Skip to main content

Blast from the past: Philippine Airlines in bancruptcy...again

 In the late 1990s, during the Asian Financial crisis, one of the oldest airlines in the region faced, like many of its neighbors' financial difficulties-- it needed to reorganize because its core business was being gravely affected and it had virtually no dry powder.  

One evening at home (then in Singapore) I get a call from the head of US Eximbank's aircraft finance division, we didn't know each other but through my colleagues, in NY he knew I was "his guy".  I had at that time a long experience in dealing with airline bankruptcy, manly regional carriers -- still.  

They were aware that Philippine Airline was about to stop lease payments on its aircraft because cash flow was severely depleted, caused by a sudden and dramatic reduction in its revenues -- mostly visiting friends and families that were at the core of its business model.

The next morning, after a 4-hour flight I was in the offices of Philippine Airlines, with its CEO, president, and finance director (who eventually became a very good friend).  I was the first, (the closest too) to be there and Exim was one of the airline's biggest creditors with its fleet of B747 aircraft.

They had not yet nominated a firm to act as an advisor in the bankruptcy and were initially trying to do a reorganization "on the cheap".  Considering the number and skill set of the main creditors (all European ECAs, Eximbank, and virtually every french bank) I voiced my concerns and suggested a number of groups that could help them.

They had no concept of DIP financing, the management was not aware that.

Since then (the airline was well recapitalized) the airline has operated successfully (its more than 20 years ago), and now faces similar headwinds.  Their solution is pragmatic -- get US$ 500 million in DIP finance, return excess (read older) aircraft and hope to weather the crisis.  I wish them luck and success -- Philippine airlines is a good carrier with a well maintained fleet.



Comments

Post a Comment

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b)...
Post a Comment
Read more

Spray painting Taylor Swift G650 aircraft (updated)

 First, a bit of paint will not harm anyone.  These climate activities are going to learn two things in the next few days:  (1) Trespassing at an airport is a felony almost anywhere in the world.  That means criminal prosecution.   (2) removing paint from an aircraft is expensive.   So these climate activists are about to find out the reach of the British criminal system and it will not be pleasant, the UK has very strict laws about that, I would be surprised if cleaning the aircraft of all the paint will cost less than $100,000.     I am sure that when they planned (premeditation) this little show they had a very valid logic to doing this.  Tonight, they are probably realizing the depth of their troubles.   I understand that in the UK it's a minimum one-year jail sentence.    Also, good luck travelling with a criminal trespass charge against you.  I am relatively certain that the airline industry will ...
Post a Comment
Read more

Janet Yellen from China supporter to Hawk...

There is rarely serious news in the world these days, it seems that most newspapers are filled with headlines and little else, and then Ms Yellen went to China.  Secretary Yellen has long been known in the Biden administration as the voice of moderation when dealing with China, yet as her trip which concluded yesterday a hawk was born:  She warned the Chinese against dumping goods in the United States.    fighting words! The American administration is very concerned about the lack of Chinese domestic consumption.   Even before the COVID-19 epidemic, there were already the beginning signs of a slowdown, automobile sales were off.   China is facing domestic deflation (a clear sign of collapsing demand) China imports few consumer goods, they import raw materials and intermediary goods.   It seems that the American administration is concerned that the Chinese administration will dump consumer goods abroad to keep its manufacturing machinery ...
Post a Comment
Read more