26/11/2020

Airline Credit Profile: Why is Philippine Airlines planning on seeking court protection?

Airline Credit Profile: Why is Philippine Airlines planning on seeking court protection?

Philippine Airlines is planning on seeking court protection from creditors, according to a report by Nikkei Asia. The publication states that the airline, among other things, is planning on returning 20 leased aircraft which would lower its financial liabilities by at least $1 billion. The report also states that the airline will seek to raise ca. $505 million in debtor in possession financing to ensure it remains a going concern during the restructuring. In response to the article, the flag carrier’s listed parent, PAL Holdings, said that, ‘..there have been no definite decision on the matter.’ It also added, ‘The instruction from the Board is to continue to study the best options for the airline as of this time’.

 

The Ishka View
 

PAL entered the coronavirus crisis with a weak financial position which has deteriorated even further over the course of 2020. As of end of September quarter, the airline had a cash balance of just PHP1.8 billion ($37 million) while total debt (including lease liabilities) amounted to PHP209.76 billion ($4.4 billion) of which around PHP56.43 billion ($1.1 billion) was due by September 2021. The airline had negative equity on account of the accumulated losses. All this meant that there was significant uncertainty over its ability to remain a going concern unless it received additional funding from its majority shareholders who had already injected funds in the past year. However, scale of losses meant that these additional liquidity raises were insufficient.

This is an excerpt from the airline credit profile on PAL Holdings/Philippine Airlines. Email team@ishkaglobal.com to request your full complimentary PAL Holdings/Philippine Airlines Airline Credit Profile from Ishka to get the complete picture on its handling of the coronavirus crisis and the main opportunities and threats to the airline’s prospects in the post COVID-19 world.

 

 

 

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