Philippine Airlines secures first-ever Fitch credit rating as fleet expansion plans gain momentum

Fitch assigns ‘BB’ rating with Stable Outlook, citing market leadership, cost discipline, and recovery since 2021 restructuring.

Nearly five years after emerging from its 2021 Chapter 11 restructuring, Philippine Airlines has secured a major endorsement from a global credit ratings agency, giving the flag carrier added credibility as it pursues an ambitious fleet expansion and bets on continued travel demand.

Fitch Ratings assigned PAL its first-ever ‘BB’ Long-Term Issuer Default Rating with a Stable Outlook, citing its position as the country’s only full-service carrier and its strong share of both domestic and international traffic.

PAL accounts for around 30% of the domestic market and 23% of international passenger traffic, supported by a network that spans 70 destinations across 16 countries and 88 routes. International operations continue to drive the bulk of revenue, while cargo contributes a smaller but steady share of business.

Fitch said PAL’s profile is reinforced by its diversified network, hybrid operating model alongside Air Philippines Corp., and ongoing efforts to streamline costs after its restructuring. The airline’s focus on fewer but more profitable routes has helped support a leaner operating structure compared to many global peers in the same ratings bracket.

The agency also flagged improving financial discipline since the restructuring, noting expectations that leverage will gradually ease in the coming years as cash generation strengthens. Liquidity levels are seen as sufficient to cover operational volatility, supported by cash on hand and committed facilities.

External pressures remain part of the operating environment, including fuel price movements and geopolitical disruptions on some routes. Still, Fitch expects margins to recover over time, supported by fare adjustments and regulatory fuel surcharge mechanisms that allow partial pass-through of rising costs.

PAL is also preparing for a steady expansion cycle, with plans to grow its fleet by about 25% over the next four years through 21 aircraft deliveries scheduled between 2026 and 2029. Capital spending is expected to rise in line with aircraft payments and maintenance requirements, but Fitch views this within the airline’s capacity to manage.

Currency exposure and fuel risk were also flagged as manageable, with a significant portion of revenue earned in US dollars helping offset peso volatility.