Philippine Airlines posts $25.1M net loss in H1 2026 as fuel costs surge

Philippine Airlines (PAL) posted a net loss of $25.1 million in the first half of 2026, a sharp decline from the $136.7 million profit it recorded over the same period last year, as sharply higher fuel costs tied to the conflict in the Middle East outweighed steady revenue growth.

The airline’s total revenue rose 5.9% to $1.746 billion, supported by stronger passenger yields and cargo performance. 

However, that growth wasn’t enough to offset a $219.5 million year-on-year increase in fuel expenses, which pushed the airline into the red for the period.

Fuel costs weigh heavily on the bottom line

Fuel expenses climbed 48.2% year-on-year to $674.5 million, making up 39.2% of PAL’s operating costs, up from 30.3% a year earlier. By contrast, non-fuel costs rose only 4.1%, reflecting the airline’s continued focus on cost discipline elsewhere in the business.

EBITDA fell 28.5% to $271.0 million, with the EBITDA margin narrowing to 15.5% from 23.0% in the first half of 2025. 

The pressure was most pronounced in the second quarter, when PAL posted a net loss of $103.6 million, compared to a $60.2 million profit in the same quarter last year, as fuel costs surged 88.2% year-on-year.

Passenger numbers also softened, with PAL carrying 8.2 million passengers in the first half, down 3.1% from a year earlier, while load factor eased to 78.9% from 81.6%.

Revenue growth continues despite the losses

Total revenue increased by $98 million year-on-year, driven by higher passenger yields, stronger cargo performance, and continued growth in ancillary revenue. 

Passenger revenue rose 4.5% to $1.47 billion, while cargo revenue climbed 30% to $98.2 million, supported by fare and freight rate adjustments.

To help manage rising costs, PAL adjusted schedules on select domestic, Middle East, and regional routes, while keeping its long-haul international network largely stable. Available Seat Kilometers (ASK) held steady at 22.8 billion.

Continued investment despite the loss

Even amid the financial pressure, PAL continued to invest in its long-term strategy during the first half of the year and into July 2026.

The airline brought its second Airbus A350-1000 into service in May 2026, deploying the aircraft on long-haul routes including New York (JFK), Toronto (YYZ), and San Francisco (SFO).

PAL also expanded its Mabuhay Miles loyalty program through new partnerships with Qantas Airways and Qatar Airways, and began integration work tied to its planned entry into the oneworld alliance. 

On the financial side, the airline issued $350 million in five-year notes to strengthen its balance sheet, and announced plans to order up to 20 Boeing 787-10 aircraft and up to 14 Airbus A350-1000 aircraft, with deliveries expected between 2031 and 2036.

Outlook remains tied to the Middle East conflict

PAL said the ongoing Middle East conflict remains the key factor shaping its outlook for the rest of 2026, given its effect on fuel prices, inflation, and travel demand. The airline noted that international demand has stayed strong, while domestic demand has been more affected by higher fares, though domestic operations remain profitable.

Richard Nuttall, President of Philippine Airlines, said the Middle East conflict created significant near-term pressure on fuel costs, and that the airline’s second-quarter results reflect that impact directly. 

He said PAL’s first-half performance nonetheless demonstrates the airline’s underlying resilience, pointing to quick action on fare and network adjustments, efforts to protect liquidity, and continued investment in the airline’s fleet and partnerships.

Nuttall added that international demand remains strong and that cost discipline is holding, giving the airline flexibility to manage through the disruption while staying focused on its long-term strategic plan.

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