PAL Holdings, Inc., the operator of flag carrier Philippine Airlines (PAL), swung to an attributable net loss of P6.12 billion in the second quarter from a P3.33-billion attributable net income a year earlier, as expenses grew far faster than revenue on a surge in flying operations costs.

The quarterly loss marks a sharp reversal for the listed holding company, which trades on the Philippine Stock Exchange and had returned to profit after emerging from a US Chapter 11 restructuring in December 2021 that reduced its obligations and added liquidity.

The company's quarterly financial disclosure, released on Thursday, showed second-quarter revenue rising 10.8% to P51.38 billion from P46.39 billion a year earlier, while total expenses jumped 31.6% to P55.73 billion from P42.36 billion.

Flying operations expenses accounted for the bulk of the cost increase, surging 68.3% to P35.29 billion from P20.97 billion.

On the revenue side, passenger revenue rose 8.7% to P43.42 billion from P39.94 billion, cargo revenue jumped 47.9% to P3.35 billion from P2.27 billion, and ancillary revenue increased 9% to P4.53 billion from P4.15 billion.

Elsewhere in the cost structure, maintenance expenses were nearly flat at P6.53 billion, while aircraft and traffic servicing costs declined to P5.36 billion from P5.59 billion. Passenger service expenses increased to P3.92 billion from P3.66 billion, and reservation and sales expenses fell to P3.13 billion from P3.81 billion. General and administrative expenses declined to P1.51 billion from P1.83 billion.

Financing charges rose 49% to P2.19 billion from P1.47 billion, while other income, net, declined to P141.69 million from P736.76 million.

On a consolidated basis, PAL Holdings posted a net loss of P6.18 billion for the quarter, reversing a P3.53-billion profit a year earlier. The loss attributable to noncontrolling interests stood at P59.47 million, compared with income of P198.03 million previously.

Management Response

"The Middle East conflict has created significant near-term pressure on our fuel costs, and our second-quarter results reflect that impact. At the same time, our first-half performance demonstrates PAL's underlying resilience," PAL President Richard Nuttall said in a media release.

"We moved quickly on fare and network adjustments, protected our liquidity, and continued investing in the fleet and partnerships that will strengthen our long-term competitiveness. International demand remains strong, our cost discipline is holding, and we enter the second half with the flexibility to manage through this disruption while staying focused on our strategic plan," he added.

First-Half Results

For the first six months, PAL Holdings recorded an attributable net loss of P1.84 billion, reversing an attributable net income of P7.66 billion a year earlier. The gap between the first-half and second-quarter figures implies the carrier posted an attributable net income of about P4.28 billion in the first quarter, cushioning part of the June-quarter loss.

First-half revenue rose 11.2% to P103.81 billion from P93.34 billion. Passenger revenue increased 9.7% to P88.27 billion, cargo revenue rose 37% to P5.91 billion, and ancillary revenue climbed 11.2% to P9.46 billion.

Operating expenses increased 20.3% to P101.81 billion from P84.65 billion, led by a 38.9% rise in flying operations expenses to P59.49 billion. The company attributed the increase in flying operations expenses primarily to higher aviation fuel and oil costs, as well as increased depreciation and amortization.

PAL said its fuel costs increased by P14.65 billion, or 56.3%, in the first half as average fuel prices surged 49.7% to $150.02 per barrel. The increase was partly offset by lower fuel consumption following capacity adjustments.

First-half fuel costs reached P40.65 billion, accounting for 39.9% of operating expenses, compared with 30.7% a year earlier. The company said the Middle East conflict had caused a surge in jet fuel prices and disruptions to aviation.

Operating Metrics

Total passengers carried declined 3.1% to 8.20 million, while passenger load factor fell 2.77 percentage points to 78.87%. Available seat kilometers increased 0.4% to 22.81 billion, and the number of round-trip flights edged up 0.2%. Passenger yield rose 9.2%.

PAL said it implemented capacity adjustments in response to higher fuel costs and weaker demand on certain routes. It also raised fares and adjusted fuel surcharges, which helped lift passenger yield and partly offset the decline in load factor. In the Philippines, fuel surcharges levied by carriers are subject to approval by the Civil Aeronautics Board, which periodically adjusts the permitted levels in step with jet fuel prices.

Outlook

"The ongoing Middle East conflict remains the key variable for PAL's second-half 2026 outlook, given its impact on fuel prices, inflation, and travel demand. The Company noted that international demand continued to be robust, while domestic demand has been more affected by higher fares, although domestic operations remain profitable," PAL said.

Shares of PAL Holdings fell by one centavo, or 0.47%, to P2.12 apiece on Thursday. — Ashley Erika O. Jose