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.
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