Airlines In The Philippines II

[Arianespace]

Should this be accurate, PAL intends to end court protection in 6 months time after filing chapter 11 in January. Earlier buzz suggest as early as 3 months after push from Airbus. That is how confident they are. That also assumes equity backing which is already prepared. Conservative estimate however suggest at least one season. Majority of the creditors already agreed for a haircut, as broken by Flightglobal report. It also confirms good graces from aircraft lessors. So lessors already agreed what haircut to take prior to filing. Perhaps recognizing the times. PAL is battling both rental-deferral and rental-haircut requests, and also lease pre-terminations from lessors due to covid19 pandemic.

[XWB_flyer]

So in shot only Next year we will learn how the Pandemic will alter PAL fleet. Also notice on Aerofleet website that PAL is slowly reactivating stored aircraft back into service such as the A321, A330 and A350.

With the restriction likely to continue for sometime a good question is how much will demand returned in 2021?

[Arianespace]

The term used for Chapter 11 filing is "Pre-package bankruptcy", or prepacks as insider would say.


Normally, A conventional bankruptcy case is one in which the debtor files for Chapter 11 relief without having agreed in advance to the terms of a plan of reorganization with its creditors.

During the course of the Chapter 11 case, a creditor or group of creditors may formulate and propose plan for reorganization of the company and how it pays its debts. If they agree with debtor, restructuring proceeds. If not, then debtor goes into liquidation.

A company undergoing Chapter 11 reorganization is operating under the protection of the court. So creditors cannot sue the airline for unpaid debts. The manner of their payment and how much will be paid to it is approve now by the court. Should the creditors agree to the restructuring plan offered by the debtor, the old lease terms are discarded and restructured ones, normally with less payment, approved by the court. This is when the company emerges from receivership.

This time however, PAL would file a "pre-packaged bankruptcy" or insolvency suit, where PAL already have secured sufficient support from creditors to confirm their plan of reorganization prior to filing for Chapter 11 reorganization.

Pre-packaged plans of reorganization always result to what industry calls a "haircut", which is a reduction of the amount that will be repaid to creditors. Aircraft lessors will not end up with an empty bag. At most its half full. I said previously that PAL was talking to them

The only requirement for PAL is to convince at least two-thirds (66%) of its debts held by creditors to support the restructuring plan. And that is just part of it. If everything goes smoothly, the plan should be confirmed by the bankruptcy court in three months time.

So why do PAL have to go to court in the first place if they can negotiate it by themselves already? The answer is for it to bind the rest of the creditors (33%) of them.

The government of the Philippines is also a creditor. That is the reason why PAL President Sta. Maria went to see Sec. Dominguez for his approval of the plan, which it did, as it had waived its aeronautical, landing, parking, terminal fees etc., already through Bayanihan Laws.

As for the rest of the 33% lies the problem, which PAL also need to sort out if it did not done so already. That is the reason why conservative estimate to exit prepacks usually last at most 6 months at the earliest.

As to what this complexities are,

An out-of-court informal restructuring/workout agreement or Rehabilitation Plan may be opted to if: (a) the debtor agrees; (b) it is approved by creditors representing at least sixty-seven percent (67%) of the secured obligations of the debtor; (c) it is approved by the creditors representing at least seventy-five percent  (75%) of the unsecured obligations of the debtor; (d) it is approved by creditors holding at least eighty-five percent (85%) of the total liabilities of the debtor, secured or unsecured.

The parties may agree to a standstill period for a maximum of one hundred twenty (120) days pending negotiation of the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan, which would be enforceable against the contracting parties and other creditors, provided that: (a) the agreement is approved by creditors representing more than fifty percent (50%) of the total liabilities of the debtor; (b) notice thereof, which invites creditors to participate in the negotiations, is published in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; and (c) the standstill period does not exceed one hundred twenty (120) days from effectivity.

I did mentioned this in October

Arianespace wrote

As of this posting, 3 A350 and 4 B777 are grounded still. So the figures reported back in August are accurate. No news however if lessors agreed to PAL proposal. My thoughts however is they already have. Otherwise, these planes would have left the country like some of CEB fleet. They are still here. So I think the no use no pay policy are already being effected. I kinda believe that lessors nowadays prefer to earn little than none at all.

