Stock Commentary: Philippine Airlines emerges from Chapter 11 bankruptcy protection

Lucio Tan’s iconic airline announced that as of December 31, Philippine Airlines [PAL 6.05 susp] had exited its Chapter 11 bankruptcy protection that it filed for less than four months prior.


The press release said that the airline was “reinvigorated” by the debt relief and injection of fresh capital that came as part of the plan and that it is “well-positioned for long-term growth” as it navigates the continuing risk of the pandemic and its economic impact”.

PAL reminded shareholders that, as part of the restructuring plan, it has the option to seek up to $150 million in “additional financing from new investors”.


Just a few quick points to hit on this. First, it’s interesting to see PAL exit Chapter 11 before the end of the year, just as PAL’s President Gilbert Santa Maria said way back in September, just before PAL’s board released a statement characterizing Mr. Santa Maria’s quote as a “statement of hope”.

Take the W, sir!

Second, while it’s nice to see PAL exit Chapter 11, this is not something that happened based on PAL’s operational performance. It’s a procedural step. The harsh realities of the new normal for air travel will still continue to savage any potential recovery.

Third, and last, PAL’s business model — before COVID eliminated demand — was a money-loser, and this press release appears to be PAL doubling-down on the Member Berries of a previous era when route efficiency, fuel economy, and domestic competition were non-factors, and the coolness of the destination posters at the travel agent’s office were the only thing that truly mattered.

PAL’s stock hasn’t traded for over almost 6 months. It’s still losing money, and the only thing that saved it (literally, the only thing that saved it) was Lucio Tan’s willingness to dump billions of more pesos into the company to keep the lights on.

There is a lot that still has to go right for PAL to even survive, let alone thrive, in this new environment. It’s not there yet.

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Merkado Barkada’s opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

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