Philippine Airlines (PAL) Inc. swung to a net loss in the first half of the year as escalation in Middle East geopolitical conflict pushed jet fuel expenses sharply higher, overwhelming steady top-line growth and disciplined non-fuel spending.

In a statement, PAL said that the flag carrier recorded a net loss of $25.1 million for the six-month period ending June 30, reversing a net income of $136.7 million in the same period last year.

A $219.5 million surge in fuel costs served as the primary drag on earnings, outweighing a 5.9 percent increase in total revenue to $1.746 billion from $1.648 billion.

The financial pressure deepened during the second quarter, when PAL posted a net loss of $103.6 million compared with a profit of $60.2 million a year earlier.

Fuel expenses during the three-month period escalated 88 percent year-on-year to $422.9 million. For the full six-month period, fuel costs rose 48.2 percent to $674.5 million, accounting for 39.2 percenr of overall operating expenses compared with 30.3 percent in the first half of 2025.

Earnings before interest, taxes, depreciation, and amortization fell 28.5 percent to $271.0 million, shrinking the EBITDA margin to 15.5 percent from 23 percent.

Total passenger volume dropped 3.1 percent to 8.2 million, while load factor eased to 78.9 percent from 81.6 percent as higher ticket prices impacted domestic travel demand.

Non-fuel expenditures remained controlled, rising 4.1 percent year-on-year as available seat kilometers held flat at 22.8 billion. Top-line performance was supported by a 4.5 percent rise in passenger revenue to $1.47 billion and a 30 percent jump in cargo revenue to $98.2 million, alongside steady growth in ancillary products.

Liquidity remained stable, with cash balances standing at $456.3 million as of June 30. Free cash flow was positive at $135 million, supported by $153 million in capital expenditures and a $350 million five-year notes issuance in the debt capital markets.

During the period, PAL deployed its second Airbus A350-1000 across long-haul routes including New York, Toronto, and San Francisco.

The airline also expanded its Mabuhay Miles loyalty program via partnerships with Qantas Airways and Qatar Airways, began integration efforts for its planned entry into the oneworld alliance, and announced long-term orders for up to 20 Boeing 787-10s and up to 14 Airbus A350-1000s scheduled for delivery between 2031 and 2036.

PAL President Richard Nuttall said ongoing volatility in the Middle East remains the central variable for the second-half outlook, though international demand and cash buffers position the carrier to absorb near-term cost pressures while advancing fleet modernization plans.