CAPA: PAL ‘far from out of the woods'
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CAPA: PAL ‘far from out of the woods’

With COVID-19 cases mounting and no end in sight to the crisis, the bumpy ride for bilyonaryo Lucio Tan’s Philippine Airlines continues.

READ: Sinangla pati ang ‘miles’: Lucio Tan to use Mabuhay Miles program in his proposed $505M loan to save PAL

Global aviation consultancy firm Centre for Asia Pacific Aviation (CAPA) believes the pandemic will continue to clip the wings of PAL, battered with heavy losses and debt.

READ: Lucio Tan’s game plan: Bye-bye New York, London, missionary routes, Clark airport as PAL focuses on China, West Coast, Manila, Cebu

“Gaining agreement from its creditors and presumably a smooth passage through bankruptcy court will be major steps for PAL. But it is far from out of the woods yet, and it still has some tough months ahead of it before any meaningful recovery takes hold,” CAPA said.

READ: Lucio Tan averts PAL closure in September after court OKs $20M in financing

PAL recently won approval from the US Bankruptcy Court in New York to access the first $20 million from a $505-million loan facility to keep its operations going.

READ: Gasping for air: PAL says it won’t last beyond September if it doesn’t get $20M in fresh cash from Lucio Tan

To ensure its survival during the pandemic, the flag carrier plans to scale down its widebody fleet and long haul network.

READ: PNB, ChinaBank, BDO, AUB, UnionBank: Find out the biggest local creditors of PAL aside from Lucio Tan

“PAL will axe its three longest routes to London, New York and Toronto, which were served by the A350s before the pandemic,” CAPA said.

READ: PAL expects to emerge from bankruptcy before year-end

To be retained are routes to destinations on the West Coast of North America – Los Angeles, San Francisco and Vancouver.

READ: Lucio Tan’s heir apparent Hun Hun gives lolo’s assurance to customers, partners: PAL will keep flying now and long into the future

CAPA said the changes align with the industry’s accepted premise that short haul markets will recover fastest following the pandemic and long haul will be slowest to recover.

READ: PAL defends bankruptcy filing: Many airlines used Chapter 11 to reinvent themselves into more successful firms

“But there is no question that a streamlined PAL will be better placed to respond to what could be a protracted recovery in international markets. It will also have options to expand its widebody fleet again and perhaps resume some of its cancelled routes when demand does eventually come back,” CAPA said.

READ: Lucio Tan cheers Chapter 11 filing as ‘breakthrough’: PAL to cut fleet by 25%, debt by $2B; raise $655M in new equity, borrowings

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