PHI 17A-Dec 2017

COVER SHEET
AUDITED FINANCIAL STATEMENTS
SEC Registration Number

P W – 9 4
COMPANY NAME
P A L H O L D I N G S , I N C .
( A S u b s i d i a r y o f T r u s t m a r k
H o l d i n g s C o r p o r a t i o n )
PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )
8 t h F l o o r , P N B F i n a n c i a l
C e n t e r , P r e s i d e n t D i o s d a d o
M a c a p a g a l A v e . , C C P C o m p l e x
P a s a y C i t y
Form Type Department requiring the report Secondary License Type, If Applicable
1 7 - A C R M D N / A
COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number
palholdingsinc2015@gmail.com (02) 816-3451 N/A
No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)
6,507 Last Thursday of May 12/31
CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation
Name of Contact Person Email Address Telephone Number/s Mobile Number
Susan T. Lee palholdingsinc2015@gmail.com (02) 816-3451 N/A
CONTACT PERSON’s ADDRESS
7/F Allied Bank Center, 6754 Ayala Avenue, Makati City
NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the
Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person
designated.
2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with
the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from
liability for its deficiencies.
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SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1. For the calendar year ended December 31, 2017
2. SEC Identification Number PW- 94
3. BIR Tax Identification No. 000-707-922
4. Exact name of registration as specified in its charter PAL HOLDINGS, INC.
5. Philippines 6.
(SEC Use Only)
(Province, country or other jurisdiction of Industry Classification Code:
incorporation or organization)
7. 8th Floor, PNB Financial Center, President Diosdado Macapagal Ave., 1307
CCP Complex, Pasay City
Address of principal office Postal Code
8. (632) 816-3451
Registrant’s telephone number, including area code
9. Not Applicable
Former name, former address, former fiscal year, if changed since last report
10. Securities registered pursuant to Section 8 and 12 of the SRC
Number of Shares of Common Stock

Title of Each Class Outstanding and Amount of Debt Outstanding
Common Stock 11,610,231,157 shares
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11. Are any or all of these securities listed on the Philippine Stock Exchange?
Yes [  ] No [ ]
Philippine Stock Exchange Common Stock – 10,089,705,458 shares
12. Check whether the registrant:
(a) has filed all reports to be filed by Section 17 of the SRC and SRC Rule 17.1
thereunder or Section 11 of the Revised Securities Act (RSA) and RSA Rule 11 (a)-1
thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines
during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports);
Yes [  ] No [ ]
(b) has been subject to such filing requirements for the past 90 days.
Yes [  ] No [ ]
13. As of December 31, 2017, the aggregate market value of the voting stock held by non-affiliates of
the registrant is P
=6,170,961,050.
14. Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE

PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
a) Corporate History
PAL Holdings, Inc., (PHI, or the Company), was incorporated on May 10, 1930 as “Baguio Gold
Mining Company”. On September 23, 1996, the Philippine Securities and Exchange Commission
(SEC) approved the change in the Company’s name to “Baguio Gold Holdings Corporation” and
the change in its primary purpose to that of a holding company.
On May 30, 1997, the stockholders approved the increase in the Company’s authorized capital
stock from 200.00 million common shares to 4.00 billion common shares both at P =1 par value per
share. On April 13, 1998, the stockholders amended the increase in the Company’s authorized
capital stock from 4.00 billion common shares to 2.80 billion common shares and 1.20 billion
preferred shares both at P
=1 par value per share. On August 30, 1999, the stockholders further
amended the authorized capital stock from 2.80 billion common shares and 1.20 billion preferred
shares to 400.00 million common shares at P
=1 par value per share this which was approved by the
SEC on October 2, 2000.
On July 26, 2006 and September 19, 2006, at separate meetings, the Board of Directors (BOD)
and the stockholders approved the increase in authorized capital stock of the Company from
=400.0 million divided into 400.0 million common shares with a par value of P
P =1 per share to
=20.0 billion divided into 20.0 billion common shares.
P
On August 17, 2006, the BOD approved the acquisition of the following holding companies
which collectively control 84.67% of Philippine Airlines, Inc. (PAL, or the Airline); Pol
Holdings, Inc., Cube Factor Holdings, Inc., Ascot Holdings, Incorporated, Sierra Holdings &
Equities, Inc., Network Holdings & Equities, Inc., and Maxell Holdings Corporation (collectively,
the Six Holding Companies).
On January 19, 2007 the Philippine SEC approved the increase in authorized capital stock and
change in corporate name of Baguio Gold Holdings Corporation to PAL Holdings, Inc.
On August 13, 2007, the Company acquired directly from the Six Holding Companies
8,823,640,223 shares in PAL, which is equivalent to 81.57% of the issued and outstanding
common shares in the Airline. At the same time, it acquired from the Six Holding Companies
except Maxell Holdings Corporation 50,591,155 shares in PR Holdings, Inc. (PR), equivalent to
82.33% of the outstanding shares in PR. Both acquisitions were made by way of dacion en pago,
whereby the total acquisition price of P
=12.55 billion for the shares in PAL and PR was satisfied
by an equivalent reduction of the liability owing to the Company from the Six Holding
Companies.
On August 14, 2007, the Company assigned its shares in each of the Six Holding Companies to
Trustmark Holdings Corporation (Trustmark).
On October 16, 2007, the Philippine SEC approved the Amended By-Laws of the Company,
which consist of the deletion of outdated provisions and the inclusion of the provisions required
under the Code of Corporate Governance provided by the Philippine SEC.
On October 17, 2007, the Philippine SEC approved the equity restructuring of the Company. This
allowed the Company to wipe out the deficit as of March 31, 2007 amounting to P =253.73 million
using the Additional Paid-In Capital amounting to P
=4.03 billion subject to the condition that the
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remaining additional paid-in capital will not be used to wipe out losses that may be incurred in the
future without prior approval of the Philippine SEC.
In April 2012, San Miguel Equity Investments Inc. (SMEII), a wholly owned subsidiary of San
Miguel Corporation, acquired 49% equity interest in Trustmark. Trustmark then owns 97.71% of
the Company, which in turn beneficially owns (directly and indirectly, thru PR) 84.67% of PAL.
In May and June 2012, the proceeds from the investment of SMEII to Trustmark flowed down to
PAL with the subscription by Trustmark of 17.00 billion shares in the Company for P=17.00 billion
and subsequently, the subscription by the Company of 85 billion shares in PAL for P
=17.00 billion.
On June 26 and September 28, 2012, the BOD, by majority vote, and the stockholders
representing at least 2/3 of the outstanding capital stock, approved the increase in authorized
capital stock from P
=20.0 billion divided into 20.00 billion shares with P=1 par value per share to
=23.00 billion divided into 23.00 billion shares with P
P =1 par value per share. Out of the increase in
the authorized capital stock, P
=2.42 billion have been subscribed and fully paid by way of cash
infusion by Trustmark. Accordingly, as a result of the infusion, Trustmark’s ownership in the
Company increased from 97.71% to 99.45%. The increase in authorized capital stock was
approved by the Philippine SEC on December 12, 2012.
On February 4 and March 15, 2013, the BOD, by majority vote, and the stockholders representing
at least 2/3 of the outstanding capital stock, approved the increase in authorized capital stock from
P =1 par value per share to P =30.00 billion
divided into 30.00 billion shares with P =1 par value per share. The increase in authorized capital
stock was approved by the Philippine SEC on June 28, 2013. Out of the increase in the authorized
capital stock, P=2.42 billion have been subscribed, of which P =603.75 million have been fully paid
as of December 31, 2015. As a result of the additional issuance of shares, Trustmark’s ownership
in the Company decreased from 99.45% to 89.78%.
On February 4, 2013, the BOD, pursuant to the authority duly delegated to it by the stockholders
on April 30, 1973, approved the Company’s change in accounting period from fiscal year ending
March 31 to calendar year ending December 31. The Amended By-Laws in connection with the
change in accounting period was approved by the Philippine SEC on July 5, 2013. On October 31,
2013, the Bureau of Internal Revenue (BIR) approved the request for change in accounting
period.
In October 2014, Buona Sorte Holdings, Inc. (BSHI) and Horizon Global Investments Limited
(HGIL) acquired 9% and 40%, respectively, the 49% stake of SMEII in Trustmark. As of
December 31, 2016 and 2015, Trustmark is 60% owned by BSHI and 40% owned by HGIL.
BSHI and Trustmark were likewise incorporated in the Philippines and are part of the Lucio Tan
Group of Companies while HGIL was incorporated in British Virgin Islands.
On September 26, 2016, the Company’s BOD approved and authorized the acquisition, in a share
swap transaction, of PAL shares from existing PAL shareholders. Relative thereto the BOD
likewise approved the share swap ratio of 5:1 or equivalent to five PAL shares to one PHI share.
On December 18, 2017, the Philippine SEC approved the acquisition of 0.64% non-controlling
interest in PAL. The Company issued 123.54 million new shares from its authorized but unissued
capital stock in favor of PAL shareholders who have participated in the PAL share swap
transaction. As of December 31, 2017, PHI has effective ownership interest in PAL of 98.91%.
On November 28, 2016, the Company’s BOD also approved the acquisition, through share swap
transaction, of the shares of Zuma Holdings Management Corporation (ZUMA), the holding
company of Air Philippines Corporation (APC), from its existing shareholders with a share swap
exchange ratio of 19:1 corresponding to 19 PHI shares to one ZUMA share. On December 21,
2017, the Philippine SEC approved the acquisition of ZUMA through share swap transaction from
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its existing shareholders. The Company issued 840.46 million new shares from its authorized but
unissued capital stock valued at P=5.00 per share in favor of Cosmic Holdings Corporation.
Accordingly, as of December 31, 2017, the Company owns 51% of ZUMA.
b) Description of Subsidiaries
Philippine Airlines, Inc.
PAL, a corporation organized and existing under the laws of the Republic of the Philippines, was
incorporated on February 25, 1941. It is the national flag carrier of the Philippines and its
principal activity is to provide air transportation for passengers and cargo within and outside the
Philippines.
PAL flies to the most popular domestic jet routes and international and regional points that are
either most visited by Filipinos or provide a good source of visitors to the Philippines. As of
December 31, 2017, PAL's route network covered 35 points in the Philippines and 42
international destinations.
PR Holdings, Inc.
PR was organized by a consortium of investors for the purpose of bidding for and acquiring the
shares of stock of PAL in accordance with the single-buyer requirement of the bidding guidelines
set by the seller, the National Government of the Republic of the Philippines. PR acquired on
March 25, 1992, 67% of the outstanding capital stock of PAL.
PR was partially dissolved or liquidated on November 9, 1998 with a decrease in its authorized
capital stock and retirement of some of its shares in exchange of PAL shares to retiring
stockholders as return of capital.
As a holding company, PR’s primary purpose is to purchase, subscribe, acquire, hold, use,
manage, develop, sell, assign, exchange or dispose of real and personal property, including shares
of stocks, debentures, notes and other securities of any domestic or foreign corporation.
Zuma Holdings and Management Corporation
ZUMA was incorporated and registered with the Philippine Securities and Exchange Commission
(SEC) on August 25, 1989. It was organized primarily to engage in the business of a holding
company. It has an investment in Air Philippines Corporation (APC), a 99.97%-owned subsidiary.
APC is primarily engaged in the business of air transportation for the carriage of passengers and
cargo within and outside the Philippines.
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Principal products or services and their markets indicating their relative contributions to sales
or revenues of each product or service:
(i) Percentage of sales or revenues and net income contributed by foreign sales
PAL
PAL's operations for the year ended December 31, 2017 are described as follows:
In 2017, PAL carried an average of 39,634 passengers per day (19,918 domestic including code
share with APC, and 19,716 international) and 674 tons of cargo per day (339 tons domestic and
335 tons international).
Systemwide Operations: FY 2017

