Lucio Tan on the Recovery of the Country’s Flag Carrier: ‘Philippine Airlines will keep flying now, and long into the future’ - Lifestyle Asia

In a video announcement of PAL’s Chapter 11 filing, the billionaire says that he and his family reaffirming their commitment to the Filipino people.

Earlier today, Philippine Airlines (PAL) released a video to announce that shared its road to recovery after a devastating year that practically grounded the air travel industry. There plans include filling for Chapter 11 bankruptcy in New York supported by lenders as well as simultaneously process under the Financial Rehabilitation and Insolvency Act in the Philippines.

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The tone of the 11-minute-and-16-second video was a mix of somber reality and calm hope, featuring everyone from members of the carrier’s executive board to cabin crew. Dr. Lucio Tan, PAL chairman and CEO, and his grandson Lucio Tan III come in at the nine-minute-and-20-second mark to end with a reassuring message.

Grounded

To start this update on the recovery plan, PAL president and chief operating officer Gilbert Santa Maria gave a rundown of the woeful year that the company and the industry suffered through.

The airline first felt the impact starting in February of last year with a ban on flights to China, Santa Maria shares, and worsened as all regularly commercial flights were halted the following month.   

Travel volumes collapsed, according to the COO, from 30 million passengers in 2019 to just seven million in 2020. “Philippine Airlines had to cancel about 80,000 flights, inconveniencing more than one and half million passengers, stranding tens and thousands of Filipinos overseas, and foreign guests in the Philippines, and wiping out more than $2 billion in revenue,” he says.

They survived the last 11 months by stretching their liquidity via cost control efforts and deferral of capital expenditures, he shares, all they continued to fly with the support of their stakeholders.

Lessors and lenders helped their cause by deferring over $360 million in payments while their own people pitched in $60 million in savings through voluntary pay cuts.

PAL chairman and CEO Dr. Lucio Tan

Necessary process

Sadly, as COVID continues to necessitate restrictions, the airline is far from restoring their full network. “Today, we operate 21 percent of our pre-pandemic flights, serving 70 percent of our usual destinations. Last February, we announced the separation of 2,300 employees, including almost half who are leaving voluntarily, for a retrenchment completed on March 12,” Santa Maria says.

Nilo Rodriguez, PAL SVP/CFO and compliance officer, spoke next, assuring the public that filing for Chapter 11 is the right move that would ensure stability in the immediate future.

“Chapter 11 enables us to restructure contracts that are mostly governed by foreign laws with our largest creditors based outside of the Philippines,” he says. “We are thus able to ensure the execution of all such agreements under a well-established legal process that is universally accepted and can be completed expeditiously.”

From left: PAL president and COO Gilbert Santa Maria; SVP, CFO and compliance officer Nilo Rodriguez

Rodriguez explains that this will set into motion positive developments, which will pare down its debt by at least $2 billion. PAL will continue business-as-usual operations while finalizing the restructuring of its network, fleet, and organization.

“We will formalize agreements reached with substantiality all of our lenders, lessors, ley aircraft and engine suppliers, and general creditors that will pare down our debt by at least $2 billion,” the CFO says.

Reassuring words

The flag carrier, Rodriguez says, will then be able to secure $505 million in Debtor-in-Possession (DIP) financing to execute its recovery plan as well as obtain another $150 million in debt funding coming out of Chapter 11.

From left: VP for Marketing Ria Domingo; SVP for Strategy and Planning Dexter C. Lee

“These permanent actions will enable Philippine Airlines to emerge from Chapter 11 in a few months with fresh capital, lower debt, and a competitive cost structure, giving us sturdy foundation to sustained profitability,” he says. “As travel demand recovers in the coming years, Philippine Airlines will be in a position to grow and innovate to serve you better.”

More PAL executives spoke as the video continued. SVP for Strategy and Planning Dexter C. Lee assured passengers that there will be no disruption in services throughout the restructuring process. VP for Marketing Ria Domingo, meanwhile, shared that their refunding efforts and Mabuhay Miles redemption will not stop.

PAL SVP for Airline Operations Capt. Stanley Ng and cabin crew member Celina Pastor listed the continue safety and health protocols that the carrier continues to have in place.

“For 80 years, Philippine Airlines has not wavered in our dedication to our passengers. We will continue to deliver our gracious and caring service to all of you who choose to fly with us,” Santa Maria reminds the video’s viewers just before the Tan grandfather-and-grandson duo  spoke.

Next generation

Wearing a black suit punctuated by a Philippine Airlines pin, the younger Tan sat next to the Barong-wearing taipan. The former is the son of the late Lucio “Bong” Tan Jr., who passed away in 2019.

Lucio Tan III, or “Hun Hun” as he more known, has been taking on more serious roles in the family’s many businesses. Most recently in May, he was named as a VP to PAL Holdings. Last year, he was also named as Tanduay Distillers Inc.

The 30-year-old graduated from Stanford University with a Computer Engineering degree in 2015. He obtained a Master of Engineering Degree in Computer Science from the same institution, while interning for tech giants such as Apple and Facebook.

After interning at and then working as a software engineer for car hailing app Lyft for two years, he decided to fly back to the Philippines and join the family business last year.  

“I want to share with you the confidence of our shareholders in the future of this airline that holds a special place in the heart of every Filipino,” Hun Hun says in the video.

He then read a message from his lolo that was addressed to the customers and partners of PAL.  

“Way back in 1993, I purchased the controlling stake in Philippine Airlines when the government privatized the flag carrier,” the message reads. “It became my commitment of a lifetime to build the airline into a flag carrier that all Filipinos could look up to with pride.”

On the 80th year of PAL—which was founded in 1941—the 84-year-old Tan says he and his family renews this commitment.

PAL Holdings vice president Lucio “Hun Hun” Tan III with Dr. Tan

“We will complete the recovery of Philippine Airlines. We firmly support the management and employees of Philippine Airlines as they undergo the restructuring process,” says the chairman, who is worth $3.3 billion according to Forbes’ most recent estimation.

Together, they will deliver an airline with a reorganized balance sheet, a streamlined workforce, and a renewed sense of mission, the message promises.

PAL’s duty has always been to support livelihoods within our archipelago and to connect our economy to the world. In times of national crisis, they are there to serve the Filipino people, he expresses.

“Today, I give you this assurance: Like the Philippine flag, we will continue to stand tall and strong, the national carrier and premier airlines of the Philippines,” the taipan says. “Philippine Airlines will keep flying now, and long into the future. Thank you for your continued support and trust.”

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