PAL Holdings trading suspended and calls for more Airbus postponements

The Philippine Stock Exchange suspended trading in parent company Philippine Airlines (PR, Manila Ninoy Aquino Int’l) PAL Holdings on Friday, June 18, following the release of its 2020 annual report exposing a record loss in the middle of “The extraordinary impact of the Covid-19 pandemic on operations.

The report, which was released in a stock file on June 17, along with its first quarter report for 2021, does not comply with the Philippine Securities Regulatory Code, the exchange said. Indeed, the Manila-based accounting firm SyCip Gorres Velayo & Co. had affixed a disclaimer on the accounts stating that it had “not been able to obtain sufficient and appropriate audit evidence” to issue an opinion on PAL’s finances.

PAL Holdings posted a record net loss of PHP 73 billion ($ 1.5 billion) for the year, compared to PHP 10.3 billion ($ 211 million) the year before. Its loss in the first quarter of 2021 edged down to PHP 8.6 billion ($ 177 million) from PHP 9.4 billion ($ 193 million) year-on-year.

The accounting firm pointed out that the group’s liabilities exceeded assets by PHP 164.02 billion ($ 3.37 billion) as of December 31, 2020, and that PAL also had long-term obligations mainly comprising guaranteed loans and debts. rental debts amounting to PHP 32.57. billion (669 million USD) and 152.03 billion PHP (3.12 billion USD), respectively.

“The group’s liquidity situation has become more critical in 2020 and 2021 due to very low passenger sales and income as a negative effect of the Covid-19 pandemic. […] Consequently, the decline in income and cash inflows put a strain on the group’s liquidity position and its compliance with certain loan covenants, ”said SyCip Gorres Velayo, adding that PAL had neither honored the principal nor interest payments on its long-term bonds since April 2020.

Management and stakeholders are working on the final stages of a restructuring plan “to ensure the continuity of PAL’s business,” he said, adding that – as previously reported – the airline is considering filing an application pre-negotiated judicial rehabilitation in a foreign jurisdiction, although as of May 26, 2021, it had not yet done so.

“The above events and conditions give rise to significant uncertainties which may cast significant doubt on the group’s ability to continue operating,” the accountants concluded.

Regarding aircraft delivery commitments, the report said the only aircraft expected in the future includes thirteen A321-200Ns, one of which is expected to be delivered in December 2021. The remaining twelve – as announced in August 2020 – have been postponed and reprogrammed for 2022. 2025.

However, he added without giving further details: “Due to the contagion which has had a catastrophic impact on the global economy, more particularly in the airline industry, PAL and Airbus are currently in discussions for a further postponement of deliveries. “

the owned by ch-aviation fleets The module shows that Philippine Airlines’ fleet of 61 aircraft and the 30 aircraft of its subsidiary PAL Express are made up of a mix of Airbus, Boeing and De Havilland Aircraft of Canada types. Of these 91, at least 62 are leased from a range of 22 landlords.

The company also said in its annual report that it had cut spending by 46% in 2020, but that was offset by a 64% drop in revenue. It relied on bridge financing and the support of majority shareholder Trustmark Holdings, deferred payments to lessors, lenders and suppliers, and implemented a downsizing program. He did not disclose the details of the bridging loan.

A 30% reduction in the workforce has already been achieved, for a total of 6,238 employees as of December 31, and PAL “will further explore business opportunities to improve sales and increase revenues.”

He stressed that “PAL’s flights and operations will not be affected by any restructuring” and “we will increase our international and domestic flights as the market recovers with the relaxation of travel restrictions.”

“Philippine Airlines will have a long way to go to recover. The uncertainty of the situation still prevails, but news on the availability of Covid-19 vaccines gives hope that passenger traffic will be better than in 2020. The airline has already started restructuring its fleet to reduce capacity and respond at reduced market demand in the short term. . PAL will also rationalize its network by interrupting certain ultra-long-haul links and adjusting frequencies, ”the group said.

Also on June 18, Philippine Finance Secretary Carlos G Dominguez III – a former managing director of Philippine Airlines – assured that the government would help carriers in the country affected by Covid, the Manila Bulletin reported.

Two public lenders, the Land Bank and the Development Bank of the Philippines, had already participated in a PHP 16 billion ($ 328 million) loan facility for Cebu Pacific Air (5J, Manila Ninoy Aquino Int’l) and its regional unit Cebgo, he said, and with respect to Philippine Airlines, the government is awaiting its scheduled filing for Chapter 11 bankruptcy protection in the United States and its final rehabilitation plan.

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