Flag carrier Philippine Airlines (PAL) 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.

PAL’s parent firm PAL Holdings Inc. reported that it incurred a net loss of ₱1.84 billion in the six months through June, reversing the ₱7.66 billion in profit during the same period last year.

PAL saw its revenues grow by more than 11 percent to ₱103.81 billion, but expenses accelerated faster by 20 percent to ₱101.81 billion, driven largely by costlier flying operations.

Flying expenses went up by 39 percent to ₱59.49 billion, with jet fuel costs soaring by more than half to ₱40.65 billion from nearly ₱26 billion a year ago.

Since the conflict in the Middle East erupted in February, PAL said jet fuel prices have risen to more than $120 per barrel, later surging to $150 per barrel by the end of June.

In response to higher fuel prices, PAL adjusted flight schedules on certain domestic and foreign routes, especially those to the Middle East, alongside recalibrating airfares.

This resulted in passenger volume declining by three percent to 8.2 million in the first half, while the seat load factor, or the percentage of occupied seats, eased to 78.9 percent from 81.6 percent.

Still, PAL said passenger revenues expanded by nearly 10 percent to ₱88.27 billion from ₱80.46 billion. Ancillary revenues, which cover non-ticket earnings such as seat upgrades, increased by 11 percent to ₱9.46 billion from ₱8.51 billion.

Cargo revenues registered a 37-percent growth to ₱5.91 billion from ₱4.31 billion last year, as freight volume still improved despite disruptions to Middle East airspace.

Despite pressure from higher fuel prices, PAL President Richard Nuttall said the performance in the first half demonstrates the carrier’s capacity to respond to any form of volatility in the aviation industry.

“We moved quickly on fare and network adjustments, protected our liquidity, and continued investing in the fleet and partnerships that will strengthen our long-term competitiveness,” he said.

Looking ahead to the second half, Nuttall said the ongoing conflict in the Middle East remains the most important factor to consider, given its impact on fuel prices, inflation, and travel demand.

While international demand continues to remain strong, PAL expects weaker demand on the domestic front following fare adjustments, although it noted that local operations remain profitable.

“Our cost discipline is holding, and we enter the second half with the flexibility to manage through this disruption while staying focused on our strategic plan,” Nuttall said.

Earlier, PAL announced orders of up to 20 Boeing 787-10s and 14 Airbus A350-1000s, as it looks to strengthen its capacity to accommodate long-range destinations, particularly to North America.