Local news reported last week that Philippine Airlines is considering filing bankruptcy protection in the US courts to give the embattled carrier more breathing space to restructure debts which have ballooned to US$5 billion, mostly owed to suppliers and lessors of planes.

This would make its proposed debt restructuring plan the largest in the country’s history.

Company insiders told local newspaper Inquirer that the embattled flag carrier will likely file court protection in the US because 75 percent of its creditors are based there.

Philippine Airlines joins other carriers in Latin America and Europe that have sought court protection to stay afloat amidst the Covid-19 crisis, which has obliterated the airline industry.

In September, regional peer Thai Airways got the green light from Bangkok’s Central Bankruptcy Court to proceed with a formal restructuring process.

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In the short term, financial experts say Philippine Airlines may find it difficult to raise cash from private sources whilst formulating a survival plan, and the Philippine government may have to ultimately act as the flag carrier’s “white knight.”

Sources said the flag carrier’s total liabilities are expected to fall to around $3 billion once its ‘rehabilitation plan’ is approved by US courts.

Nikkei Asia repor­ted details of the restructuring plan by Philippine Airlines, which is partly owned by ANA Holdings. This includes returning 20 aircraft or about 20 percent of its fleet and raising $505 million, roughly split between the group of owner Lucio Tan and loans from private and Philippine government banks.

In October the embattled carrier announced its plan to lay off 35 percent or 2,700 employees out of its 7,800 workforce, joining the likes of other Asia Pacific carriers that have announced job culls, salary deductions and options for redundancy in order to cut costs.