The pleasing thing about airline earnings is that they arrive in large, round numbers. The dangerous thing is that they often conceal the balance-sheet strain required to produce them. PAL Holdings’ 2025 results belong firmly in that tradition: respectable at first glance, even encouraging, but rather less reassuring when read below the fold. Yes, the group earned ₱10.07bn on revenues of ₱183.83bn, up from ₱8.12bn the year before. Yes, it carried 16.29mn passengers, increased flights to 115,007, and was recognised as the No. 1 on-time airline in Asia Pacific with 83.12 per cent punctuality. Operationally, this is a business that has plainly improved. Financially, it remains more brittle than the headline suggests.
That distinction matters. PAL’s strongest argument is operational competence. Passenger numbers rose 4.3 per cent, cargo revenues grew 3.7 per cent to ₱9.49bn, and ancillary revenues surged 25.4 per cent to ₱17.33bn, lifting their share of total revenues to 9.4 per cent from 7.8 per cent a year earlier. Those are not trivial gains. They suggest better monetisation of the network, better product discipline, and a management team increasingly aware that modern airline profitability depends not simply on filling seats, but on selling a wider menu of services around them. The group’s Net Promoter Score improved to +48 from +43, reinforcing the impression that service reliability is becoming a commercial asset rather than merely a public-relations line.
Fleet renewal also strengthens the operational case. PAL ended 2025 with 82 aircraft and took delivery of its first Airbus A350-1000, becoming the first carrier in Southeast Asia to operate the type. It has also committed to 13 A321neo aircraft for delivery between 2026 and 2029 and eight more A350-1000s for 2026 to 2027. In a highly competitive market, newer aircraft should bring better fuel efficiency, more competitive premium cabins, and improved long-haul economics. The logic is sound. Airlines that fail to invest in fleet and product are punished twice: first in costs, and then in yields.
But this is precisely where the cheer requires qualification. Revenue rose 3.3 per cent in 2025; operating expenses rose faster, by 6.0 per cent, to ₱169.67bn. Maintenance costs climbed to ₱25.27bn, aircraft and traffic servicing expenses to ₱22.85bn, and general and administrative costs jumped 64.5 per cent to ₱6.21bn. While jet fuel costs fell 3.7 per cent to ₱53.32bn, that relief was more than offset by cost inflation elsewhere, including higher landing and take-off charges, staff costs and maintenance. The company still delivered an operating profit of ₱14.17bn, but its own metrics show EBITDA margin slipped to 18.7 per cent from 20.3 per cent in 2024 and 23.3 per cent in 2023. This is not a company enjoying widening operating leverage; it is one working harder merely to stand still.
The quality of the top line is also less robust than a passenger-growth figure might imply. Capacity, measured by available seat kilometres, increased 3.3 per cent, while passenger load factor dipped to 78.7 per cent from 79.1 per cent. Passenger revenues, meanwhile, grew by only 1.3 per cent despite stronger passenger volume. Management attributes this to the “softening of passenger yields” as global capacity normalised. That phrase deserves attention. It is the polite airline equivalent of saying price discipline is weakening. In other words, PAL is carrying more people, but extracting less pricing power from each seat than the volume growth might suggest.
The balance sheet tells the more uncomfortable story. Total assets increased to ₱230.62bn, but liabilities also rose to ₱185.13bn, up from ₱170.38bn the year before. Equity edged up to ₱45.49bn, yet the group’s debt-to-equity ratio worsened to 2.18x from 1.87x. More striking still, the current ratio fell to 0.56, from 0.70 in 2024 and 0.88 in 2023. Current assets stood at ₱47.25bn against current liabilities of ₱83.78bn. For a capital-intensive airline, a current ratio below one is not unusual, but it does leave less room for operational error, financing stress or external shocks. A profitable airline can still be a fragile one if its short-term obligations consistently outrun its short-term resources.
To be fair, PAL is not short of cash generation. Net cash from operating activities reached ₱32.63bn, and year-end cash and cash equivalents rose to ₱25.97bn. Yet this is where the investment burden reappears. Net cash used in investing activities was ₱27.26bn, largely for aircraft and related capital expenditure, while long-term obligations net of current portion climbed to ₱73.06bn from ₱55.06bn. The group is therefore doing what many recovering airlines do: using improved operations to finance an expensive future. The risk is that the future arrives with higher interest rates, weaker demand, or both. PAL itself notes that the ratio of floating-rate loans to total borrowings rose to 0.83:1 in 2025 from 0.75:1 a year earlier, leaving it more exposed to rate volatility.
And the company is admirably candid about its vulnerabilities. Its annual report lists fuel price volatility, foreign exchange exposure, airport and infrastructure limitations, rising airport charges, competitive pressure from low-cost carriers, supplier concentration among aircraft and engine manufacturers, cybersecurity risk, financing risk and the burden of high fixed costs among its core business threats. None of these is theoretical. PAL’s domestic market share was 29 per cent in 2025, versus 56 per cent for the Cebu Pacific Group and 14 per cent for AirAsia in the Philippines. That is not the market structure of a carrier able to pass through every cost increase at will.
There is, then, a sensible investment conclusion. PAL today looks like a better airline than it did a few years ago. It appears operationally sharper, commercially more disciplined, and strategically serious about fleet and product. But it does not yet look like a financially relaxed business. The combination of thinner margins, rising leverage, sub-par liquidity and large forward aircraft commitments means investors should treat the earnings line less as proof of financial strength than as evidence of operating progress bought at considerable financial cost. In aviation, those are not quite the same thing.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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