Arianespace wrote

Flight crews have no idea how dire the straight is. All of them was told that some of them might have to go. I hope the airline hold them until December otherwise they may have to seek employment elsewhere which is pretty hard at this time.

Lo and behold, its all coming true!

       
By: Daxim L. Lucas, Miguel R. Camus - @inquirerdotnet
Philippine Daily Inquirer / 04:02 AM December 01, 2020

Philippine Airlines is pushing back the timetable for its manpower reduction program until after the Christmas holidays, even as the company divulged plans over the weekend to retrench some of its most senior pilots as part of cost cutting measures.

Read more: https://business.inquirer.net/312820/pal-layoffs-pushed-back-to-january-2021#ixzz6gfZe2nK0

So that confirms their projection is spot on and improving.

[XWB_flyer]

Gong Xi fa chao!

I've heard from "Sources" that PAL first B77W will be retired. Further more the source also mention that all of PAL wide-body types will face reduction including the A350.

For confirmation its best to wait for the 2Q 2021 which will confirm which types face reductions.

Additionally CEB first A330-300 has returned to MNL and is being prepared to be returned to its lessor.

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[Evodesire]

RP-C9910 (A321-200) was returned.

Based on airfleets, 24 PAL jets are parked. 3x 77Ws, 2x A350, 5x A330, 7x A321ceo, 3x A321neo, 4x A320. Anyone has an idea if all these will be returned or sold?

[Arianespace]

CEOs are scheduled to be return to lessor beginning 2021-2024, including old A320s. Their replacement NEOs delivery were earlier announced to be deferred until 2023. No info on status of widebodies. All i know is that those not flown are not paid, probably lessor concessions. On this score, your guess is good as mine.

[crashandburn]

what i heard...6 B777s, 2 A350s, 8 A330s and 29 A321s to be retained...

[Arianespace]

If my source is correct, Prepack insolvency will be filed by PAL this month in New York. Does not say which aircraft goes and which doesn't. Its been revised 3 times that some information we learned may not be accurate anymore. Lets wait and see.

[Arianespace]

There it goes.

PAL Informs Lessors Of Chapter 11 Filing Deadline

Philippine Airlines has informed its lessors of a plan to file for Chapter 11 bankruptcy protection in the USA by the end of May, three people with knowledge of the matter tell Cirium.

“They are going to file before the end of May as long as they have the requisite support from creditors in terms of the majority they need to get it through and the prearranged fashion they’re going for,” says one of the people.

PAL is putting together a prearranged insolvency, which the person describes as a “halfway house” between a pre-pack and the freeform filing that, for example, some of the Latin American carriers have used.

“There are milestones and there are things that the airline then would have to do, there are commitments and DIP [debtor-in-possession financing] that have to materialise,” the person adds.

“The DIP funding would have to come through and all of that is negotiated with the lawyers. That’s the approach they are taking.”

Norton Rose Fulbright is the airline’s counsel on the restructuring. Seabury Capital has been hired as a restructuring adviser.

PAL tells Cirium: “We’re not able to provide any details or confirmation on the type or scope of any planned restructuring at this point. Our management and stakeholders continue to work on the comprehensive restructuring and we will make the needed disclosures at the proper time, once details are finalised.”

The airline adds: “What we can say is that we continue to build up our operations gradually on both international and domestic routes. The surge in Covid cases and related travel restrictions have been a setback, forcing us to cancel numerous international flights in the past two months, but we hope to get back to incremental expansion as the outbreak abates and our authorities revoke some of the restrictions.”

PAL has had a Chapter 11 filing on the cards since at least the fourth quarter of 2020. Like many struggling airlines around the globe and in Southeast Asia, the airline has been in talks with its lessors for months about restructuring leases. Cirium understands PAL is looking to reduce its leased fleet and seeking more favourable lease terms on the leased aircraft it decides to keep.

Nineteen lessors are exposed to PAL to the tune of 49 aircraft, Cirium fleets data shows.

And one-third of these aircraft that will leave their fleet soon.

[Arianespace]

According to source, B777 aircraft lessor Voyager Aviation has confirmed that it granted payment deferrals to PAL for 3 of its B777W aircraft in exchange for additional cash infusion into the flag carrier by LT. We have news story about that here.

Voyager delayed secured debt amortization payments of $11.8 million related to B777 aircraft lease to PAL during the first nine months of 2020.

