Bilyonaryo Lucio Tan wants the Mabuhay Miles program to be included as collateral in his proposed $505 million debtor-in-possession (DIP) loan to his bankrupt Philippine Airlines.
In the flag carrier’s Chapter 11 filing in a New York court, PAL CFO Nilo Thaddeus Rodriguez said the airline’s frequent flier program would be added as new collateral to the $505 million DIP financing from Tan’s holding firm, Buona Sorte, and PAL’s parent, the Tan-controlled PAL Holdings.
In a briefing, PAL officials admitted that this was probably the “first, rare” occasion that a loyalty program would be used to secure an airlines loan.
Rodriguez said all the collateral used in the $100 million bridge loan extended by Tan to PAL in the first half of 2021 would also be used to secure the $505 million DIP financing.
PAL said the Mabuhay program was critical to keeping its customers worldwide. It also reiterated its serious commitment in honoring all its obligations under this travel perks plan.
Mabuhay Miles generated $21.4 million in revenues or one percent of PAL’s turnover in 2019. As of May this year, Mabuhay had 4.9 million members.
Under the Mabuhay frequent flyer program, members can earn travel rewards by simply accumulating mileage credits earned on flights with PAL and its partner airlines.
Mabuhay members can also earn miles through the purchase and use of services from mileage partners, including credit card providers, banks, telecommunications services, hotels and resorts, tour operators, cruise services, insurance providers, car rentals, and other merchandise and travel companies.
PAL has proposed to use the $505 million DIP facility to prepay Tan’s $100 million bridge loan, provide an immediate $20 million cash infusion to ensure that the airline survives beyond the third week of September, and ensure minimum liquidity to survive through its Chapter 11 filing