MANILA, Philippines — Japan Credit Rating Agency Ltd. (JCR) has placed Philippine Airlines Inc. (PAL) under close monitoring as the flag carrier faces growing pressure from elevated fuel costs and expanding debt tied to aggressive fleet acquisitions.
On Wednesday, October 7, the Japanese agency assigned PAL a foreign currency long-term issuer rating of “BBB” with a stable outlook, crediting its robust domestic and international footprint, operational cost-efficiencies, and cautious financial stewardship.
However, JCR highlighted that financial metrics for parent firm PAL Holdings Inc. (PHI) have weakened due to global fuel price spikes hitting earnings alongside fresh debt accrued to finance aircraft deliveries.
PHI’s interest-bearing debt-to-EBITDA ratio climbed on a trailing 12-month basis to roughly 4.2 times as of late June, up from about 2.7 times at the end of December 2025. Over the same period, its debt-to-equity ratio worsened from 2.2 times to 3 times, while its interest coverage ratio contracted to just over 1 time from 2.85 times.
JCR noted it will monitor how earnings recover as fuel markets stabilize, alongside the broader leverage impact of funding upcoming jetliner orders.
While PHI generated ₱103.8 billion in revenue for the first half of 2026—an 11.2% year-on-year increase—it swung to a ₱1.8-billion net loss attributable to parent owners, driven by Middle East geopolitical tensions that sent fuel costs soaring.
At the airline level, fuel expenditures surged 48.2% year-on-year. Although PAL’s EBITDA margin dropped from 23% to 15.5%, JCR described the current figure as remaining at a “solid level.”
Concurrently, PAL is pushing forward with fleet expansion to meet surging air travel demand backed by Philippine economic growth.
Of its 2023 order for nine Airbus A350-1000 aircraft, two were delivered by the end of June, with seven more scheduled through 2028. In July, PAL signed a memorandum of understanding (MOU) with Airbus for nine more A350-1000s plus purchase rights for five additional units, alongside a separate MOU with Boeing for 15 787-10 jets with purchase options for another five.
JCR stated that PAL aims to protect its capital structure even amid market turbulence by utilizing flexible procurement strategies, including adjusting delivery schedules and diversifying capital sources.
Despite near-term financial hurdles, JCR highlighted PAL’s strong market foundation. Together with PAL Express, the airline commanded a 29% domestic market share in 2025, with North American routes generating roughly 35% of its total revenue.
Additionally, PAL received an invitation in June to join the oneworld Alliance as its 16th full member, a move expected to enhance its international presence.
For the full year 2025, PHI recorded ₱183.8 billion in revenue and ₱10.1 billion in net income.
JCR acknowledged PAL’s steady debt reduction efforts since emerging from Chapter 11 bankruptcy in December 2021, but warned that its overall credit profile remains vulnerable to fluctuations in air travel demand, jet fuel prices, and broader macroeconomic conditions.