Chief Financial Officer Jaime Bautista said: "Most (creditors) are not accepting of the plan but we will be talking to them. We are confident that we will be able to agree on terms that will make this rehabilitation plan successful."

The plan, drawn up by PAL's receivership committee, was rejected by the European Export Credit Agencies because it did not address the need for a strategic partner following the collapse of equity buy-in talks with airline Cathay Pacific.

The creditors, represented by Credit Agricole Indosuez, control the leases of 12 Airbus aircraft which would constitute half of PAL's fleet under the survival plan.

They threw out the plan saying the equity injection had also been reduced from $200m to $150m.

Missing criteria

In their rejection letter the creditors said: "Since these crucial elements, despite having been presented to and discussed with PAL are not included, it will not be possible for the lessors to support the rehabilitation plan as currently drafted."

Philippine President Joseph Estrada brokered a last-minute deal with unions

PAL, Asia's oldest airline, has held talks separately with Hong Kong-based Cathay Pacific Airways and US carrier Northwest Airlines on forging a strategic partnership. Both sets of talks collapsed earlier this month prompting PAL to slash the capital infusion it was seeking.

The European creditors include Britain's Export Credits Guarantee Department, German insurance group Hermes and French credit insurer Coface.

PAL is saddled with debts of around $2bn, incurred by the falling demand in air travel and heavy over-staffing and months of strikes. It briefly closed down in September but went back into business when President Joseph Estrada negotiated an eleventh-hour deal with unions.