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Walkers and A&O Support Philippine Airlines’ Jet Engine Financing

Walkers and A&O Advise on Philippine Airlines’ Landmark Jet Engine Financing
Philippine Airlines (PAL) has secured a significant financing deal to lease a Rolls-Royce Trent XWB-97 jet engine, marking its first Export Credit Agency (ECA)-backed transaction in over 12 years. This financing supports the airline’s ongoing fleet modernization efforts as it responds to increasing domestic and inbound travel demand. The transaction, for an undisclosed amount, highlights PAL’s strategic commitment to upgrading its aircraft capabilities amid a competitive and evolving aviation market.
Legal Advisory and Transaction Structure
Walkers and A&O Shearman provided critical legal counsel throughout the deal. Kristen Kwok, finance partner at Walkers, led the team advising on all Cayman Islands law aspects. Walkers represented the ECA lenders, offering guidance on the finance-lease structure, which involved establishing a Cayman orphan special purpose vehicle (SPV) to serve as the borrower, owner, and lessor of the engine. The firm’s professional services team also managed fiduciary responsibilities related to the creation and ongoing maintenance of the SPV.
Kwok emphasized the significance of the transaction, noting that ECA-backed loans are typically reserved for high-value aircraft and less frequently for engines. The collaboration with lead counsel A&O Shearman, headed by Brendan McCarthy, ensured comprehensive legal support for the ECA lenders throughout the process. A&O Shearman declined to comment on the specifics of the deal.
The financing was facilitated by US bank Citi, with the loan guaranteed by the UK’s Export Finance agency. The Rolls-Royce Trent XWB-97 engine acquired through this arrangement will power PAL’s incoming Airbus A350-1000 aircraft, nine of which are currently on order.
Fleet Expansion Amid Operational Challenges
This latest financing aligns with PAL’s broader strategy of fleet expansion and modernization. The airline recently incorporated five Airbus A320s and secured its first A350-1000 through a sale and leaseback agreement with BOC Aviation. These initiatives have been positively received by the market, reflecting PAL’s efforts to meet growing travel demand and improve operational efficiency.
Despite these advancements, PAL continues to face challenges including infrastructure limitations, supply chain disruptions, and weather-related operational impacts. Industry analysts observe that competitors may adopt similar fleet expansion strategies to leverage the robust travel market.
The successful ECA-backed financing deal underscores Philippine Airlines’ dedication to enhancing its fleet and sustaining competitiveness in a dynamic aviation environment.

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