Southeast Asia’s national airlines feel the heat of the virus

Philippines Airlines joins Thai Airways on the path to bankruptcy

Philippines Airlines has become the next Southeast Asian airline to file for bankruptcy after Thai Airways, and it looks like as if Garuda Indonesia might follow suit as the carriers got increasingly burdened in debt amid a collapse in global travel demand arising from the Covid-19 pandemic.

Philippine Airlines said on September 4 that it was filing for bankruptcy in the US to slash $2 billion in debt. The airline said it reached an agreement with its local creditors ahead of a chapter 11 petition of its local division, filed with the US Bankruptcy Court in New York on September 3.

The airline aims to cut $2 billion in borrowings through a proposed restructuring plan, which needs court approval, it said. Philippine Airlines will also get $505 million in equity and debt financing from its majority shareholder, the business empire of Filipino billioniare Lucio Tan, as well as $150 million of debt financing from new investors. The carrier said it has support agreements from 90 per cent of its lenders.

The restructuring plan would allow the carrier to reduce its fleet capacity by 25 per cent, the airline said, adding that the plan would allow it to return at least 20 aircraft. Philippine Airlines also cut 35 per cent of its workforce early this year.

It is the second national carrier in Southeast Asia to file for bankruptcy protection after Thai Airways did so in May this year.

Garuda Indonesia needs up to $3 billion for survival

Meanwhile, Garuda Indonesia is also facing a pay-or-die scenario. A number of creditors have filed an application for bankruptcy against the airline over unpaid obligations after Garuda in June defaulted on a periodic payment of an Islamic bond trust certificate worth $500 million.

Analysts say Garuda Indonesia may need at least between $1.3 billion to $3 billion in fresh capital to survive. Of that, the airline requires up to $350 million on the spot to keep its operations going at a greatly reduced scale for less than one year.

Garuda has been trying to restructure its debt through negotiations with creditors and lessors, with mixed results. The airlines largest shareholder, the Indonesian government, is reluctant to inject the money, and as uncertainties over debt negotiations prevail, there is still no indication of how the company can be saved.



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[caption id="attachment_37559" align="alignleft" width="300"] Philippines Airlines joins Thai Airways on the path to bankruptcy[/caption] Philippines Airlines has become the next Southeast Asian airline to file for bankruptcy after Thai Airways, and it looks like as if Garuda Indonesia might follow suit as the carriers got increasingly burdened in debt amid a collapse in global travel demand arising from the Covid-19 pandemic. Philippine Airlines said on September 4 that it was filing for bankruptcy in the US to slash $2 billion in debt. The airline said it reached an agreement with its local creditors ahead of a chapter 11 petition of...

Philippines Airlines joins Thai Airways on the path to bankruptcy

Philippines Airlines has become the next Southeast Asian airline to file for bankruptcy after Thai Airways, and it looks like as if Garuda Indonesia might follow suit as the carriers got increasingly burdened in debt amid a collapse in global travel demand arising from the Covid-19 pandemic.

Philippine Airlines said on September 4 that it was filing for bankruptcy in the US to slash $2 billion in debt. The airline said it reached an agreement with its local creditors ahead of a chapter 11 petition of its local division, filed with the US Bankruptcy Court in New York on September 3.

The airline aims to cut $2 billion in borrowings through a proposed restructuring plan, which needs court approval, it said. Philippine Airlines will also get $505 million in equity and debt financing from its majority shareholder, the business empire of Filipino billioniare Lucio Tan, as well as $150 million of debt financing from new investors. The carrier said it has support agreements from 90 per cent of its lenders.

The restructuring plan would allow the carrier to reduce its fleet capacity by 25 per cent, the airline said, adding that the plan would allow it to return at least 20 aircraft. Philippine Airlines also cut 35 per cent of its workforce early this year.

It is the second national carrier in Southeast Asia to file for bankruptcy protection after Thai Airways did so in May this year.

Garuda Indonesia needs up to $3 billion for survival

Meanwhile, Garuda Indonesia is also facing a pay-or-die scenario. A number of creditors have filed an application for bankruptcy against the airline over unpaid obligations after Garuda in June defaulted on a periodic payment of an Islamic bond trust certificate worth $500 million.

Analysts say Garuda Indonesia may need at least between $1.3 billion to $3 billion in fresh capital to survive. Of that, the airline requires up to $350 million on the spot to keep its operations going at a greatly reduced scale for less than one year.

Garuda has been trying to restructure its debt through negotiations with creditors and lessors, with mixed results. The airlines largest shareholder, the Indonesian government, is reluctant to inject the money, and as uncertainties over debt negotiations prevail, there is still no indication of how the company can be saved.



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

 

 

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