PAL obtains critical financing to buy new jet engines

Philippine Airlines (PAL) obtained a 12-year loan to be able to acquire new jet engines, the airline’s first export credit agency (ECA) financing in more than a decade after the airline grappled with a major post-pandemic restructuring due to enormous debt.

The loan, arranged through ECA financing by Citi and UK Export Finance (UKEF), will used for the purchase of Rolls-Royce Trent XWB-97 engines for the new Airbus A350-1000 jets.

The financing also comes three years after PAL successfully complied with a financial restructuring plan that eliminated $2.1 billion debt.

The airline filed for Chapter 11 bankruptcy protection in September 2021, after the pandemic weighed heavily on its operations, resulting in an operating loss of $98.1 million.

But PAL exited Chapter 11 after reorganizing its fleet. It logged its first positive full-year operating income since 2019 at $297.2 million last year.

The ECA is PAL’s first in 12 years. ECA-backed loans are typically used for high-value aircraft or engine purchases because they are partially guaranteed by a government, lowering risk and often reducing borrowing costs.

“This financing agreement with Citi and UKEF marks a significant step in our fleet modernization and demonstrates the strength of our partnership with these institutions,” said Alvin Limqueco, PAL senior vice president.

PAL is embarking on a fleet modernization to reduce fuel cost while enhancing passenger experience.

PAL expects delivery of nine Airbus A350-1000 equipped with the Rolls-Royce Trent XWB-97 engine, which is about 15 percent more fuel-efficient than previous engine types.

PAL earlier refurbished 18 A321 CEO airplanes with upgraded Business and Economy Class cabins. Deliveries of 13 A321 NEO jets are scheduled starting next year.

According to Citi, the loan will support PAL through its next phase of growth and expansion.

“Citi is proud to support PAL through this UKEF-backed financing transaction, which demonstrates the strength of PAL’s long-term growth strategy and access to global funding markets,” said Manish Bajaj, Citi Philippines’ corporate banking head.