Net Passenger Revenues (in millions) =109,284.4
P
Net Cargo Revenues (in millions) =8,396.7
P
Revenue Passenger Kms (‘000) 36,973,091
Available Seat Kms (ASKs) (‘000) 51,793,133
Passenger Load Factor 71.39%
Number of Passengers 14,466,729

Freight Kilograms 236,187,245
Net Revenues by Route
Based on the results of operations for the years ended December 31, 2017, 2016 and 2015, the
comparative revenue contribution by route is shown below:
2017 2016 2015

Transpacific 26.7% 27.2% 28.6%
Europe 2.5% 2.5% 2.1%
Middle East 9.3% 8.9% 9.4%
Asia and Australia 40.1% 39.2% 39.4%
Total International 78.6% 77.8% 79.5%
Total Domestic 21.4% 22.2% 20.5%
Total System 100.0% 100.0% 100.0%
International Passenger Services
As of December 31, 2017, PAL's international route network covered 42 cities in 19 countries.
42 on-line points: Guam, Honolulu, Los Angeles, New York, San Francisco, Toronto,
Vancouver, London, Abu Dhabi, Dubai, Doha, Kuwait, Dammam,
Jeddah, Riyadh, Brisbane, Darwin, Melbourne, Sydney, Auckland,
Port Moresby, Fukuoka, Nagoya, Osaka, Tokyo, Pusan, Seoul, Hong
Kong, Macau, Beijing, Chengdu, Guangzhou, Shanghai, Quanzhou,
Xiamen, Taipei, Bangkok, Kuala Lumpur, Saigon, Singapore,
Jakarta, Denpasar Bali
Transpacific
During the year, PAL flew an average of 34 flights a week to North America utilizing the B777-
300ERs and A340-300s: 14 times weekly non-stop flights to Los Angeles; 7 times weekly non-
stop services to San Francisco (with additional 3 times weekly during peak months); and 10 times
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a week to Vancouver, two direct flights, four of which fly onward to Toronto and back, and
another four of which fly en route to New York and back. Direct flights to Toronto at 4 times
weekly started on December 16, 2017. After which, service to Vancouver was reduced to 7 times
weekly, with three direct flights, and maintaining the 4 times weekly en route to New York.
In addition, PAL also operates a regular five weekly direct service to Honolulu and daily to
Guam.
Services between Cebu and Los Angeles were cancelled starting May 30, 2017. Flights to Saipan
(operated by APC) were also discontinued during the year
The Airline is entitled to fly to other US cities for unlimited frequencies under certain terms and
conditions of the Philippines-US bilateral air transport agreement.
Europe
PAL flies to London daily using the B777-300ERs.
Middle East
The multilegged routes including the Manila-Abu Dhabi-Doha v.v., Manila-Dubai-Jeddah v.v.,
and Manila-Dubai-Kuwait v.v. were discontinued on March 25, 2017. Untagged and direct flights
between Manila and Abu Dhabi at 3 times weekly, between Manila and Doha at 4 times weekly,
between Manila and Dubai daily, between Manila and Jeddah at 3 times weekly, and between
Manila and Kuwait at 4 times daily, commenced on March 26, 2017.
PAL also operates 5 times a week to Dammam; and daily to Riyadh.
All flights to the Middle East utilize the A330-300 high gross weight aircraft.
Asia and Oceania
PAL operated 337 departures per week out of Manila, Clark, Cebu, Kalibo, and Puerto Princesa to
13 countries in Asia and Oceania. The Airline flew 42 times a week to Seoul; 35 times a week to
Hongkong; 32 times a week to Singapore; 28 times a week to Tokyo (Narita); 21 times a week
each to Bangkok and Osaka; 14 times a week each to Tokyo (Haneda) and Taipei; 11 times a
week to Pusan; 10 times a week to Nagoya; 9 times a week to Beijing; 7 times a week each to
Chengdu, Denpasar (Bali), Fukuoka, Guam, Guangzhou (Canton), Jakarta, Kuala Lumpur,
Saigon, Shanghai, and Xiamen; 5 times a week each to Macau and Quanzhou (Jinjiang).
In Australia, PAL operates 7 times weekly to Sydney; 3 times weekly to Melbourne; and 4 times
weekly to Darwin onward Brisbane and back. With the introduction of 3 times weekly direct
services to Auckland on December 6, 2017, service to Cairns onward Auckland and back, were
discontinued.
PAL also operates 3 times a week to Port Moresby in Papua New Guinea.
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APC
In 2017, APC operated 27,930 round trip flights (27,700 domestic and 230 international) under
the code share agreement with PAL, and charter flights of 546 round trips. APC’s international
route covered Saipan and Incheon (code share with PAL).
Systemwide Operations: FY 2017
Traffic Revenues (in millions) =10,251.6

P
Traffic revenue pertains to billings to PAL in accordance with the code share agreement which is
recognized as revenue when the transportation service is rendered. It also includes revenue from
chartered flights under charter agreement with various third parties.
Domestic Passenger Services
PAL's domestic network covered 35 cities and towns in the Philippines (mostly under code share
and operated by APC). It served the following domestic destinations: Bacolod, Basco, Butuan,
Busuanga, Cagayan, Calbayog, Camiguin, Catarman, Caticlan, Cebu, Clark, Cotabato, Davao,
Dipolog, Dumaguete, General Santos, Iloilo, Jolo, Kalibo, Laoag, Legazpi, Manila, Masbate,
Naga, Ozamiz, Puerto Princesa, Roxas, Siargao, Surigao, Tablas, Tacloban, Tagbilaran,
Tuguegarao, Virac, and Zamboanga.
Joint Services and Code Share Agreements
PAL
The Airline continues to employ tactical codeshare alliances to broaden its route network and
establish a presence in cities where it does not fly.
PAL maintains codeshare agreements with Malaysia Airlines (in place since February 1999)
covering a total of 21 weekly flights between Kuala Lumpur and Manila; with Cathay Pacific (in
place since November 2001) on 5 times weekly services between Hong Kong and Cebu; with
Gulf Air (in place since March 2006) on 7 times weekly services between Bahrain and Manila;
with Etihad Airways (in place since April 2014) on 14 times weekly services between Abu Dhabi
and Manila; with All Nippon Airways (in place since November 2014) on codeshare services
between several cities in Japan and Manila, and between domestic points in Japan; with West Jet
(in place since February 2015) on codeshare flights on selected points within Canada; with
Turkish Airlines (in place since July 2015) on 3 times weekly services between Istanbul and
Manila; with China Airlines (in place since December 2015) on 14 times weekly services between
Taipei and Manila; with Xiamen Airlines (in place since February 2016) on daily services
between Quanzhou and Manila, daily services between Xiamen and Manila, and 3 times weekly
services between Xiamen and Cebu; and with Hawaiian Airlines (in place since June 2016) on
connection for PAL Honolulu passengers with Hawaiian inter-island destinations including Hilo,
Kona, Lihue, and Maui.
PAL's daily services between Manila and Saigon are operated under a codeshare agreement with
Vietnam Airlines (in place since July 2001) with PAL as the operating airline. PAL also has
similar agreements with Garuda Indonesia (since March 2001) on PAL operated flights between
Manila and Jakarta, with Air Macau (since October 2009) on PAL operated flights between
Manila and Macau, and with Xiamen Airlines (since February 2016) on PAL operated flights
between Xiamen and Manila, and between Quanzhou and Manila.
PAL codeshares with APC since May 2002 on regular domestic services which the latter operates.
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APC
APC entered into a Joint Marketing and Licensing Agreement and Block Space Code Share Agreement
(code share agreement) with PAL, on domestic and international flights operated by PAL. Under
the code share agreement, PAL markets the code share flights and APC operates the flights. The
transactions with PAL include joint services and maintenance services.
APC has an existing Special Re-Accommodation Agreement with Cebu Air, Inc. for the
endorsements of passengers during flight interruptions, effective since October 25, 2011.
Frequent Flyer Programs
The PAL Mabuhay Miles program provides opportunities for travel rewards through the
accumulation of mileage credits earned on flights with PAL and partner airlines. Members also
earn miles through purchases and availment of services from partner establishments including
credit cards, banks, telecommunications, hotels and resorts, tour operators, cruise services,
insurance, car rentals, and other merchandise companies. PAL Mabuhay Miles has a website,
www.mabuhaymiles.com, which provides members access to their account information, and
details on promotions and offers.
The Mabuhay Miles Elite or Premier Elite members enjoy exclusive travel privileges including
priority reservation waitlist, dedicated reservation telephone lines, priority check-in, additional
free baggage allowance, priority luggage handling, priority airport standby, priority boarding,
access to Mabuhay Lounges and participating VIP lounges, and additional discounts and
amenities from program partners. The Mabuhay Million Milers enjoy the Premier Elite privileges
plus other exclusive benefits for life as a token of appreciation to members who have flown one
million cumulative flight miles.
The SportsPlus Card is a privilege card designed for sports enthusiasts, which grants members the
benefit of extra free baggage allowance for sports equipment.
(ii) Distribution Methods of Products or Services
PAL maintains a total of twelve (12) sales and ticket offices in Manila, thirty (30) in other cities in
the Philippines, and twenty (20) located in foreign stations. There are thirty (30) general sales
agents in selected international points representing the Airline in eighty-two (82) territories,
Billing Settlement Plan subscription in seventy (70) different countries/territories, eleven (11)
domestic sales agents and seven hundred eighty five (785) agents under the domestic ticketing
program that handle the promotions and sales of PAL's products and services.
The PAL website, www.philippineairlines.com, has a booking facility which provides interactive
booking of flights and ticket purchases. It also contains additional web pages that feature detailed
descriptions of PAL destinations and a calendar of destination festivities. Functionalities include
fares and tour modules, online training registration, route maps, flight schedules, dropdown lists,
and online cargo booking. Real time flight information of all PAL flights may also be accessed
by logging on to the PAL website.
The PAL mobile app (application software) enables passengers to conveniently book and pay for
their flights, track flight status, and check-in on-line using their mobile services such as
smartphones and tablets.
PAL’s official accounts on the social network sites Facebook and Twitter, are venues for
communicating directly with the customers.
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(iii) Status of any Publicly-announced New Product or Service
Complimentary meals and beverages, a variety of reading materials, and in-flight amenities are
provided in international and domestic flights. Special meals may be requested on all
international flights to satisfy the dietary requirements of passengers. Business Class overnight
kits and the ‘Junior Jetsetter’ activity kits are offered in long haul international flights.
The ‘myPAL eSuite’, PAL’s inflight entertainment system which consists of a selection of choice
movies, TV shows, music, games, and informative features can be accessed through the passenger
in-seat video and audio facilities. Aside from these, the Apple iPad, a popular tablet, is now part
of PAL’s inflight entertainment system offered on selected routes. The entertainment devise
features a selection of movies, television shows, music, games, reading materials, and the tablet
version of the PAL Mabuhay magazine.
The ‘myPAL’ products can be availed in all flights using the passengers’ own devise. Internet
connectivity, mobile services, and wireless entertainment can be availed using the passengers’
personal devise. The ‘myPAL Wi-Fi’ provides on-line internet connection while onboard. The
‘myPAL Mobile’ allows calls, text messages, and use mobile data through roaming facilities of
the mobile service operator. The ‘myPAL Player’ provides complimentary onboard movies, TV
shows and music (by downloading myPAL Player app before boarding the flight)..
The Fiesta Boutique is a selection of duty free products offered in all international flights. The
service provides the convenience of duty free shopping during the flight. Products for sale
include imported and local liquor, cigarettes, perfumes, and other high quality gift items.
PAL Mabuhay Lounges are available in selected international and domestic stations for Mabuhay
Class passengers and Mabuhay Miles Elite and Premier Elite members. Passengers can unwind,
dine, and freshen up in these facilities before boarding their flights.
Economy class passengers can purchase choice seats positioned at the bulkhead and exit rows
which provides the widest legroom or forward seats located in front rows for easy and priority
embarkation.
The ‘Premium Economy’ class is now offered in the domestic and selected international flights.
Aside from the benefits similar to the Business Class, the ‘Premium Economy’ service includes
new product offerings such as accrual of miles, increased free baggage allowance, and flexibility
in rebooking, refund, and ticket changes.
PAL's RHUSH (Rapid Handling of Urgent Shipments) is the airport-to-airport cargo service
which provides the fastest way to ship cargo domestically or overseas. It offers high priority in
cargo, guaranteed space, and quick acceptance and release times.
The PAL Boutique which covers ground, on-board and on-line selling, offers exclusive PAL
merchandise designed and produced in collaboration with retail icons in the Philippines. The
products sold at special prices include leather goods, apparel, wi-fi service (myPAL Roam), food
items, travel essentials, special souvenirs, and memorabilia items.
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(iv) Competitive business conditions and the registrant’s competitive positions in the industry
and methods of competition
PAL continues to maintain a strong market share in its international routes despite competition
with legacy carriers and growing number of LCCs in the Asia Pacific region. Aside from point to
point traffic, these carriers also target beyond passengers via their home countries to their entire
network.
The following table shows the Airline’s main competitors and PAL's total market and capacity
share per route.
PAL's Market and Capacity Share:

