Philippine Airlines delivers Q1 profit growth as Middle East tensions loom large

Philippine Airlines (PAL) reported higher earnings and revenue in the first quarter of 2026, though the carrier warned that escalating tensions in the Middle East have introduced uncertainty heading into the rest of the year.

The Philippine flag carrier earned a net income of US$78.55 million for the quarter, up 2.6% compared to the same period last year. Total revenues climbed 9.7% to US$895.70 million.

Passenger demand holds strong

PAL carried 4.30 million passengers in the first three months of 2026, a 6.1% increase year-on-year. 

Passenger revenues rose 8.7% to US$759.65 million, supported by post-holiday travel demand and what the airline described as a resilient network.

The carrier expanded capacity to match demand, with available seat kilometers up 7.2% and the number of flights operated rising 8.4%.

Cargo sees double-digit growth

Cargo was a bright spot for the quarter, with revenues jumping 22.5% to US$43.21 million. 

The airline attributed the growth to improved yields amid tight global airfreight capacity, particularly on routes affected by disruptions in the Middle East.

Ancillary revenues, which include add-on services and personalized travel products, also climbed 11.2% to US$83.56 million.

Costs rise but margins hold

Operating profit came in at US$101.85 million, as revenue growth outpaced the increase in expenses.

Total operating costs rose 7.1% to US$793.85 million. Flying operations, the airline’s largest expense, increased 9.2% to US$447.08 million. PAL pointed to higher flight activity, rising fuel prices tied to Middle East developments late in the quarter, and increased depreciation from fleet expansion as the main drivers.

Middle East tensions cast shadow

Philippine Airlines acknowledged that the full impact of the Middle East crisis was not yet reflected in the results. The situation escalated late in the period of Q1 2026, bringing fuel price volatility and disruptions to parts of the global aviation network.

Richard Nuttall, President of Philippine Airlines, said the airline is taking steps to protect margins and liquidity.

“Our first quarter results reflect both the strength of demand for Philippine travel and the disciplined execution of our team,” Nuttall said. “However, these results only partially reflect the impact of the escalation in the Middle East late in the quarter, which has introduced volatility in fuel prices and disrupted parts of the global aviation network.”

He added that the airline remains confident in its fundamentals despite the near-term challenges.

“We are actively managing our network and costs to protect margins and liquidity. While near-term headwinds remain, we are confident in the strength of our fundamentals and are taking prudent steps to sustain our momentum.”

PAL said it will continue to focus on financial discipline and operational resilience as global conditions remain unpredictable. The airline generated strong operating cash flow during the quarter, which it used to fund capital spending, service debt, and strengthen its cash position while preparing for potential disruptions ahead.

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