Philippine Airlines said on Friday that it has filed for Chapter 11 bankruptcy in the United States which will allow the airline to restructure and reorganize its finances impacted by COVID-19 crisis.

The proposed restructure plan which was filed in the Southern District of New York and needs court approval will allow the airline to consensually reduce its fleet capacity by 25 percent and aims to cut $2 billion in borrowings, the company said.

The restructuring plans also includes $505 million in long-term debt equity and debt financing from the airline’s majority shareholder and $150 million of additional debt financing from new investors, the company said.

PAL Holdings the listed parent company and PAL Express are not included in the Chapter 11 bankruptcy, the company added.

Rolls-Royce and Lufthansa Technik are among the largest unsecured creditors in the company, according to the court filing.

Ongoing trade creditors and suppliers are expected to be unimpaired by the restructuring plan, the company said.

In June, PAL Holdings said it was in the final stages of putting together a debt restructuring plan for the flag carrier to help through the crisis.

(Reporting by Sabahatjahan Contractor in Bengaluru; Editing by Sandra Maler)

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Photo Credit: Empty cabin of Philippine Airlines 350-900 jet Paulo O / Flickr