PAL capable of growing in crisis – Moody’s

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March 30, 2026 | 12:00am

MANILA, Philippines — Flag carrier Philippine Airlines (PAL) has secured a Ba2 corporate family rating from Moody’s Ratings, a sign the company is oiled up to weather imminent risks like the war in the Middle East.

Moody’s said PAL was given a Ba2 rating because of promising gains in its financials, driven by the growth of its domestic and international segments and paired with its local leadership in transpacific flights.

Moody’s vice president and senior credit officer Nidhi Dhruv said PAL looks prepared to make it out of the fuel crisis in one piece.

For one, the Middle East accounts for just 11 percent of PAL’s capacity and only eight percent of the airline’s revenues. Likewise, Dhruv said PAL has procured jet fuel until mid-2026, placing it ahead of competitors in terms of supply readiness.

Dhruv also considered that PAL controls the other half of what is a virtual duopoly in Philippine air travel. He said PAL is bound to maintain, if not grow, its market share, as airline competition in the country is limited by infrastructure constraints, such as the lack of airport slots.

Likewise, the airline is expected to sustain transpacific leadership, allowing it to keep sourcing a third of its revenues from North American flights.

For 2026, Dhruv said PAL is poised to increase revenues between 4.5 percent and seven percent, prevented from reaching double-digit growth by the uncertain situation in the Middle East.

Based on operating leverage, PAL is projected to maintain its earnings margin from six percent to 8.5 percent this year.

Moody’s also sees PAL restricting its debt-to-earnings ratio below four times over the next 12 to 18 months. Although the airline is awaiting the delivery of 21 aircraft until 2029, Moody’s said it is funding fleet expansion through a combination of operating and finance leases.

Dhruv said PAL’s rating could be downgraded if its earnings margin drops below seven percent. The airline’s debt-to-earnings ratio is also being monitored, especially if it exceeds four times on a sustained basis.

PAL is pressured to maintain its market share on the domestic and international front, as it could lose liquidity advantage if its flight network shrinks.

PAL flies 30 percent of domestic passengers and 23 percent of international travelers with its fleet of 82 aircraft that is bound to rise to 106 by 2030.