US court expected to decide on PAL reorganization plan next month
By Arjay L. Balinbin, Senior Reporter
THE United States Bankruptcy Court for the Southern District of New York is expected to decide next month on either to approve or reject the reorganization plan of flag carrier Philippine Airlines, Inc. (PAL).
“[T]he hearing at which the court will consider confirmation of the plan (the confirmation hearing) will commence on Dec. 17, 2021 at 10 a.m., prevailing Eastern Time before Honorable Shelley C. Chapman, United States bankruptcy judge,” a hearing notice dated on Nov. 12 said.
An industry source told BusinessWorld in a phone message on Nov. 11 that “if [the confirmation of plan hearing] goes well, this will pave the way for emergence from Chapter 11.”
The deadline for filing objections to the plan is Dec. 10, according to a copy of the notice from the airline’s claims agent Kurtzman Carson Consultants LLC.
As part of its plan, PAL intends to exit unprofitable markets and continue to fly on those routes that are, or can be made, profitable, while reintroducing capacity in line with evolving demands.
PAL expects to exit its recovery phase by the end of 2022, as operating activities “generate more consistent positive monthly cash flow.”
It expects an operating income of $220 million in 2022 and $364 million in 2023, the airline said in its plan of reorganization.
The airline filed a voluntary petition for relief under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Southern District of New York on Sept. 3.
In September, PAL officials expressed confidence that the flag carrier would exit the Chapter 11 process before the end of the year.
PAL Holdings, Inc. (not included in the Chapter 11 filing) had said that billionaire Lucio C. Tan’s private firm Buona Sorte Holdings, Inc. (BSHI) would inject “fresh and additional capital” amounting to P12.75 billion ($255 million) into the listed parent company of PAL.
BSHI would also provide a five-year loan of $250 million to PAL.
PAL Holdings trimmed its third-quarter attributable net loss to P5.28 billion from a loss of P7.92 billion in the same period a year ago.
Its gross revenue for the quarter climbed 66.7% to P14.12 billion from P8.47 billion previously.
For the nine months to September, PAL Holdings’ attributable net loss was reduced to P21.83 billion from a loss of P28.85 billion last year. Gross revenue went down by 29% to P32.16 billion from P45.29 billion previously.
The company’s consolidated operating expenses as of the third quarter of the year decreased to P42.75 billion or 36.7% lower than last year’s same period total of P67.52 billion, mainly due to the significant reduction in the number of flights operated.
PAL Holdings said expenses related to grounded aircraft, which were recognized this year under other charges, as well as lower manpower costs as a result of PAL’s retrenchment program in mid-March of the current year contributed to the decrease in operating expenses.