Philippine Airlines filed for Chapter 11 bankruptcy protection in the US on Friday to allow the carrier to restructure and reorganise its finances impacted by Covid-19 crisis.
The proposed revamp will allow the airline to cut its fleet capacity by a quarter and it aims to reduce $2 billion in borrowings.
Rolls-Royce and Lufthansa Technik are among the largest unsecured creditors in the company, according to the New York court filing.
Ongoing trade creditors and suppliers are expected to be unimpaired by the restructuring plan, the company said.
Aircraft leasing company Avation said it had agreed terms for PAL to retain the use of a Boeing 777-300ER.
Avation said: “PAL have advised that sufficient creditors, including Avation, have agreed to support the restructuring and the airline has a high level of confidence that the process will be completed successfully.
“A successful restructuring will ensure that Avation’s aircraft will remain with PAL and that Avation will recommence collecting cash rent on the aircraft for the first time since mid-2020. Under the restructuring, Avation will also be entitled to receive payments relating to utilisation since 1 September 2020 on a ‘power by the hour’ basis.”
Avation executive chairman, Jeff Chatfield said: “A successful restructuring outcome for Philippine Airlines would amount to significant step forward to provide Avation with certainty on lease duration in respect of its Boeing 777-300ER. A successful restructuring returns this aircraft to revenue generation and ensures rent collection which is a positive outcome for Avation.”