(January to December 2017)
Market Capacity Airline Competitors

Share Share
Transpacific 39% 35% Eva Air, Cathay Pacific, Korean Airlines,
Asiana Airlines, United Airlines, All Nippon
Airlines, Delta Airlines, China Airlines, China
Southern, Japan Airlines, Air China
Middle East 27% 22% Cebu Pacific, Emirates, Saudia Airlines, Etihad,
Qatar, Kuwait Airways, Gulf Air, Cathay
Pacific, Oman Air
United Kingdom 30% 33% Cathay Pacific, Emirates, Etihad, KLM Kuwait
Airways, Singapore Airlines, Qatar, Air China
Asia and Australia 26% 28% Japan Airlines, Cathay Pacific, Singapore
Airlines, Thai Airways, Korean Airlines,
Asiana Airlines, China Airlines, Eva Airways,
Qantas Airways, China Southern Airlines,
Dragon Air, Delta Air Lines, Cebu Pacific, All
Nippon Airways, Jetstar, Silk Air, Tiger
Airways, Air Asia Zest, Jeju Airlines, Jin Air,
Air Busan, Air China, Malaysia Airlines,
United Airlines, Air Niugini
Among the legacy carriers, Emirates, Etihad, United Airlines, Delta Airlines, Cathay Pacific, and
Singapore, airlines are among the world's biggest in terms of passengers carried. Cathay Pacific,
Singapore Airlines, Korean Air, and Thai Airways are still the leading carriers in the Asia and
Pacific region. Most of these international airlines belong to the largest alliances in the industry
(Star Alliance, Sky Team and One World).
In the domestic market, PAL held a 29.6% share for the period Jan-Sep 2017. The biggest
competition come from the Cebu Pacific group (Cebu Pacific and CebGo) (55.7%), and Air Asia
Zest (12.9%). PAL continues to expand its domestic network by opening new routes from its
Cebu, Davao and Clark hubs to offer better alternative airports other than Manila.
The continuous enhancement of products and services, creativity in fare structuring, and an
excellent safety record enables PAL to hold its place in the market. In the transpacific market,
PAL has the unique advantage of providing the only nonstop service from the Philippines to
mainland USA and Canada. Nonstop service to Auckland, New Zealand was also introduced in
2017. This nonstop attribute, together with the distinct Filipino flavor of the PAL inflight service,
appeal strongly to Filipino ethnic passengers, and cements the PAL edge over the non-Filipino
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carriers.
(v) Sources and availability of raw materials and the names of principal suppliers
PAL’s inflight catering requirements are provided by Sky Kitchen Philippines Inc., for all
domestic flights and outgoing flights ex- Manila and for Manila incoming flights originating from
Hong Kong (HKG), Singapore (SIN), Saigon (SGN), Taipei (TPE), depending on the type of
aircraft utilized. For other incoming flights, the major suppliers include Flying Food Group
(SFO), HACOR Inc. (LAX), International In-Flight Catering Co. Ltd. (HNL), LSG Sky Chefs
(JFK), Gate Gourmet Svcs. Pty. Ltd. (CNS & DRW), Q Catering (MEL), Alpha Flight Services
PTY LTD. (SYD & BNE), LSG Sky Chefs (AKL), Air Niuguini (POM), CLS Catering Services
Ltd. (YVR & YYZ), Alpha LSG Limited (LHR), Etihad Airport Services (AUH), Saudia Airlines
Catering (RUH & DMM), Emirates Flight Catering (DXB), Kuwait Aviation Services Co. (KWI),
Saudia Airlines Catering (JED), Cebu Pacific Catering Services Inc. (CEB), Fukuoka Inflight
Catering (FUK), AAS Catering Services, (KIX), Nagoya Air Catering Co. Ltd. (NGO), Cosmo
Enterpise Co. LTD. (NRT & HND), Korean Air Catering (ICN and PUS), Shanghai Eastern Air
Catering Co. Ltd. (PVG), Beijing Airport Inflight Kitchen Ltd. (BJS), Cathay Pacific, Catering
Services Ltd. (HKG), China Pacific Catering Services (TPE), Xiamen Fliport Catering Ltd.
(XMN), Southwest Air Catering Co., LTD (CTU), Macau Catering Services (MFM), LSG Sky
Chefs (Thailand) Ltd. (BKK), Aerofoods ACS CGK (CGK), LSG Sky Chefs, Guam (GUM)
SATS Catering Pte. Ltd. (SIN), Aerofoods ACS DPS (DPS) and Vietnam Airlines Caterers
(SGN).For the outgoing international flight ex- Clark Miascor Catering (CRK).
PAL’s jet fuel suppliers are: Air BP, Petron Corporation, Pilipinas Shell Petroleum Corporation,
Chevron Products Company, PT Pertamina (Persero), World Fuel Services (Singapore) Pte. Ltd.,
Win Both International Corporation, PTT Public Co. Ltd., China National Aviation Fuel Supply
Co., Ltd., Shanghai Pudong International Airport Aviation Fuel Supply Co. Ltd., Hyundai
Oilbank Co. Ltd, S-Oil Corporation, Singapore Petroleum Co. Ltd., Sinopec (HK) Petroleum Co.
Ltd., IP&E Holdings, LLC (dba. IP&E Guam), JX Nippon Oil and Energy Corporation, Vitol
Aviation Company, Lubwell Corporation, Safeair Corporation, Modern Consortium for Refueling
Aircraft Co. Ltd. (MCRA), The Arabian Petroleum Supply Co. Saudi Arabia (APSCO), Abu
Dhabi National Oil Company for Distribution (ADNOC), Par Hawaii Refining LLC, Phoenix
Petroleum Philippines, Inc., Unioil Petroleum Phils., Inc., Kuwait Petroleum International
Aviation Company Limited, Bakri International Energy Co. Ltd., Royal Petrol Trading Co., LLC,
Z-Energy Limited, Island Energy Services Downstream LLC, Jin Jiang Airport Oil Company,
Caltex Australia Petroleum Pty. Ltd., EMG Marketing Godo Kaisha, Kairos Oil Trading Pte Ltd.
and Petro Diamond Company Limited.
(vi) Dependence on one or a few major customers and identify any such major customers
PAL has a large network of customers all over the world and is not dependent on one or a few
major customers.
(vii) Transactions with and/or dependence on related parties
The Company’s significant transactions with related parties are described in detail in Note 18 of
the Notes to Consolidated Financial Statements.
(viii) Patents, trademarks, licenses, franchises, concessions, royalty, agreements or labor

contracts, including duration;
PAL subcontracts the maintenance of its commercial fleet to Lufthansa Technik Phlippines (LTP
Manila) for line, base, heavy maintenance and to HAECO (Xiamen) for heavy maintenance.
PAL's Aircraft Engineering Department (AED) undertakes planning, monitoring and control of all
- 13 -
maintenance activities and technical compliance of aircraft, engines and accessories with
airworthiness requirements and industry accepted standards for safety, reliability, and customer
acceptability.
The PAL Fleet is maintained in accordance with the standards and mandated by the aviation
authorities such as:
 Civil Aviation Authority of the Philippines (CAAP),
 US Federal Aviation Authority (US-FAA), and the
 European Aviation Safety Agency (EASA)
PAL complies with the International Civil Aviation Organization (ICAO) requirements and
currently holds IATA Operational Safety Audit (IOSA) certification. The Continuous
Airworthiness Maintenance Program (CAMP) of PAL is approved by the CAAP and is based on
Aircraft Manufacturer’s / Original Equipment Manufacturer’s approved and recommended
documents and Airworthiness Authorities’ mandatory requirements. This ensures that PAL
aircraft and equipment are always in an airworthy condition. AED established the General
Maintenance Manual (GMM) which describes the policies and processes required to achieve the
intent of the CAMP, as required by the CAAP.
PAL subcontracts the maintenance of its aircraft to competent Approved Maintenance

