Global airlines on Tuesday wrapped up their first meeting since COVID-19 brought their industry to its knees, voicing optimism about pent-up demand but desperate for governments to harmonize disjointed border rules to avoid slipping back into recession, Reuters reported. The International Air Transport Association (IATA), which groups 290 airlines, said confusion over travel restrictions were holding back the industry's fragile recovery after the pandemic plunged air travel into its worst-ever downturn. IATA expects international travel to double next year compared with the depressed levels seen during the pandemic and reach 44% of pre-crisis 2019 levels. In contrast, domestic travel is tipped to reach 93% of the pre-pandemic levels. The trade group, which includes dozens of state-owned carriers, blamed that gap on wide variations in entry rules and testing requirements in the top 50 air travel markets. Airlines called for an end to restrictions on vaccinated travelers and for common health protocols at borders, though global coordination in aviation tends to move at a deliberate pace.
Mexican airline Grupo Aeromexico SAB de CV has filed a reorganization plan that includes a financing proposal largely backed by a group of senior noteholders and unsecured creditors and allow the carrier to shed $1 billion from its debt stack, Reuters reported. In court papers filed late Friday, Aeromexico says it is continuing to “actively negotiate with various stakeholders regarding an exit financing package” based on the noteholders and trade creditors’ joint proposal to bring in as much creditor support for the plan as possible. The airline, represented by Davis Polk & Wardwell, filed for chapter 11 in June 2020 with $2 billion in debt, blaming the downturn in travel demand caused by the COVID-19 pandemic. Aeromexico plans to ask U.S. Bankruptcy Judge Shelley Chapman in Manhattan to grant approval for it to begin soliciting creditor votes on the plan at a hearing on Oct. 25. The joint proposal includes $1.1875 billion in new equity and $537.5 million in new secured debt. The new financing would be used to refinance or pay off all or some of $1 billion in loans used to fund operations during the bankruptcy. It would also be used to cover costs necessary to emerge from chapter 11, to set up a cash-out option for general unsecured creditors and acquire Aimia Holdings UK Ltd’s interest in the airline's travel loyalty program, PLM Premier. The joint proposal puts Aeromexico's total enterprise value at $5.4 billion. Aeromexico says the plan would save nearly 13,000 jobs worldwide.
Philippine Airlines Inc. received U.S. court approval to access $505m in debtor-in-possession financing, which is core to its restructuring plan, Bloomberg News reported. “This important step confirms that our recovery process is on track,” Philippine Air President Gilbert Santa Maria said in a statement. Getting full access to the long-term equity and debt financing will give the Lucio Tan-led airline additional liquidity to meet obligations and continue operating as usual. It expects to emerge from chapter 11 bankruptcy before the end of the year, with a leaner fleet and fewer destinations as travel demand isn’t likely to recover anytime soon.
LATAM Airlines Group, the region's largest carrier, said yesterday that it had secured additional financing of up to $750 million, a key step in a bankruptcy protection process the airline initiated in 2020, Reuters reported. LATAM filed for bankruptcy protection in the U.S. in May 2020 as world travel came to a halt amid the coronavirus pandemic. At the time, it was the world's largest airline to take such action due to COVID-19. The fresh funds announced on Wednesday were obtained for Tranche B of the debtor-in-possession (DIP) financing, the airline said in a statement, "at rates and more competitive conditions than those obtained for Sections A and C, which will allow the group to improve its cost of financing under Chapter 11." LATAM's board of directors unanimously approved the offer, which came from a group composed of Oaktree Capital Management, Apollo Management Holdings "and certain funds, accounts and entities advised by them," the statement said. The proposal must now be approved by the U.S. bankruptcy court overseeing the process. The company said earlier this month it had received several offers to fund its exit from chapter 11 bankruptcy, each of which are worth more than $5 billion.
Florida-based Mammoth Freighters LLC will acquire a 50% stake in the MRO unit of Texas-based GDC Technics, cargofacts.com reported. The deal will give Mammoth access to hangar space to stand up conversion lines at GDC’s Fort Worth (AFW) MRO facility for its in-development 777 passenger-to-freighter conversion programs. The investment, which includes existing debt facilities and new loans, will also pave the way for GDC’s exit from chapter 11 bankruptcy. The U.S. Bankruptcy Court for the Western District of Texas in San Antonio approved GDC’s exit plan yesterday. As part of the exit plan, Mammoth has provided around $3.75 million in the form of a super-senior secured superpriority debtor-in-possession credit facility and will make available $13 million in new money “exit loans,” according to a Sept. 6 final basis filing. In exchange for the investment, Mammoth will replace funding commitments from GDC’s existing lender, MAZAV Management, for a 50% stake in GDC’s MRO division post-restructuring. MAZAV will retain the remaining 50% stake. Mammoth will also gain a 25% stake in GDC’s satellite-based wireless in-flight affiliate, with MAZAV controlling a 75% stake.
