Philippine Airlines to End New York, Toronto Flights Under Restructuring Plan
Bankrupt Philippine Airlines will end service to New York and Toronto as part of a rejigging of its route map under a restructuring plan it filed with a U.S. bankruptcy court on Thursday.
Citing “structural issues impacting profitability,” the Manila-based carrier will end its ultra long-haul service to New York and Toronto and focus instead on flights to Los Angeles, San Francisco and Vancouver on the West Coast of North America. PAL outlined plans to expand its codeshare with American Airlines at its remaining U.S. gateways to maintain connectivity.
PAL will also end service to Manila’s Clark Airport, which is popular with low-cost carriers, and focus on strengthening its hub at Manila International Airport. In addition, it will also cut unprofitable routes in Asia.
“The [restructuring] plan will bring PAL into sustained profitability,” the airline said in the filing. If approved by the court, PAL forecasts a $220 million operating profit next year and a $364 million in 2023.
PAL filed for Chapter 11 bankruptcy protection on September 4. The surprised few as the carrier had struggled for years, and the bled through cash during the Covid-19 crisis. At the time of the filing, PAL had just $28.6 million in unrestricted cash on hand — far less than the at least $300 million advisers said an airline its size needed to keep flying. However, the filing came with the support of its creditors who had already agreed to a restructuring plan framework. PAL said at the time that it hoped to emerge from bankruptcy within six months.
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Under the plan, PAL will remove 21 “surplus aircraft” from its fleet leaving it with just 77 planes when it exits bankruptcy. Among the aircraft being removed are three Airbus A350s that, depending on the source, could be its entire remaining fleet of the jet. PAL primarily used the A350 on flights to London, New York and Toronto prior to the pandemic with the latter two now being cancelled.
The network and other cuts acknowledge a harsh truth for PAL: the airline has lost much of its home market to more nimble low-cost competitors. Domestically in the Philippines, PAL and its subsidiary PAL Express saw their combined marketshare shrink 12.5 points from 2012-2019 even as the market grew 44 percent to 29.5 million flyers, according to data from the Philippines’ Civil Aeronautics Board. During this period, Cebu Pacific solidified its position as the country’s dominant carrier.
PAL has lined up $505 million in debtor-in-possession financing that will convert to equity upon its exit from bankruptcy. And it is seeking another $150 million in exit financing.
The bankruptcy court is will hold a hearing on the restructuring plan on November 12.Subscribe Now to Airline Weekly