Organizations (AMO)-to LTP for line and base maintenance in the Philippines and HAECO for
base maintenance of the PAL Boeing 777 fleet in Xiamen, China. Line maintenance in overseas
destination stations is subcontracted to CAAP-approved maintenance organizations such as KLM
in London Heathrow, Cathay Pacific in Japan Stations, and Singapore Airlines Engineering and
Virgin Atlantic in the US, among many others. LTP and the outstation service providers are
mandated to comply with the requirements of PAL’s Maintenance Schedule and General
Maintenance Manual approved by the CAAP. AED exercises oversight responsibilities to ensure
compliance of the contracted maintenance providers to the established policies and procedures
and contractual obligations.
Man-hour rates for maintenance requirements are negotiated with the respective contracted
maintenance providers in accordance with the terms of the agreement. Maintenance materials and
parts are sourced from the original equipment manufacturers which include Airbus Industrie,
Boeing, General Electric, CFM International, International Aero Engines, Rolls-Royce, among
others.
Shop maintenance and overhaul services of engines are provided by SR Technics Switzerland
Ltd., Lufthansa Technik in Hamburg, Germany (LHT), Air France Industries (AFI), IHI in Tokyo,
Japan, Christchurch Engine Centre in New Zealand, SAESL in Singapore and HAESL in Hong
Kong, while the same services for the Auxiliary Power Units (APUs) are provided by
Honeywell. Maintenance and repair services for fan thrust reversers are provided by Lufthansa
Technik Shanghai (LTS) and, occasionally, by Nordam in Singapore. Component pooling and
repair services are handled by LHT for the Boeing 777 fleet / Airbus A340 / A320 and by SR
Technics for the Airbus A330 / A321 fleet.
PAL also operates a small fleet of trainer aircraft that is managed by the PAL Aviation School.
Maintenance of these aircraft is performed by another MRO, Aviation HubAsia Inc. (AHAI).
PAL has a Technical Services Agreement with AHAI. AED assists the PAL Aviation School in
its oversight of the maintenance activities of the trainer fleet.
- 14 -
Development Plans
After a rigorous audit of the Airline’s inflight and on ground service for both international and
domestic operations during the year, PAL has been certified as a 4-Star airline by Skytrax, the
international air transport rating organization. PAL is now amongst the forty other well-renowned
airlines in this prestigious category, and is the only airline in the Philippines to have a 4-Star
rating. This is a product of two years of facilities improvement, customer innovations, and
employee training and process enhancement. With this, the Airline will consistently deliver the
quality of service empowered by its distinct service culture, the ‘Buong Pusong Alaga’ or whole
hearted service, leveraged on its brand equity ‘the Heart of the Filipino’. PAL will continue to
provide the excellent flying experience to its passengers.
For the next five years, modern and technologically advanced aircraft on order will be delivered.
These new aircraft types will not only result to operational efficiency, reliability and profitability,
but will provide comfort and improve the product and service offerings.
PAL will further expand its route network. Plans include the introduction of new destinations and
route sectors. Operations and more flights will continue to be developed in new hubs such as
Clark, Cebu, Davao, and Kalibo. Flight schedules and timings will also be improved to provide
better connections.
PAL’s priorities include the further development of its competent workforce and provide
satisfying careers to the employees. Also, employees especially front liners are continuously
made aware on the focus on bringing excellent service beyond customers’ expectations.
PAL will explore on sales and business opportunities, invest on facility and resource improvement
programs, acquire more efficient operating system, optimize flight and ground operations, and
constantly prioritize safety.
Franchise
PAL Franchise
PAL operates under a franchise, which extends up to the year 2034, granted by the Philippine
Government under Presidential Decree No. 1590. As provided for under the franchise, PAL is
subject to:
a. corporate income tax based on net taxable income; or

b. franchise tax of 2% of the gross revenue derived from nontransport, domestic transport and
outgoing international transport operations,
whichever is lower, in lieu of all other taxes, duties, royalties, registration licenses and other fees,
and charges of any kind, nature, or description, imposed by any municipal, city, provincial or
national authority or government agency, except real property tax.
APC Franchise
APC operates under a franchise for a term of 25 years from August 8, 1997, the date of effectivity
of Republic Act (RA) No. 8339, with some provisions amended under RA No. 9215 effective
May 5, 2003. As provided for under the franchise, APC is subject to, among others:

b. franchise tax of 5% of the gross revenue derived from non-transport, domestic transport and
whichever is lower, in lieu of all other taxes, duties, fees, and licenses of any kind, nature, or
- 15 -
description, imposed by any municipal, city, provincial or national authority or government
agency, except real property tax.
As further provided for under PAL’s and APC’s franchises, PAL and APC can carry forward as a
deduction from taxable income, net loss incurred in any year up to five years following the year of
such loss (see Note 22 of the Notes to Consolidated Financial Statements). In addition, the
payment of the principal, interest, fees, and other charges on foreign loans obtained by PAL and
APC, and all rentals, interest, fees and other charges paid by PAL and APC to their lessors for the
lease of aircraft, engines, spares, other flight or ground equipment, and other personal property are
exempt from all taxes, including withholding tax, provided that the liability for the payment of
said taxes is assumed by the grantee (PAL or APC, as applicable). Under RA No. 9337 or the E-
VAT Act of 2005 which took effect on November 1, 2005, the franchise tax of PAL and APC was
abolished and PAL and APC became subject to the corporate income tax. PAL and APC remain
exempt from any taxes, duties, royalties, registration license, and other fees and charges, as may
be provided under PAL’s and APC’s franchises.
(ix) Need of any government approval of principal products or services
PAL’s operations are regulated by the Philippine Government through the Civil Aeronautics
Board (CAB) with regard to new routes, tariffs, schedules and passenger rights; through the Civil
Aviation Authority of the Philippines (CAAP), formerly the Philippine Air Transport Office, for
aircraft and operating standards; and through a slot coordinator for airport slots. PAL also
conforms to the standards and requirements set by different foreign civil aviation authorities of
countries where the airline operates.
In coordination with the different government air transport agencies - the CAAP and the
Department of Transportation (DOTr) - PAL initiates improvement programs for facilities in the
country's domestic and international airports to conform with international standards and enhance
safety of the Airline's operations. In particular, PAL is actively involved in and cooperating with
ongoing efforts by the government to address congestion problems at the Ninoy Aquino
International Airport and further develop the Clark International Airport as an international and
domestic gateway. With respect to passenger rights and protections, PAL assiduously complies
with existing regulations on the matter and continues to cooperate in various efforts to better
define and/or enhance the same.
(x) Effects of existing or probable government regulations on the business
Not Applicable
(xi) Estimate of the amount spent during each of the last three years on research and
development activities, and if applicable the extent to which the cost of such activities are
borne directly by customers;
Not Applicable
(xii) Cost and effects of compliance with environmental laws
PAL has fully complied with the following major environmental laws:
1. Republic Act (RA) 8749, “Clean Air Act”
In compliance to condition of Permit to Operate –Air Pollution Source Installation of MBC,

PAL paid P=123,200.00 to third party stack tester for conducting Source Emission Test for 10
generator sets above 300kW capacity.
- 16 -
2. Republic Act (RA) 9275, “Clean Water Act”
Cost: Renewal of Discharge Permit of Jet Fuel Storage Facility MNL- P

=13,000.00 and
Discharge Permit of Inflight Center- P
=22,533.00
3. DENR Administrative Order No. 2016-08, “Water Quality Guidelines and General Effluents
Standards”
Cost: P=84,739.20 annually for water quality analysis; approximately P=1,200,000/annum for
electricity consumption for operation of the sewage treatment plant (STP); P
=456,000/annum
for enzyme used to dissolve grease in the catering/kitchen area, control odor and enhanced
STP biological reaction and manpower cost for the maintenance and operation of STP
=910,816.90 – for PAL operations
P
4. Presidential Decree No. 1152, “Philippine Environmental Code”
No cost to PAL for period covering 2017
5. Presidential Decree No. 1586, “Establishing an Environmental Impact Assessment System”

and DENR Administrative Order No. 96-37
Environmental Compliance Certificate issued to Remote Parking Apron Terminal 2B and Jet
Fuel Storage Facility MNL and CEB. Certificate of Non-Coverage (CNC) issued to IFC,
Maintenance Base Complex (MBC) and Data Center Building (DCB) and PAL Learning
Center.
Cost for application of CNC for PAL Learning Center is P

=1,126.00
6. Republic Act No. 6969 “Toxic and Hazardous Waste Management” and DENR
Administrative Order No. 2013-22
Cost for the proper disposal of hazardous waste [busted fluorescent lamps (D406), used
industrial oil (I101), used vegetable oil including sludge (I102), oil contaminated materials
(I104), containers previously containing toxic chemicals (J201), grease waste (H802):
=1,930,532.16.
P
Note: Increase in the cost for disposal of hazardous waste due to inclusion of I102 and H802
to the list of hazardous waste in DAO 2013-22.
7. Presidential Decree No. 1067, “The Water Code of the Philippines”
No cost to PAL for period covering 2017
8. Republic Act 9003 “The Ecological Waste Management Act of 2000”
Cost for the proper disposal of solid waste: P

=506,720.00
9. Department of Health (DOH) Administrative Order 29, s. 2000, “License to Operate an

