“Assessing the Chapter 11 filed Bankruptcy of Philippine Airlines in this Covid19

Crisis”
Bankruptcy and Covid Crisis
A Case Study Research

September 2021

Hielvin E. Ermac

A Concept Study Research

 “Assessing the Chapter 11 filed Bankruptcy of Philippine Airlines in this Covid19
Crisis”
Bankruptcy and Covid Crisis
A Case Study Research

I. Facts of the Study

The covid19 crisis hit the Flag Carrier of the Philippines as Philippine Airlines

Files a chapter 11 bankruptcy to United States as this industry gutted by the Coronavirus

pandemic. Last year in the beginning of spreading, the covid19 virus and the declaration

of the World Health Organization of the Covid19 virus as a Pandemic that threaten the

Global Health. The Philippine Airlines as the flag carrier felt the impact starting in the

February last year 2020 with the ban on flights to China. The pandemic becomes worsen

as the transmission of the virus spread rapidly and on the second half of March all regular

commercial flights were halted as part of the Philippine Government Health Regulations

and Guidelines to contain the spread of Covid19. As step to follow, PAL was only

permitted to operate special repatriation and cargo charters until regular commercial flights

were allowed to restart in June.

The pandemic causes a great impact to all Businesses especially the Airline

Industry, because of the restrictions on health regulations and guidelines implemented by

the Philippine Health Authorities that brought a collapsed to the PAL travel volume as well

as the percentage of passengers by year was declined from 75% of about 30 Million

passengers last 2019 to just 7 Million in 2020 according to PAL that the Philippine Airlines

had to cancel more than 80,000 flights inconveniencing more than 1.5 million passengers,
and stranding ten thousand of Filipino Overseas and Foreign guests in the Philippines.

Eventually this was led into a great crisis to the Philippine Airlines that wipe out more than

two billion dollars in revenue.

According to the President and COO of PAL, survival mode of methods was

applied in all efforts of Philippine Airlines just to survive by the great caused of the

Pandemic. The Philippine Airline Stretched their liquidity as of through extraordinary cost

control efforts and deferral of capital expenditures, through these the Philippine Airlines

continued to fly with all the supports from all PAL stakeholders. These factors of effect

that the covid19 pandemic made the Airline Industry in a dysfunctional system where

changes are being applied through the system of workflow and services including the many

employees who were affected by the covid19 pandemic. Collaborations were made to other

sectors of the Governments through selected services that PAL provided. Separation of

2,300 employees is reported to a great cause of half who are leaving voluntarily last March

2021.

The Philippine Airlines seeks to reorganize and improve its Financial Health.

Under the Financial Rehabilitation and Insolvency act of the Philippines, the Philippine

Airlines announced the filed Creditor Protection under Chapter 11 of US Bankruptcy code

in New York on September 04, 2021, said the resources from PAL and Rappler Online

Article. The Chapter 11 will enable to restructure contracts that will make to finalize the
reconstructing of their network, fleet, and Organization including the reorganization of

debtor’s business affairs, debts, and assets.

II. Point Of View

The Researchers of this Case study “Assessing the Chapter 11 Filed Bankruptcy

of Philippine Airlines in this Covid19 crisis” will sought to assess the factors of Upside

and Downside effect of the filed Chapter 11 Bankruptcy including the takeaways

obligations that PAL will undergo as they will reorganize and improve their financial

health. Moreover, the researcher will analyze the case through descriptive method as part

of the undergo case study of assessing the chapter 11 Filed Bankruptcy of Philippine

Airlines.

III. Statement of the Problem

This case study aims to document descriptively through assessing the “Chapter

11 Filed Bankruptcy of Philippine Airlines in this covid19 crisis”

1. What are the countermeasures to consider as Filing the Chapter 11 Bankruptcy U.S

code in this time of covid19crisis?

2. What are the Advantages and Disadvantages in Filing Chapter 11?

 IV. Statement of Objectives

The objectives of this case study are to give the readers the opportunity to

identify the given factual pieces of information regarding on “Assessing the Chapter 11

Filed Bankruptcy of Philippine Airlines” and seeks to collect documented gathered data of

the case study. Imparting the goal vision on the assumption of the recovery of financial

health of Philippine Airlines as to reorganize debtor’s business affairs, debts and assets

including the restructure of their contracts to finalize the network, fleet, and Organization

as it seeks to restore and improve the financial health of Philippine Airlines. The objectives

will help shape the data information that serves as the backbone of the study.

V. Areas of Consideration

This will seek to assess on referring the external and internal environments of

the case study on Philippine Airlines through the used of SWOT analysis. For internal

environment this will indicate the facts relating to company’s financial situation. For

External environment this will indicate the economic situation of the country including the

Government policies in this covid19 pandemic and its competitors.

 The Philippine Airlines Financial Situation is in a momentous change as this industry hit

by the downside effect of the covid19 pandemic crisis that caused a transition of percentage

travel volume of the Philippines as it begins to decline that wiped out more than two billion

dollars in revenue. By looking the economic situation in the Philippines rapid changes of

declination of GDP growth as the country faced the pandemic as well as the factors that

includes the health standard regulations and protocols as implemented by Government

Health Authorities in effort to contain the spread of the covid19 virus. The Health National

Emergency and its Regulations had caused the closures of few big and small businesses

and limited privileges as to operate through the minimum health standards. Adaptation of

the situation, many of the businesses begin to amend their services as the financial situation

is in a great intensive risk to a potential closure or bankruptcy. In addition to this, by the

effort of Philippine Airlines through filing the Chapter 11 Bankruptcy U.S code,

countermeasure should be obligated as imparting the advantages and disadvantages of

Chapter 11.

