Moody’s gives PAL first credit rating, stable outlook

Global credit agency Moody’s Ratings has given Philippine Airlines (PAL) its first-ever corporate family rating, assigning a Ba2 grade with a stable outlook.

The rating signals confidence in the flag carrier’s recovery after its restructuring, while noting the challenges it still faces.

“PAL’s Ba2 rating reflects its position as the national flag carrier of the Philippines, with steady domestic and international market shares and a defensible long-haul franchise,” said Moody’s vice president Nidhi Dhruv.

She added that the rating also reflects PAL’s stronger balance sheet and leaner cost structure after its 2021 Chapter 11 restructuring. “PAL’s small scale relative to global peers, sizable fleet expansion plans, and limited liquidity constrain the rating,” she noted.

Global risks flagged

However, Moody’s still flagged global risks, including tensions in the Middle East. “Although PAL’s direct exposure to the Middle East conflict is limited… the company remains indirectly exposed to higher fuel costs and potential shifts in travel demand,” Dhruv said.

Fuel supply concerns have grown after the Philippines declared an energy emergency in late March. While PAL has secured fuel through June, any disruptions could affect its credit profile.

At home, PAL operates in a duopoly and is the country’s only full-service airline, controlling about 30 percent of the domestic market and 23 percent of international passenger traffic. It also has a strong presence in North America, which accounts for 40 percent of its capacity and a third of its revenue.

Moody’s expects PAL’s revenue to grow around 4.5 to 7 percent until 2027, with profit margins of 6 to 8.5 percent amid global headwinds.

Additional 21 new aircraft between 2026 and 2029

The airline plans to add 21 new aircraft between 2026 and 2029, funded through a mix of operating and finance leases. Despite these plans, PAL’s debt is expected to remain manageable, with adjusted debt-to-EBITDA below 4x over the next 12 to 18 months.

PAL does not hedge fuel or currency risks but partially offsets fuel costs through government-regulated surcharges. Its short booking window and revenue mix — 35 percent in US dollars — also help manage foreign-exchange exposure.

Liquidity adequate but tight

Liquidity is adequate but tight. As of December 2025, PAL had $432 million in cash and short-term investments, supported by $768 million in operating cash flow, enough to cover $845 million in debt and around $505 million in capital spending through mid-2027.

The airline has also raised $1.5 billion from lessors and alternative lenders since leaving Chapter 11.

PAL currently operates 82 aircraft and aims to grow to 106 by 2030, serving 70 destinations worldwide.