Industrial X-ray Facility”
Cost: P
=5,330.00 renewal of permit application for 12 X-ray facilities nationwide (PAL Pre-
Departure, Cargo Terminal, Mactan-Cebu, Davao and General Santos Cargo Services, Iloilo X-
ray Facility, Kalibo X-ray Facility, Bacolod X-ray Facility, Zamboanga X-ray Facility) – for
PAL and APC’s operations
- 17 -
Cost of Trainings required for Radiation Protection/ Safety Officer Accreditation
 Food and Drug Administration (FDA)- CDRRHR- P =7,500.00
 Philippine Nuclear Research Institute (PNRI)- P=3,000.00
10. DENR Administrative Order 2014 – 12 Revised Guidelines for Pollution Control Officer
Accreditation
Cost of Trainings required for PCO Accreditation (Renewal)

 Laguna Lake Development Authority (LLDA): P=7,000.00
 DENR-EMB Region 7 (Cebu) : P =11,000.00
The effects of PAL’s compliance with environmental laws are as follows:
1. Compliance to national legislations

2. Resource recovery and recycling
3. Rescued waste generation
4. Reduced cost of disposal of wastes
5. Improved public image and community relations
6. Improved relationship with the regulators (LLDA, DENR, DOH, PNRI)
7. Enhancing PAL’s commitment to continually improve its environmental performance in
all aspects of its operations
8. Appreciation and recognition from the DENR for PAL’s participation to international
and local environment such as Earth Day, Environment Month and International Coastal
Cleanup celebrations
9. Cost cutting through energy and resource conservation
PAL completed the Stage 1 of IATA Environmental Assessment (IEnvA) in July 2017.
(xiii)Total number of employees and number of full time employees
The Company has five (5) compensated officers as of December 31, 2017. The Company does not
have any plan of hiring additional employees within the ensuing 12 months.
PAL Employees:
As of December 31, 2017, PAL has a total workforce of 6,588 as follows:
Classification Number of Employees

Ground Employees
Philippine 2,843
Foreign 286
Flight Crew
Pilots 858
Cabin Crew 2,601
PAL has 766 rank and file ground employees - in the Philippines (638), United States (10),
Singapore (12) and Japan (106); and 2,573 cabin crew who are covered by a collective bargaining
agreement (CBA).
PAL recognizes two local labor unions, Philippine Airlines Employees’ Association (PALEA) for
the rank and file ground employees and Flight Attendants’ and Stewards’ Association of the
Philippines (FASAP) for the cabin crew. In addition, it also recognizes foreign labor unions in
the United States, Singapore and Japan.
- 18 -
On July 5, 2017, a Memorandum of Agreement was entered into by PAL and FASAP which
forms part of the 2015-2018 PAL-FASAP CBA (July 16, 2015 to July 15, 2018). Whereas, the
CBA with PALEA is in effect on October 01, 2017 until September 30, 2018.
Likewise, the CBA for PAL – International Association of Machinists and Aerospace Workers
(IAMAW), which covers employees in the United States, is valid up to June 30, 2019. The current
CBA with the Singapore Manual and Mercantile Workers’ Union, which covers employees in
Singapore is valid up to December 31, 2020. The CBA with Airline’s Labor Union – Japan will
expire on May 31, 2018.
PAL, as always, gave its employees all benefit entitlements in accordance with stipulations in the
respective CBAs.
APC Employees:
As of December 31, 2017, APC has a total workforce of 1,699 as follows:
Classification Number of Employees

Ground Employees
Philippine 959
Flight Crew
Pilots 314
Cabin Crew 426
Major risk/s involved in each of the businesses of the Company and subsidiaries and the
procedures being undertaken to identify, assess and manage such risks.
Investment risk - the Company has available-for-sale investment which has unpredictable market
prices.
Price risk - price fluctuations in cost of fuel which is based primarily in the international price of
crude oil. Substantial increases in fuel costs or the unavailability of sufficient quantities of fuel is
harmful to the business.
Regulatory risk - PAL is subject to extensive regulations which may restrict growth or operations
or increase their costs.
Competition - PAL is exposed to increased competition with major international and regional
airlines.
Security and safety risk - the impact of terrorist attacks on the airline industry severely affects the
overall air travel of passengers.
Financial market risk - fluctuations of interest and currency rates.
Economic slowdown - reduces the demand or need for air travel for both business and leisure.
Procedures undertaken to manage risks
- PAL continues to comply with applicable statutes, rules and regulations pertaining to the
airline industry in order to maintain the required foreign and domestic governmental
authorizations needed for their operations.
- 19 -
- Increase in fuel cost and shortage in fuel can sometimes be offset by increase in passenger
fares or the curtailment of some scheduled services.
- Airlines have been required to adopt numerous additional security measures in an effort to
prevent any future terrorist attacks, and are required to comply with more rigorous security
guidelines.
- PAL sees to it that it has remain competitive in the areas of pricing, scheduling (frequency
and flight times), on-time performance, frequent flyer programs and other services.
- Proper fund management and monitoring is being done to avoid the adverse effects in the
results of operations of the Company, cash flows and financial risks are managed to provide
adequate liquidity to the Company.
Item 2. Properties
The Company does not own any properties and equipment and has no plans of acquiring any property
in the next 12 months. The Company leases space from an entity under common control. In 2017, the
Company was billed at a monthly rate of P
=34,650.00.
PAL’s properties and equipment include its aircraft fleet, various parcels of land, and buildings.
PAL’s fleet as of December 31, 2017 consists of:
Owned:
Bombardier DHC 8-400 3
Airbus 340-300 6
Under Finance Lease:
Boeing 777-300ER 4
Airbus 330-300 5
Airbus 321-231 10
Airbus 320-200 8
Under Operating Lease:
Boeing 777-300-ER 6
Airbus 330-300 10
Airbus 321-231 14
Airbus 320-200 11
Total 86
Aircraft covered by finance lease agreements that transfer substantially all the risks and give rights
equivalent to ownership are treated as if these had been purchased outright, and the corresponding
liabilities to the lessors, net of interest charges, are classified as obligations under finance leases
included under the caption long term obligations in the Consolidated Statements of Financial Position.
The finance leases provide for quarterly or semi-annual installments, generally ranging from 10 to 12
years, at fixed rates and/or floating interest rates based on certain margins over three- or six-month
London Interbank Offered Rate (LIBOR).
Aircraft covered by operating lease agreements contain terms ranging from 6 to 12.3 years. Total
operating lease charges amounted to P
=14.1 billion for twelve months ended December 31, 2017
There are six (6) A321-200 aircraft, twelve (12) A320-200 aircraft, four (4) Bombardier DHC 8-300,
and eight (8) DHC 8-400 aircraft that are leased/subleased to APC with lease terms ranging from 36
- 20 -
to 120 months.
PAL owns land and buildings located at various domestic and foreign stations.
A. Domestic Properties
1. Bacoor, Cavite 126 sq.m. (house and lot) and 212 sq.m. (parcel of land)
2. Maasin, Iloilo City 3,310 sq.m. and 9,504 sq.m . (parcels of land)
3. Somerset Millennium Makati City 39 sq.m. (condominium unit)
4. Malate 266.40 sq.m.(lot)
5. Ozamiz City 10,000 sq.m. (parcel of land)
6. Quezon City 627.1 sq.m. (parcel of land)
7. Bacolod City 200,042 sq.m. (parcel of land)
8. Mandurriao, Iloilo City 1,300 sq.m. and 1,700 sq.m. (parcels of land)
9. Paranaque City 375 sq.m. (parcel of land)
10. Lapu-Lapu City 4,114 sq.m. (parcel of land with building)
B. Foreign Properties
1. Hongkong 977 sq.ft. and 3,701 sq.ft. (condominium units)

2. San Mateo, Daly City, California 1,760 sq.m. and 1,193 sq.m. (condominium units)
3. Singapore 85 sq.m.; 126 sq.m., and 68 sq.m. (office units)
4, Singapore 65 sq.m. (shop unit)
5. Sydney, Australia 177 sq.m. and 229 sq.m. (office units)
In addition, PAL owns cargo buildings located at the following domestic stations:
1. Zamboanga 300 sq.m.

