PAL lands long-term financing for new engine
Philippine Airlines (PAL) has secured a 12-year loan to purchase a new engine, marking its first export credit agency (ECA) financing in more than a decade after the airline grappled with heavy debt and a major postpandemic restructuring.
The loan, arranged through export credit agency financing by Citi and UK Export Finance (UKEF), will fund a Rolls-Royce Trent XWB-97 engine for a new Airbus A350-1000 aircraft.
The financing also comes three years after PAL completed a financial restructuring plan that eliminated $2.1 billion in 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 the Chapter 11 proceedings after reorganizing its fleet. It logged its first positive full-year operating income since 2019 at $297.2 million last year.
It’s PAL’s first ECA 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 modernisation and demonstrates the strength of our partnership with these institutions,” said Alvin Limqueco, PAL senior vice president.
Fleet modernization
PAL has been working on fleet modernization to reduce fuel consumption and enhance the passenger experience.
Recently, nine Airbus A350-1000 aircraft were delivered, to be powered by the Rolls-Royce Trent XWB-97 engine, which is about 15 percent more fuel-efficient than previous models.
The airline also refurbished 18 A321ceo planes with upgraded Business and Economy Class cabins, and is set to receive 13 Airbus A321neo aircraft in 2026.
According to Citi, the loan will support PAL through its next phase of growth and expansion.
“Citi is proud to support Philippine Airlines through this landmark 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.
