Philippine Airlines (PAL) reported a slight increase in first-quarter net income, as strong passenger demand and cargo performance helped offset rising operating costs and fuel price pressures.

The flag carrier said on Tuesday its net income rose 2.6 percent year-on-year to $78.55 million for the January to March period, supported by broad-based revenue growth.

Total revenues grew 9.7 percent to $895.70 million, driven by sustained travel demand, improved cargo yields, and higher ancillary revenues.

Passenger revenues, which accounted for the bulk of earnings, rose 8.7 percent to $759.65 million, as PAL carried 4.30 million passengers during the quarter, up 6.1 percent from a year earlier. This was supported by post-holiday travel demand and a resilient route network, with capacity expanding in line with demand. Available seat kilometers increased 7.2 percent, while flights mounted rose 8.4 percent.

Cargo revenues also provided a strong boost, jumping 22.5 percent to $43.21 million on improved yields amid tight global airfreight capacity, particularly on routes affected by disruptions linked to tensions in the Middle East. Ancillary revenues increased 11.2 percent to $83.56 million, driven by higher uptake of value-added and personalized travel services.

Despite rising costs, PAL maintained profitability, generating an operating profit of $101.85 million as revenue gains outpaced expense growth. Total operating expenses increased 7.1 percent to $793.85 million.

Flying operations, the airline’s largest cost component, rose 9.2 percent to $447.08 million, reflecting higher flight activity, fuel price volatility late in the quarter due to developments in the Middle East, and increased depreciation and amortization from fleet expansion.

“Our first quarter results reflect both the strength of demand for Philippine travel and the disciplined execution of our team,” PAL President Richard 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. 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,” he added.

PAL said it remains focused on maintaining financial discipline and operational resilience as it navigates ongoing volatility in the global aviation environment.