2. Cebu 1,215 sq.m.
3. Puerto Princesa 192 sq.m.
4. Butuan 192 sq.m.
5. Kalibo 192 sq.m.
6. Legazpi 192 sq.m.
PAL’s existing ground facilities service the Airline’s own requirements. These major ground facilities
as of December 31, 2017 are as follows:
The PAL Learning Center (PLC) in Ermita, Manila is a modern training facility. The Center aims
to continue to provide world-class training to every employee regardless of area of specialization,
reinforce the culture of service, and develop every employee into a total PAL professional committed
to the Airline’s corporate values.
The facility serves as the home for the Airline’s Human Capital's Training & Development Sub-
Department, with the Airline’s training units, namely: Commercial Training & Development
Division, Management & People Development Division, and Training Administration & Logistics
Division.
Likewise, the PLC also houses a Ticket Office.
The PLC boasts of new and modern training equipment and facilities such as cabin safety simulator; a
grooming room, a speech laboratory for personality development; and five (5) computer training
rooms. Support facilities include an auditorium/projection room, canteen and a medical clinic. The
PLC building with a total floor area of 6,787.56 sq.m. is leased from the Tan Yan Kee Foundation.
The PAL Inflight Center (IFC) along MIAA Road corner Baltao St., Pasay houses PAL’s inflight
- 21 -
kitchen which is capable of producing more than 4.06 million meals annually to service PAL’s
catering requirements. PAL’s inflight catering requirements are provided by SKYKITCHEN
Philippines Inc., for all domestic flights and outgoing flights ex- Manila.
PAL IFC has a total land area of 22,093.00 sq.m. of which 68% is allocated to Catering Services and
the remaining 32% for Cabin Services, warehouse and other offices. The land and the buildings are
leased from the Manila International Airport Authority (MIAA).
The modern NAIA Centennial Terminal 2 in Pasay is where the Airline’s international flight with
domestic connectivity as well as domestic flight with international connectivity is housed in one
terminal. This gives PAL a genuine hub for its operations where passengers from domestic flights can
connect seamlessly unto international flights and vice versa. The terminal boasts of complete
facilities for PAL’s passenger’ comfort and convenience; two Mabuhay Lounges – one each for
domestic and international passengers, a big ticket office and spacious check-in and pre-departure
areas. In April 2014 the domestic operations expanded to NAIA Terminal 3 due to the volume of
domestic flights. Due to the continuous growth in passenger traffic, NAIA Terminal 1 is being used
for flights departing from San Francisco and Los Angeles and flights departing and arriving from
Middle East.
It is also the home of the Airport Operation Department and other support offices, i.e., Fleet Control
Center, Fuels, Ticket Office, Treasury and Medical office.
The areas are leased from MIAA.
The PAL Cargo Terminal (PCT) near NAIA 1 in Pasay which houses PAL’s domestic and
international cargo operations and sales offices at the NAIA measures 5,727.55 sq.m. (warehouse) and
1,050.88 sq.m. (office space). The land on which it stands is leased from the MIAA.
PAL’s Data Center Building (DCB) along Airport Road, Pasay is the center of applicatons
development and support. It is where 180 technical staff are located managing the equipment,
business analysis and developer for providing application support. It also houses the oversight group
for the passenger services system. The DCB, comprising 3,588.35 sq.m. open area and 3,806.69
sq.m. covered area is likewise leased from the MIAA.
Other major ground facilities include a Maintenance Base Complex (MBC) in Nichols, Pasay City.
It is composed of the North and South sectors which refer to the areas north and south of Andrews
Avenue, respectively. It covers an area of 104,531.87 sq.m. (open) and 1,768.01 sq.m. (covered)
leased from MIAA. It also covers a Local Area Network (LAN) and Wide Area Network (WAN) that
links together all of PAL’s domestic on-line and office stations as well as the other major offices in
Metro Manila.
MBC houses the Operations Group. MBC-NORTH SIDE: PAL GATE 1 – PAL Operations
Accounting, PALEX Accounting, Corporate Logistics & Services, Corporate Logistics & Services
(General Materials & Inflight Purchasing Sub-Department,/Aircraft Operations Support Sub-
Department/Warehouse Management Sub-Department/Ground Handling & Inflight Contracts
Management); Medical (Medical/Flight Surgeon/Dental); PAL Dependents Medical Plan; Sports
Center (Employees Welfare & Communications/Basketball Courts/Tennis Court); PAL GATE 3
Area - Old EOD Building – Construction & Facilities Management Sub-Dept. (Construction
Engineering Division and Facilities Management Division); General Materials Warehousing Division;
Material Sales Management Division; Aviation School (Flying School); Inflight Services Training
Division (Cabin Services/Door Training Room); Redbird Flight Simulator; K9 Facility; Records
Warehouses (Financial Services Warehouse/Treasury Records Warehouse/AED-TPR Warehouse);
PAL GATE 4 Area – ISD/Technology Infrastructure Management (Network Management/Desktop
Management); PATC/Ground/Flight Training; Integrated Operations Control Center (Cabin Crew
- 22 -
Scheduling/Flight Dispatch/PALEX IOCC); MBC SOUTH SIDE: PAL GATE 1 – Flight
Operations Building (SVP-Airline Operations/VP-Flight Operations/Planning, Research Evaluation &
Flight and Fuel Analysis//Flight Technical Division/Flight Operations Sub-Department-
B747/A340/A320/ Office of the Chairman); Security Department (Pass Control/Briefing Room); Pilot
Lounge-Flight Operations Dept.; Flight Simulator Building-PAL Aviation Training Center (OAVP-
PAL Aviation Training Center/Flight Training Division/Ground Training Division/Flight Simulator –
B320/B321); Aircraft Engineering Department (Technical Representatives/Technical Publication
Records); Aircraft Assets Management; Quality Department; Safety Department; Employee Benefits
Services-HCD; Funds Management & Cash Operations (Cashier)/PALEX Central Flight Dispatch;
Fuel Management Department; PAL GATE 2 – Security Department (OVP); MBC Canteen; PAL
Foundation; Ground Equipment Unit Load Device Maintenance Sub-Department.
PAL entered into a lease agreement with PAGCOR in August 2014 for 10 hectares of land situated at
Aviation Support Industrial Area 2 formerly Nayong Pilipino Pasay city for PAL’s aircraft parking
facility. This is in addition to the 8.1 hectares of land leased by PAL from MIAA in the same area
and for the same purpose.
PAL’s head office is located at the PNB Financial Center along President Macapagal Avenue, Pasay
City. It houses the Executive Offices, Commercial Group, Finance Group, Legal, Corporate
Secretary’s Office, Human Capital Department, Corporate Audit, Corporate Communications,
Government Relations, Domestic and International Ticket Offices, Reservation – Fulfillment Center,
Office of the Country Manager, Metro Manila/Luzon Sales and Services, Passenger Sales Philippines,
Ancilliary Business Office, Corporate Planning and Business Development Office, PAL Foundation
Inc., PAL Holding Inc., Office of the President and Office of the Chairman, APC Sales Department,
APC Treasury, Facilities Management Division, Satellite Office and Security Office of PAL. The
total area being leased from the Philippine National Bank is 17,349.31 sq.m.
Item 3. Legal Proceedings
PAL
PAL is a defendant in a case entitled In re Transpacific Air Transportation Antitrust Litigation, a
putative class action also for possible violation of U.S. Anti-trust laws brought before the U.S. District
Court for the Northern District of California against air carriers operating passenger air services to and
from the U.S. From the time PAL was impleaded as defendant in this case in 2009, the Court has
granted motions filed and defended by the defendant airlines which effectively narrowed the claims of
the plaintiffs. On January 3, 2017, PAL and the plaintiffs signed a Settlement Agreement to resolve
all claims in the action. The settlement must be approved by the Court before it becomes final.
PAL is a petitioner in various cases pending before the Court of Tax Appeals (CTA) for the refund of
excise taxes paid by PAL under protest in connection with its importation of commissary items used
for operation in the amount of P
=169.8 million. On August 27, 2014, the Supreme Court (SC) affirmed
a grant of tax refund in the amount of P =4.6 million. This judgment became final and executory on
January 14, 2015 and is now pending execution. Similarly, on July 6, 2015, the SC affirmed a grant of
tax refund in the amount of P=4.5 million. The Collector of Customs filed a motion for reconsideration
of this Decision which was denied with finality in the SC’s Resolution dated February 17, 2016.
Partial grants have also been affirmed by the SC in the amounts of P
=1.5 million and P=0.2 million. All
other cases are ongoing with the CTA and the Court of Appeals (CA).
Aside from the importation of commissary items, PAL is also seeking refund of excise taxes paid
under protest on its importation of aviation fuel. PAL filed various cases with the CTA in the
aggregate amount of P
=3.3 billion and hearings are now ongoing with the CTA.
In line with its claims for refund of the foregoing taxes on fuel importation for its domestic
operations, PAL has likewise filed for the Declaration of Nullity of a 2002 Department of Energy
- 23 -
(DOE) Certification, a one-liner summation stating “there is locally available jet fuel in reasonable
quantity, quality and price”, thereby effectively overriding PAL’s exemption under its charter which
states that tax exemption is enjoyed by PAL if there is no locally available aviation fuel in “reasonable
quantity, quality or price.” On July 12, 2010, PAL obtained a Preliminary Injunction issued by the
Regional Trial Court (RTC) against the Department of Finance (DOF) and DOE, enjoining the latter
from implementing the 2002 DOE Certification. On February 27, 2014, PAL obtained a decision from
the RTC declaring the aforementioned 2002 DOE certification as null and void and further declaring
permanent the preliminary injunction previously issued. In a Decision dated January 27, 2017, the CA
denied the appeal of DOF and DOE and affirmed the decision of the RTC. As of date, DOF and DOE
has not availed of any remedy available under the Rules.
Except for the foregoing, PAL or any of its subsidiaries or affiliates is not involved in, nor any of its
properties the subject, of any legal proceeding and has no knowledge of any contemplated proceeding
by any government authority involving an amount exceeding P =3.9 billion (10% of its total current
assets) for the year ended December 31, 2017.
APC
APC has on-going claims for refund filed with the CTA pertaining to excise taxes paid on the
importation of Jet A-1 aviation fuel used for its domestic operations in the amount of P
=709.0 million.
On June 15, 2016, CTA has ordered the Bureau of Internal Revenue (BIR) and Bureau of Customs
(BOC) to return to APC the erroneously collected P
=94.6 million excise tax on importation of jet fuel
The BIR and the BOC appealed on this Decision with the CTA en banc. As of to date, the appeal is
still pending with the CTA en banc.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the calendar
year ended December 31, 2017.
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
A. Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters
1. Market Information
The market for the registrant’s common equity is the Philippine Stock Exchange. The high
and low sales prices for each quarter for the past three years are as follows:
HIGH LOW
Php Php
2018
First Quarter 12.52 9.80
2017
Fourth Quarter 5.65 4.70
Third Quarter 5.39 5.00
Second Quarter 5.60 5.00
- 24 -
HIGH LOW
2016
2015
As of April 5, 2018, the latest practicable trading date, the Company’s shares were traded at
P9.75 per share.
2. Holders
The number of shareholders of record as of December 31, 2017 is 6,507 and common shares
outstanding as of the same date were 11,610,231,157. The Company has no preferred shares.
The top 20 stockholders as of December 31, 2017 are as follows:
Stockholders’ Name No. of Shares Held % to Total

1 Trustmark Holdings Corporation 10,033,776,103 86.4217%
2 Top Direct Investments Ltd. 1 460,507,500 3.9664%
3 Cosmic Holdings Corporation 378,206,591 3.2575%
4 Fast Accurate Investments Ltd. 206,842,500 1.7815%
5 City Trade Investments Ltd. 176,400,000 1.5193%
6 Corporate Supreme Ltd. 171,000,000 1.4728%
7 One Corporate Grand Tours Inc. 2 36,000,000 0.3101%
8 Principal Grand Tours International Inc. 2 36,000,000 0.3101%
9 PCD Nominee Corporation (Filipino) 24,217,105 0.2086%
10 Pan-Asia Securities Corp. 16,058,709 0.1383%
11 Wonderoad Corporation 4,613,255 0.0397%
12 PCD Nominee Corporation (Non-Filipino) 297,753 0.0026%
13 Commercial Investment Co. Ltd. 229,708 0.0020%
14 Luisita P. Bothelho 181,124 0.0016%
15 Allen Cham 154,787 0.0013%
16 Tuan Kai Ang 128,777 0.0011%
17 Nan Klingler 125,075 0.0011%
18 Investors Securities, Inc. 120,167 0.0010%
19 Ansaldo, Godinez & Co., Inc. 113,219 0.0010%
20 E. Santamaria & Co., Inc. 109,426 0.0009%
1 Subscription rights were assigned to Videlo Holdings, Inc. (VHI) on October 23, 2014. The application for
clearance to register the subscription rights under the name of VHI is still pending approval with the BIR.
2 Subscription rights were assigned to Emelar Holdco, Inc. (EHI) on October 23, 2014. The application for
clearance to register the subscription rights under the name of EHI is still pending approval with the BIR.
3. Dividends
a. The Company did not declare any cash dividends during the past 3 years. The Board of
Directors may declare dividends only from the surplus profits arising from the business of
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the Company and in accordance with the preferences constituted in favor of preferred
stock when and if such preferred stock be issued and outstanding.
b. There are no other restrictions that limit the ability to pay dividends on common equity or
that are likely to do so in the future.
4. Recent Sales of Unregistered or Exempt Securities, Including Recent Issuance of Securities

