The Philippine Airlines (PAL) has filed for Chapter 11 bankruptcy in the United States to pursue a restructuring plan to keep the company afloat amid the COVID-19 pandemic, the airline said on Saturday.

The airline said the move is "to allow the company to successfully restructure and reorganize its finances to navigate the COVID-19 crisis and emerge as a leaner and better-capitalized airline."

Chapter 11 is a form of bankruptcy that involves reorganization. A Chapter 11 bankruptcy allows a company to stay in business and restructure its obligations.

"The restructuring plan, which is subject to court approval, provides over 2.0 billion U.S. dollars in permanent balance sheet reductions from existing creditors and allows the airline to consensually contract fleet capacity by 25 percent and includes 505 million U.S. dollars in long-term equity and debt financing from PAL's majority shareholder and 150 million U.S. dollars of additional debt financing from new investors," the airline said.

The airline said it has entered into a series of agreements with its lenders, lessors, aircraft and engine suppliers, and its majority shareholder.

PAL said it will continue to operate flights in the "normal course" of business according to safety regulations. The company expects to continue to meet its current financial obligations throughout this process to employees, customers, the government, and its lessors, lenders, suppliers, and other creditors.

The restructuring plan "empowers PAL to overcome the unprecedented impact of the global pandemic that has significantly disrupted businesses in all sectors, especially aviation, and emerge stronger for the long-term," PAL Chairman and CEO Lucio Tan said.

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