The countermeasures are the Strength, Weaknesses, Opportunity, and Threats.

This is the descriptive summary of SWOT analysis in order:

STRENGTH: Philippine Airlines is the outstanding and flag carrier and premier airlines

in the Philippines despite of the surrounding competitors in Airline industry.

WEAKNESSES: As covid19 pandemic remains Philippine Airline felt the impact as they

amend their company that includes their financial situation, voluntary leaving of 2,300

employees and the stretching out their liquidity through extraordinary cost control efforts

and deferral of capital expenditures. Moreover, in the filed chapter 11 disadvantages should

be considered as it is an expensive form of bankruptcy that needs to have an intensive

reorganization and reconstruction of their network, fleet, and organization as it aims to

restore the financial health crisis that Philippine Airlines faced in this Covid19 crisis.

OPPORTUNITIES: As the restrictions begin to slowly uplift by the Philippine

Government that this will seek to revive the economy as the country slowly opens for

international economic services. Through this, it will help to slowly recover the losses of

Philippine Airlines and their countermeasure as they filed for Creditor Protection under

Chapter 11 Bankruptcy code as it seeks to restore the financial health problems. Thus, the

Airline Company will remain in its usual business as it is in the process of restoration

through reorganization in all business affairs, debts, and assets.

THREATS: The Philippine Airlines should consider its competitors as the company is on

the expensive form of bankruptcy as it to restore its financial health. Competitors in Airline

Industry are in favor to accelerate their Services and Loyalty to all customers.
 VI. Alternative Courses of Action

The alternative courses of action will provide a brief solution to the problem of the case
study on “Assessing the Chapter 11 Filed Bankruptcy of Philippine Airlines in this Covid19
crisis”

These are the procedures adopted by the Philippine Airlines to deal with the situation.

The Philippine Airlines has its general alternative course of action to deal with the situation
they faced right now imparting the Chapter 11 Filed Bankruptcy U.S code in this Covid19
Crisis.

1. The Chapter 11 enables to restructure contracts.

2. Finalizing the restructuring of their network, fleet, and Organization.
3. Formalizes agreements reached with all of lenders, lessors, key aircraft and engine
supplies, and general creditor that will pre down debt by at least two billion dollars.
4. Implementation of 25% reduction of fleet.
5. Permanently reducing lease payments for retained aircrafts through modified least
contracts.
6. Secure Debtor-In-Possession (DIP) financing of 505 million dollars to execute the
recovery plan.

The Debt-In-Possession facility will then convert into equity and long term-debt. As on the
process of exit to Chapter 11.
Advantages to the General Alternative Course of Action by the Philippine Airlines on the
Filed Chapter 11 Bankruptcy U.S Code in this Covid19 Crisis.

1. Philippine Airlines will continue Business-as-usual operations.

2. Obtain another 150 million Dollars in Debt funding upon on emergence from
chapter 11.
3. The permanent actions will enable Philippine Airlines to emerge from Chapter 11
in a few months with fresh capital, lower debt and a competitive cost structure that
will give a sturdy foundation to sustained profitability.
4. No disruptions of services as throughout the restricting process.

Disadvantages to General Alternative Course of action by the Philippine Airlines on the

Filed Chapter 11 Bankruptcy U.S Code in this Covid19 crisis.

1. The Philippine Airlines should consider its competitors as the company is on the
expensive form of bankruptcy as it to restore its financial health. Competitors in
Airline Industry are in favor to accelerate their Services and Loyalty to all
customers.
2. Chapter 11 bankruptcy is the most complex of all bankruptcy cases. It is also
usually the most expensive form of a bankruptcy proceeding. For a company that
is struggling to the point where it is considering filing for bankruptcy, the legal
costs alone might be a bit onerous. (“Chapter 11 Definition – The Wolf of Wealth”)
(“Chapter 11 Definition – The Wolf of Wealth”) Plus, the reorganization plan must
be approved by the bankruptcy court and must be manageable enough to where they
can pay off the debt over time. For these reasons, a company must consider Chapter
11 reorganization only after careful analysis and exploration of all other
alternatives.
 VII. Conclusion

Based on the Descriptive Analysis the researchers sought to assess the Chapter 11 filed
Bankruptcy of Philippine Airlines in this covid19 crisis through looking on the possible
assumptions as PAL undergoes a creditor protection as it seeks to restore, restructure, and
organize the network, fleet, and organization. Moreover, Countermeasures are being
considered as the researcher collected the data based on the Alternative Course of Action,
the SWOT analysis as procedures adopted by Philippine Airlines to deal with the situation
as well as the on the descriptive analysis through collecting the gathered data on the
possibility on its advantages and disadvantages of filing the Chapter 11 Bankruptcy U.S
code. The objectives of the study will determine to shape the information that serves as the
backbone of the study.

VIII. Recommendations

This study seeks improvements by the aid of the following entities:

a. Future Researchers. The future researchers should improve the objectives and
goals of the study by implementing the descriptive analysis as it seeks to collect
data from a specific or related case study.
b. Students. The students should be aware on the case study to assess a similar case
study that will seek to assess the Filed Chapter 11 Bankruptcy U.S code to any big
Businesses, Corporations, and Institutions in the Philippines.
c. Teachers. Teachers must educate every student in line with this course about the
Descriptive analysis of a case study that will seek to assess the Filed Chapter 11
Bankruptcy U.S code.
REFERENCES:

Chapter 11 Definition – The Wolf of Wealth, https://thewolfofwealth.com/news/chapter-11-

definition/.

PAL expects Chapter 11 bankruptcy process to end in 2021 (rappler.com)

Chapter 11 Definition (investopedia.com)

(200) Philippine Airlines Recovery Plan - YouTube