exit bankruptcy.
“Today’s court approval represents a critical moment in our journey to emerge as a stronger airline,” Gilbert Santa Maria, PAL president and chief operating officer, said in a statement on Friday. “We are thankful for our loyal customers, dedicated employees, and the support of our shareholders and partners and government, which has enabled us to move efficiently through the process and reach this milestone.”
The company filed for bankruptcy protection in New York in September, paving the way for the restructuring of over $2 billion in debts and fresh capital injection of $505 million from its majority shareholder.
“We have a few more procedural steps to take before we can complete the Chapter 11 process, after which we will focus intensely on serving the public, navigating the continuing challenges of the pandemic and economic recovery, and sustaining the links that connect our archipelago,” Santa Maria said. PAL said it expects to complete the Chapter 11 process by the end of the year.
As part of PAL’s restructuring plan, it will downsize its fleet by more than 20%. The carrier is also cancelling some unprofitable long-haul routes in the U.S., while boosting flights to high growth Asian destinations such as China, the company said in court filings in October.
Airlines are among the hardest hit by the pandemic as governments around the world imposed lockdowns and restricted cross-border travel to curb the further spread of the virus. The International Air Transport Association estimates airlines around the world will lose about $52 billion this year after incurring about $138 billion in losses last year.
PAL, which has been piling on losses in the last five years, expects to return to the black next year with the implementation of the restructuring plan and gradual easing of travel restrictions.
Tan—who emerged as PAL’s controlling shareholder in 1995 when he was appointed chairman—regained control of PAL in in 2014 after buying San Miguel Corp.’s controlling interest in the airline. With a net worth of $1.9 billion, Tan, was ranked No. 12 on the list of the Philippines’s 50 Richest that was published in September. His business empire spans tobacco, spirits, banking and property.