Philippine Airlines files for bankruptcy

Sep 6, 2021

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Last Friday, Philippine Airlines (PAL) filed for U.S. Chapter 11 bankruptcy according to Bloomberg. While this is an indication of serious financial trouble within a company, it is not (yet) shocking for flyers – the airline is permitted to continue normal operations while trying to restructure debt and other financial means in order to survive.

Tickets will keep their value and the airlines Mabuhay Miles loyalty program will keep operating as usual.

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While it may seem counter-intuitive that the Manila-based airline is seeking bankruptcy in the United States, this is often the case with multinational companies due to them having an entity in the U.S. for regulatory reasons. With this bankruptcy case, filed in New York, the airline hopes to be released of some debt and to reduce its fleet by 25%.

Both Boeing and Airbus planes will be returned to their lessors, bringing the fleet down from 92 to 70 aircraft. Also, the airline will ask Airbus to delay the arrival of 13 new narrow-body jets. Like other airlines worldwide, PAL has temporarily grounded some of its fleet while demand for air travel remains low.

In many similar cases, we have seen struggling South East Asian airlines transform into a more regional-first airline. For example, Malaysia Airlines, Garuda Indonesia and Thai Airways have all become more focused on their regional operations after restructuring processed triggered by decreased demand due to the pandemic.

Currently, there is no indication if the fleet reduction will impact mainly regional or mainly intercontinental operations. The airline has been aiming for a higher quality of intercontinental service by offering flights on new Airbus A350s to prime destinations like New York (JFK) and London Heathrow (LHR) in recent years.

However, given the strong network in the region and relatively few longer flights, it might make more sense for the airline to put regional flights first.

Related: A Review of Philippine Airlines’ A350 in Economy From Manila to New York

Times are still tough for the airline industry. The intercontinental airlines, with flag carriers such as British Airways, KLM and Lufthansa, rely on business travel to make money. Although passengers numbers as a whole are on the rise again, the proportion of business versus leisure travelers is way off compared to pre-pandemic numbers. This balance leads to leisure-heavy airlines flourishing, while more traditional airlines are still struggling to stay afloat.

Featured image of a Philippines Airlines Airbus A321 by Fabrizio Gandolfo/SOPA Images/LightRocket via Getty Images

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