Constituting an Exempt Transaction (for the past 3 years).
There was no recorded sale of unregistered securities during the past 3 years.
Item 6. Management’s Discussion and Analysis (MDA)
Restatement to Philippine Peso
In line with the adoption of PAS 21, The Effects of Changes in Foreign Currency Rates, PAL
determined that its functional currency is the US Dollar. On May 20, 2005, the Philippine SEC
approved PAL’s use its functional currency, the US Dollar, as its presentation currency. Accordingly,
effective April 1, 2005, PAL proceeded in measuring its results of operations and financial position in
US Dollar.
Since the functional and presentation currency of the Company is in Philippine Peso, for purposes of
combination of the financial statements in accordance with PFRS 10, Consolidated Financial
Statements, there is a need for PAL and its subsidiaries to restate its financial statements to the
Philippine Peso.
Consolidation
The consolidated financial statements referred to consist of the financial statements of the Company
and its subsidiaries. The financial statements of the subsidiaries are prepared using consistent
accounting policies as those of the Company. Companies included in the consolidation are PAL and
PR and ZUMA. The Company owns 98.91% of PAL, through a direct ownership in 98.56% of PAL’s
shares and an indirect ownership in 0.35% of PAL’s shares through an 82.33% direct ownership in
PR. In turn, PR owns 0.42% of PAL. The Company acquired 51% ownership interest in ZUMA in
2017, and thereby obtaining control over ZUMA, the holding company of APC. Subsidiaries are
consolidated from the date on which control is transferred to the Company and cease to be
consolidated from the date on which control is transferred out of the Company. All intercompany
accounts and transactions with subsidiaries are eliminated in full.
Results of Operations
2017 vs 2016
The Company’s financial performance for the year ended December 31, 2017, showed a consolidated
total comprehensive loss of P =4.6 billion as compared with the consolidated total comprehensive
income of P
=5.9 billion in 2016.
Consolidated revenues for the current year amounted to P =129.5 billion, up by P

=15.0 billion or 13.2%
higher than last year’s figure of P
=114.5 billion. The increase in revenues was attributable mainly to
higher passenger revenues brought about by the growth in volume of passengers carried and number
of flights mounted. During the year, new international points and city pairs were introduced. Flights
between Clark and Seoul, Cebu and Chengdu, Kalibo and Chengdu, Kalibo and Guangzhou and Cebu
and Bangkok and daily service to Kuala Lumpur commenced. On the domestic network, route sectors
originating Clark Airport in Pampanga, Cebu, and Davao were also introduced during the year. PAL
- 26 -
carried 14.5 million passengers vis a vis 13.4 million in 2016.
Consolidated expenses amounted to P =136.0 billion for the year ended December 31, 2017, up by
26.7% or P=28.6 billion from P
=107.3 billion in 2016. The main drivers for the growth are attributable
to flying operations expenses, maintenance, passenger service, aircraft and traffic servicing, and
reservation and sales.
Flying operations expenses increased by 31.7% from P =51.1 billion in 2016 to P=67.3 billion in 2017.
Jet fuel costs represent the biggest expense of PAL. PAL spent P =37.7 billion for jet fuel in 2017
compared with P =26.1 billion in 2016. This represents 10.1 million barrels burned during the current
year versus 9.1 barrels in the previous year. Jet fuel prices increased from an average of US$ 67.57
per barrel in 2016 to US$ 75.59 per barrel in the current year. Aircraft lease rentals increased to P
=14.1
billion during the current year compared to P=11.6 billion in 2016 due to phase in of additional B777
and A321 aircraft.
Maintenance expenses grew by 23.5% or P =3.7 billion over the last year’s figure of P=15.7 billion. This
was due to higher aircraft, engine and component repair and maintenance costs incurred during the
current period as a result of the additional aircraft deliveries and increase in utilization.
Passenger service expenses amounted to P =12.6 billion for 2017, higher by P

=2.3 billion or 22.1% from
the year ago level of P
=10.3 billion. This was mainly due to the growth in passenger traffic and flights
operated in the current year by 8.3% and 3.2%, respectively.
The increase in number of flights operated in 2017 resulted to higher aircraft and traffic servicing
expenses particularly ground handling charges and landing and take-off charges by P =2.7 billion or
18.0% over the year ago level of P
=15.1 billion.
Reservation and sales were up by 18.7% or P =1.5 billion higher than the previous year. This was due to
higher booking fees incurred as a result of the increase in number of passengers carried.
For the year ended December 31, 2017, the Company incurred other charges-net of P =338.0 million
versus the P=474.9 million other income recognized in 2016. The reduction in income was primarily
due to the impairment of some aircraft and engines in 2017.
The reassessment done on the deferred tax assets and liabilities on all deductible temporary
differences in accordance with PAS 12, Income Taxes, as well as the current income tax payable
based on PAL’s operations, resulted in the recognition of a net income tax expense of P
=2.9 million.
For the year ended December 31, 2017, the Company recognized other comprehensive income of
=1.9 billion as against P
P =936.1 million in 2016. The increase was mainly brought about by the net
changes in fair value of AFS investments as the market value of the Company’s quoted investments
significantly increased during the year.
2016 vs 2015
The Company’s financial performance for the year ended December 31, 2016, showed a consolidated
total comprehensive income of P
=5.9 billion, a 29.0% decline from the P
Consolidated revenues for the calendar year ended December 31, 2016 amounted to P =114.5 billion, up
by P=7.2 billion or 6.7% higher than P=107.2 billion in 2015. The upward movement in revenues was
attributable mainly to the P
=5.9 billion increase in passenger revenues. This was brought about by the
12% growth in number of passengers carried as a result of the 8.5% increase in number of flights
operated. In 2016, PAL introduced new destinations namely Kuwait, Jeddah, Doha and Saipan and
new services between Cebu and Los Angeles, Cebu and Singapore, Osaka via Taipei, Cebu and
- 27 -
Caticlan and Clark and Caticlan. PAL carried 13.4 million passengers vis a vis 11.9 million in 2015.
Consolidated expenses were up by 6.8% or P =6.9 billion for the year ended December 31, 2016 versus
previous year’s same period total of P =100.5 billion. The increase in expenses was attributable to
higher maintenance, aircraft and traffic servicing, passenger service, and reservation and sales offset
in part by the decrease in flying operations expenses.
Maintenance expenses grew by 33.1% to P =15.7 billion in 2016 due to higher aircraft, engine and
component repair and maintenance costs incurred during the current period.
The increase in number of flights operated in 2016 resulted to higher aircraft and traffic servicing
expenses particularly ground handling charges and landing and take-off fees by P
=2.7 billion or 21.7%
over the year ago level of P
=12.4 billion.
Growth in passenger traffic and flights operated in the current year had the effect of increasing
=10.3 billion, 18.4% higher than previous year’s total of
expenses related to passenger service to P
=8.7 billion.
P
Higher advertising and booking fees increased the reservation and sales expenses to P
=8.1 billion or
18.5% higher than the previous year.
The decrease in flying operations expenses was attributable mainly to lower fuel expenses. Jet fuel,
which remains to be the Airline’s biggest expense, registered a 14.7% decrease over last year’s figure
of P
=30.6 billion. The decrease was a result of the rollback in jet fuel prices per barrel from an average
of US$ 83.64 in 2015 to US$ 67.57 in 2016.
For the year ended December 31, 2016, the Company recognized other income-net of P =474.9 million
as against the P =1.7 billion recognized in 2015. The reduction in income was primarily due to the
effect of gain from sale of PAL’s investment in Abacus International Holdings Limited in 2015,
partially offset by the effect of provision for contingencies and loss from disposal of aircraft parts.
The reassessment done on the deferred tax assets and liabilities on all deductible temporary
differences in accordance with PAS 12, Income Taxes, as well as the current income tax payable
based on PAL’s operations, resulted in the recognition of a net income tax expense of P
=2.2 billion in
2016.
For the year ended December 31, 2016, the Company recognized other comprehensive income of
=936.1 million compared with the P
P =1.2 billion in the previous year. The decline was mainly due to
the revaluation increment recognized in 2015.
Financial Condition
As of December 31, 2017, the Company’s consolidated Total Assets amounted to P =180.0 billion or
=15.4 billion higher than December 31, 2016 balance of P
P =164.6 billion. This was on account of the
increase in Current Assets by 5.4% and increase in Noncurrent Assets by 10.4%.
Total Current Assets as of December 31, 2017 amounted to P =35.9 billion, up by P=1.8 billion from
=34.0 billion as of December 31, 2016. This was due to the increase in Receivables, Expendable
P
Parts, Fuel, Materials and Supplies account, and Assets Held for Sale offset in part by lower Other
Current Assets.
Assets Held for Sale comprised of certain aircraft and engines amounted to P
=785.0 million as of
December 31, 2017.
Other Current Assets decreased by 8.2% mainly due to the returned security deposits related to fuel
- 28 -
hedging transactions.
Total Noncurrent Assets increased by P

=13.5 billion mainly due to the increase in Property and
Equipment, Other Noncurrent Assets and Investment Properties offset in part by the decrease in
Deferred Income Tax Assets-net.
Property and Equipment increased to P =122.6 billion as of December 31, 2017, P =9.9 billion or 8.8%
higher than the previous year’s balance of P
=112.7 billion, mainly due to the delivery of five Q400NG
aircraft and pre-delivery payments made related to future acquisition of A350 and A321 aircraft.
Investment Properties increased to P

=3.6 billion as of December 31, 2017 due to purchase of a property
in Southern Philippines.
Other Noncurrent Assets as of December 31, 2017 amounted to P =17.2 billion, up by P

=3.3 billion from
the previous year’s balance of P=13.9 billion, brought about by the increase in security deposits for
various leased aircraft and manufacturer’s credit received during the current year.
Total Liabilities increased to P=166.0 billion versus the December 31, 2016 balance of P =142.9 billion
as a result of the increase in Current Liabilities by 30.8% or P
=19.8 billion and increase in Noncurrent
Liabilities by 4.1% or P=3.2 billion.
The 30.8% increase in Current Liabilities was attributable to the increase in Current Portion of Long-
term Obligations due to loans related to aircraft financing by P =10.5 billion and increase in Notes
Payable pertaining to PAL’s unsecured short term loans from local banks by P =10.1 billion. Accounts
Payable which consists mainly of obligations to various suppliers increased by P =2.8 billion offset by
the decrease in Accrued Expenses and Other Current Liabilities by P =5.1 billion brought about by the
settlement of disputed CAAP and MIAA charges. Unearned Transportation Revenue increased by
10.2% as a result of the growth in passenger sales.
The increase in Noncurrent Liabilities of P