PAL is Voyager's largest customer. It happens to own 7778,7779,7781,7782. If you say that these planes are owned by Intrepid Aviation, you are also correct as this was the previous name of Voyager Aviation Holdings.

That said, one of these planes are going back to lessor. Presently, two are stored.

[Evodesire]

Many airlines are returning their older and larger planes while retaining the newer ones. I wonder if PAL will follow the same by leaving the A321neos and A350s while returning older 777s, A330s A321CEOs and A320s. Cebu Pacific is getting rid of their non-neo jets and replacing them with newer ones.

[Arianespace]

If you look at the table above, only 1 777 is owned by GECAS. It used to owned both 7777 and 7776. Also from the table, 6 appears to be on lease. So 4 are already airline owned. As both GECAS planes are "finance leased" planes, it is no brainer to keep them as it basically pays off its amortization already. Its only drawback is the old configuration.

If you happen to recall the B744, they operated it until retirement. It made them money. So if worse comes to worse operating your own fleet of planes is the best bet.

[Evodesire]

Based on my understanding, there are two kinds of lease. Financial lease and operating lease.

Financial lease is like a rent-to-own arrangement while operating lease is like renting the equipment until a certain agreed period period.

Out of the total number, how may are on financial and operating lease? Particularly for the 777s and A350s?

Also, will PAL keep all NEOs and return CEOs?

[Arianespace]

The 4 77Ws were product of security deposits from Boeing of the 744s orders that were never taken. They are basically PAL metal. When PAL decided to convert the order to 77Ws the plane was automatically sold to GECAS and other lessors as financial leases. Two more were decided to be bought in 2014, for a total of 6. One of the Intrepid plane is among them. This GECAS and Intrepid plane will eventually be PAL metal. The rest are operating leases. As it stands, 4 are scheduled to be return. The operating leases. But that still depends upon the official filing in New York as this propose agreement has been changed 3 times upon consent of lessor. For one, GECAS agreed for PAL to keep both the B777 and A330 when they are obliged to keep only the triple seven.

Meanwhile, SMBC financed A350's are financial leases. They are the first two. Basically, PAL metal. The rest are operating leases. PAL would have return all of them. But Ireland based Goshawk, controlled by NWS Holdings of Hong Kong, agreed to have their A350s flown with PAL. Goshawk leases two. What is not known is whether both is agreed to be kept, as they also owns 2 A321neo (9937,9938) which are not flying, again consistent with the prepack insolvency proposal. PAL will lose newer A350s from Avolon in exchange for A320's or A330's. Still is unclear which one would stay. Only 1 A330 (8771) is flying . None of the A320/321s is flying.

[Evodesire]

RP-C3506 now has a new home. This is also PAL's first widebody to be returned to its lessor. Any news about the Chapter 11 filing? Seems like things are moving slow? Or they are just silent about their moves. With all that I am observing, it seems like its Cebu Pacific thats quick to act and they do seem to have a concrete plan which include returning or selling all its older and less fuel efficient aircraft in exchange of NEOs. All their 9 NEOs are active, as compared to PAL where only 4 are active and the 4 other are stored. I wonder why they would rather use those CEOs instead of the NEOs which are more efficient.

[Arianespace]

It seems PAL has secured another A359 (3508) to fly for them from the lessor. So the information previously provided is accurate. Just some of the matters that was described in the late Chapter 11 filing.

I was also provided information that leased A359 and B77w frames will be return to them soon. Another part of the negotiated settlement perhaps.

[Evodesire]

So based on those information previously posted, what is the approx number or forecast on how many 77Ws, A359s, and A333s will be returned? Also, will they be returning A21Ns?

Looks like Cebu Pacific has a different approach. They are keeping the new ones particularly the NEOs and getting rid of the old ones.

[Arianespace]

used to be Six 777 two 359. Now its nine. No info on A330 and narrowbodies.

Incoming CEB neo planes are Indigo planes. Finance by their new owner Indigo partners LCC. Without them CEB could already be in a coma or worst liquidation.        

[Evodesire]

No wonder Cebu Pacific keeps taking in new aircraft, and why they are removing their older ones for NEOs. Well, its all about survival nowadays, and hopefully, a long term solution for them.

Nine 777s and 350s all in all? Meaning 6 777s and 3 A350s? or 7 777s and 2 A350s?