Philippine Airlines (PAL) bought more time from its creditors' lawsuit in January with its first payment to lenders since June.
The carrier made the $37.9 million payment to fully secured aircraft creditors on 29 January to avoid having 19 aircraft seized. In doing so, it won agreement that there will be no attempts to seize assets until at least 15 March - the day the troubled carrier is due to file a new rehabilitation plan with the Securities and Exchange Commission (SEC).
The SEC has kept PAL in receivership since late June, when it stopped making payments on its debt of $2.2 billion - $1.3 billion of which is due to fully secured aircraft creditors.
The creditors had threatened to take legal action unless some sort of token payment was made by the end of January. In an early-February letter to employees, PAL management said: "Had we failed to pay that day, PAL would be without a fleet and we would be talking about liquidating the company's assets instead".
PAL is rushing to complete its new rehabilitation plan with the help of former Cathay Pacific Airways executives who were given five-year consulting contracts in January. They were hired after an initial rehabilitation plan, filed on 7 December, was rejected by creditors.
The new plan is expected to provide for a 22-aircraft fleet but will detail more clearly terms for a cash injection and the resumption of debt payments. Asset sales, starting with PAL's maintenance operation, are also in the plan. The carrier has said it is in talks with a "major European airline", thought to be Lufthansa Technik. PAL also claims to be in codeshare talks with US and European airlines.
It is also considering a domestic franchise arrangement, under which a local carrier will operate flights on its behalf.
Source: Airline Business