The Justice Department filed an antitrust suit against American Airlines and JetBlue, saying a growing alliance between the two carriers had created a “de facto merger” in the New York and Boston markets, reducing competition and hurting consumers, The New York Times reported. The suit said the arrangement between the airlines reduced the incentive for them to compete in the Northeast and elsewhere and would “cause hundreds of millions of dollars in harm to air passengers across the country through higher fares and reduced choice.” “This sweeping partnership is unprecedented among domestic airlines and amounts to a de facto merger,” the Justice Department declared. It said attorneys general in six states and the District of Columbia were joining in the lawsuit. The action is the latest effort by the Biden administration to increase competition and limit the power of large companies through antitrust actions. But it comes as airlines are trying to right themselves after the pandemic crushed their revenue and profits. And the two airlines rejected the lawsuit’s premise, contending that their partnership in fact helps increase competition against Delta Air Lines and United Airlines and in New York airports. “Ironically, the Department of Justice’s lawsuit seeks to take away consumer choice and inhibit competition, not encourage it,” Doug Parker, American’s chief executive, said in a statement. The Transportation Department signed off on the alliance in January, just before President Biden took office. Under this agreement, the airlines agreed to conditions aimed at ensuring that the carriers did not behave in an anticompetitive manner. The Justice Department complaint contends that the alliance combines the airlines’ operations at the three main airports serving New York and at Logan International in Boston. It said the airlines had committed to coordinate “on all aspects” of network planning, including routes, schedules and aircraft; to pool their gates and takeoff and landing authorizations, known as slots; and to share revenues earned at those airports — arrangements that it said would raise prices and reduce choices. The Justice Department’s central argument is that the alliance will prevent JetBlue from bringing the sort of fierce competition to New York airports that is said to have led to big savings for travelers at other airports.
Avianca Holdings SA won court approval to send its reorganization plan to creditors for a vote, bringing the Colombian air carrier one step closer to exiting bankruptcy under new ownership, Bloomberg News reported. Lenders and noteholders who agreed to refinance their debt at the beginning of Avianca’s bankruptcy case last year will get 72% of the airline’s equity in exchange for canceling about $934.7 million, according to court papers. U.S. Bankruptcy Judge Martin Glenn said he would approve a disclosure statement that will be sent to creditors in the U.S. and Colombia that they can use to decide whether to support the debt restructuring plan. Under the proposal, the company will eliminate about $3 billion in debt, the company said. Avianca was Latin America’s second-largest airline before the COVID-19 pandemic slowed air travel to a trickle last year, leading it to file for chapter 11 protection in a New York court in May of 2020. Latam Airlines Group SA and Mexico’s Grupo Aeromexico SAB also were forced into bankruptcy as the region suffered one of the world’s sharpest drops in flights.
Philippine Airlines Inc. won approval yesterday from a New York bankruptcy judge to access financing for its chapter 11 proceedings, the first step in an effort to relieve the national carrier of roughly $2.1 billion in financial obligations, WSJ Pro Bankruptcy reported. Bankruptcy Judge Shelley Chapman granted approval to let Philippine Airlines draw up to $20 million from a $505 million loan facility led by the carrier’s controlling shareholder, Buona Sorte Holdings Inc. Buona Sorte, controlled by the Tan family, a prominent Filipino business clan, has also agreed to forgive several hundred million dollars in unsecured loans it provided to Philippine Airlines as emergency advances since the COVID-19 pandemic curbed air travel world-wide, according to court documents. Buona Sorte is expected to maintain majority ownership of Philippine Airlines after the restructuring. The company has said it aims to exit from bankruptcy by the end of the year. Before filing for bankruptcy, Philippine Airlines reached a restructuring agreement with almost all of its aircraft lenders, lessors and equipment suppliers that will cut roughly $2.1 billion of the carrier’s roughly $6 billion in total liabilities. Jasmine Ball, an attorney for the airline, said during the Thursday court hearing that there will be just one class of creditors deemed impaired under the bankruptcy plan, because they will receive less than full value, and are therefore entitled to vote on the plan. Ball said that more than 90% of the impaired creditors have signaled support.
LATAM Airlines said yesterday that it has received several offers to fund its exit from chapter 11 bankruptcy, each of which are worth more than $5 billion, Reuters reported. LATAM, the largest airline in Latin America, received the offers from creditors and shareholders, according to a filing with the U.S. Bankruptcy Court in New York City. The Santiago, Chile-based company did not reveal the number of offers received or from whom they came, but Delta Air Lines Inc is LATAM’s largest shareholder. Other shareholders include Qatar Airways, with a 10% stake. LATAM, which also operates in Brazil, Colombia, Ecuador and Peru as well as having operations through Latin America, Europe, the United States and the Caribbean, only said in the filing the offers came from “its most significant claimholders and its majority shareholders.” It said negotiations for financing are ongoing. LATAM filed for chapter 11 protection in New York in May 2020 as world travel came to a halt amid the COVID-19 pandemic. It hopes to accomplish by the end of the year the major tasks it needs to exit bankruptcy but may not formally exit by that time.
Philippine Airlines Inc. expects to emerge from chapter 11 bankruptcy before the end of the year, with a leaner fleet and fewer destinations as a recovery in travel demand isn’t likely in the next few years, President Gilbert Santa Maria said, Bloomberg News reported. Majority owned by billionaire Lucio Tan, the carrier filed for chapter 11 bankruptcy in New York on Sept. 3 with a lender-supported plan to help it recover after the pandemic devastated global travel. It aims to cut $2 billion in borrowings, will get $505 million in equity and debt financing from existing shareholder and banks, as well as $150 million of debt financing from new investors. Philippine Airlines will trim its fleet to 70 planes from more than 90, with a “good number” of wide-body aircraft to be returned, Santa Maria said in a briefing Monday. “The remaining fleet will be more than adequate to see our demand through until recovery” which isn’t likely until 2025, he said. No further job cuts are expected after the company reduced its workforce by 30% in March.