=3.2 billion from P
=78.6 billion as of December 31, 2016 to
=81.8 billion as of December 31, 3017 was mainly due to loans related to aircraft financing.
P
The Company’s consolidated Total Equity was down by 35.5% from P =21.7 billion as of December 31,
2016 to P
=14.0 billion as of December 31, 2017. The decline was brought about mainly by the resulted
total comprehensive loss for the current period.
- 29 -
TOP FIVE KEY PERFORMANCE INDICATORS OF PAL
Mission Statement Key Performance Indicator Measurement Methodology
To maintain aircraft with the Aircraft Maintenance Check Number of checks performed
highest degree of airworthiness, Completion less number of maintenance
reliability and presentability in delays over number of checks
the most cost and effective performed
manner
To conduct and maintain safe, Number of aircraft related By occurrence and
reliable, cost and effective flight accidents/incidents monitoring by Flight
operations Operations Safety Office
To achieve On-Time Performance Percentage Deviation from Number of flights operated
on all flights operated Industry Standards (OTP less number of flights delayed
Participation) over total flights operated
To provide safe, on time, quality Number of safety violations Number of incidents of safety
and cost effective inflight service incurred by cabin crew violation incurred by cabin
for total passenger satisfaction crew per month
To maximize revenue generation Net Revenues generated from Percentage Deviation from
in passenger and cargo sales passengers and cargoes carried Budget/Forecasted Revenues
through increased yields by
diversifying market segments and
efficient management of seat
inventory and cargo space
- 30 -
In addition to the Qualitative Key Performance Indicators of PAL, the following comprise its
Quantitative Financial Ratios:
December 31, December 31,

2017 2016
Profitability Factors:
1. Return on Total Assets
Net Income/Average Total Assets (3.99%) 2.80%
2. Percentage of Operating Income
Operating Income/Total Revenues (2.37%) 7.70%

Asset Management:
3. Receivable Turnover
Net Sales/Average Trade Receivables 20.50 18.31

4. Number of Days Sales in Receivables
( General Traffic)
Number of Days/Receivable Turnover 17.80 19.99

Financial Leverage:
5. Interest Coverage Ratio
Earnings Before Interest & Taxes/Interest Charges (0.90) 2.99
Other than those that have already been disclosed, there are no known trends, demands, commitments,
events or uncertainties that may have a material impact on the Group’s liquidity.
i. Other legal proceedings
 On July 22, 2008, the SC rendered an adverse decision in the case entitled “Flight Attendants
and Stewards Association of the Philippines (FASAP) vs. the Philippine Airlines” ordering PAL
to reinstate the retrenched FASAP members and pay back wages inclusive of allowances and
other monetary benefits plus 10% attorney’s fees. PAL filed a Motion for Reconsideration. On
October 2, 2009, the Motion for Reconsideration was denied with finality and affirmed the July
22, 2008 decision with modification in that the award of attorney’s fees and expenses of
litigation is reduced to P
=2.0 million. On November 3, 2009, PAL filed a Second Motion for
Reconsideration. On September 7, 2011, the SC issued a resolution denying with finality PAL’s
Second Motion for Reconsideration.
In a subsequent turnaround, the SC, on October 4, 2011, issued another resolution recalling the
September 7, 2011 resolution which denied the Second Motion for Reconsideration. Apparently,
there has been violation of its internal rules when the wrong division ended up deciding on the
case. The SC en banc thus accepted and took cognizance of PAL’s Second Motion for
Reconsideration and the case was re-raffled to a new Member-in Charge.
FASAP filed a Motion for Reconsideration of the October 4, 2011 resolution of the SC en banc.
In a resolution dated March 13, 2012, the SC denied FASAP’s Motion for Reconsideration and
affirmed the recall of the September 7, 2011 resolution. FASAP filed Motion for Leave to Admit
the Motion for Reconsideration dated April 4, 2012, which was granted by the SC in a resolution
- 31 -
dated April 24, 2012.
On March 13, 2018, the SC en banc finally promulgated a decision on PAL’s Second Motion for
Reconsideration and FASAP’s Motion for Reconsideration. Affirming the decision of the Court
of Appeals dated August 23, 2006, the SC en banc confirmed the validity of the retrenchment in
1998 due to very serious business losses. The SC emphasized that retrenchment or downsizing is
a mode of terminating employment resorted to by management during periods of business
recession, industrial depression or seasonal fluctuations or during lulls over shortage of
materials. It is a reduction in manpower, a measure utilized by an employer to minimize business
losses incurred in the operation of its business. The SC noted that PAL was then in dire financial
distress. In fact, the SC recognized that PAL underwent corporate rehabilitation sufficiently
indicates its fragile financial condition. After having been placed under corporate rehabilitation
and its rehabilitation plan having been approved by the Philippine SEC on June 23, 2008, PAL's
dire financial predicament could not be doubted.
The SC went on to say that even FASAP admitted the financial situation of PAL then
questioning only the manner and lack of standard in carrying out the retrenchment. The SC,
however, explained that PAL observed good faith in implementing the retrenchment. As the SC
puts it, as between maintaining the number of its flight crew and the PAL’s survival, it was
reasonable for PAL to choose the latter alternative. The SC said that it cannot legitimately force
PAL as a distressed employer to maintain its manpower despite its dire financial
condition. Moreover, the SC pointed out that being under a rehabilitation program, PAL had no
choice but to implement the measures contained in the program, which included that of reducing
its manpower.
Corollary, the SC affirmed that PAL resorted to both efficiency rating and inverse seniority in
selecting the employees to be subject of termination. It was ruled that there is no indication that
provisions of the Collective Bargaining Agreement have been grossly disregarded as to taint the
retrenchment with illegality. PAL relied on specific categories of criteria, such as merit awards,
physical appearance, attendance and check rides, to guide its selection of employees to be
removed. The SC did not find anything legally objectionable in the adoption of these
norms. Finally, the SC affirmed the validity of the quitclaims signed by the employees.
Thus, the dispositive portion of the March 13, 2018 ruling of the SC reads as follows:
“WHEREOF, the Court:
(a) GRANTS the Motion for Reconsideration of the Resolution of October 2, 2009 and
Second Motion for Reconsideration of the Decision of July 22, 2008 filed by the
respondents Philippine Airlines, Inc. and Patria Chiong;
(b) DENIES the Motion for Reconsideration (Re: The Honorable Court's Resolution
dated March 13, 2012) filed by the petitioner Flight Attendants and Stewards
Association of the Philippines;
(c) SETS ASIDE the decision dated July 22, 2008 and resolution dated October 2, 2009;
and
(d) AFFIRMS the decision of the Court of Appeals dated August 23, 2006.”
 On September 9, 2010 FASAP filed a Notice of Strike for alleged Unfair Labor Practice on the
grounds of PAL’s refusal to submit counter proposal and/or conclude the remaining term of
2005-2010 CBA, address age and gender discrimination, salary increase and rice subsidy.
Attempts by the National Conciliation and Mediation Board (NCMB) to amicably settle the labor
dispute failed. Thus, on October 6, 2010 the DOLE Secretary assumed jurisdiction over the labor
dispute and directed the parties to submit their respective position papers and other pleadings.
- 32 -
On December 23, 2010, the Department of Labor & Employment (DOLE) issued a Decision in
favor of FASAP granting salary increase and monthly rice allowance for the period July 16,
2007 to July 15, 2010 and higher compulsory retirement from 45 to 60 years old. On April 1,
2011 DOLE Secretary issued a Decision on the PAL’s Motion for Partial Reconsideration and
Motion for Clarification. The DOLE Secretary affirmed with modification the December 23,
2010 DOLE Decision in that the award of monthly rice allowance for the first year of the CBA
effective July 16, 2007 was reduced from P =1,800 to P
=1,500. PAL was also directed to reinstate 9
flight pursers who were retired at age 55 during the pendency of the case and to pay them full
back wages and benefits. The 9 flight pursers who were retired at age 55 were reinstated and
those active cabin attendants due for retirement at age 55 were allowed to continue until age 60
without prejudice to further or other legal action on the issue. On May 17, 2011, PAL elevated
the case to the CA via a Petition for Certiorari with prayer for issuance of a Temporary
Restraining Order and Preliminary Mandatory Injunction. On June 18, 2013, the CA rendered a
Decision which partly granted the Petition insofar as the salary increase and the compulsory age
retirement are concerned. FASAP filed a Motion for Reconsideration against which PAL filed its
Comment. FASAP filed its Reply. On May 29, 2014, the CA denied FASAP’s Motion for
Reconsideration. FASAP filed a Petition for Review with the SC. The group of purser Pauline
Gopez filed a Petition for Intervention. PAL filed its Comment to the Petition. The Commission
on Human Rights filed a Motion for Leave of Court to file Petition for Intervention dated
January 26, 2015.
On March 20, 2018, PAL received a copy of the SC’s resolution dated January 2, 2018 where the
High Court resolved to:
NOTE and DEEM AS SERVED by substituted service the returned and unserved copy of the
Resolution dated 25 April 2017 sent to Ms. Veronica G. Han; and
REQUIRE the parties to MOVE IN THE PREMISES within 30 days from notice otherwise,
the case shall be deemed CLOSED and TERMINATED."
Currently, there are other ongoing legal proceedings involving PAL (refer to Legal Proceedings
on page 23). Other than this, there are no known events that will trigger direct or contingent
financial obligation that is material to the Group, including any default or acceleration of an
obligation.
ii. There are no known material off-balance sheet transactions, arrangements, obligations (including
contingent obligations), and other relationships of the Company with unconsolidated entities or
other persons created during the reporting period.
iii. Commitments for capital expenditures
In June 2017, PAL exercised its purchase rights for seven additional DHC 8-400 (Q400
NextGen) turbo propeller aircraft bringing PAL’s total firm order to twelve DHC 8-400 aircraft.
Five of which were delivered in 2017, another five are scheduled to be delivered in May, June,
September, October and November 2018 and the two aircraft are to be delivered in 2019.
iv. There are no known trends, events or uncertainties that have had or that are reasonably expected
to have material favorable or unfavorable impact on net sales or revenues or income from
continuing operations.
v. There are no significant elements of income that did not arise from continuing operations.
vi. The causes for any material change from period to period which shall include vertical and
horizontal analyses of any material item:
- 33 -
Results of our Horizontal (H) and Vertical (V) analyses showed the following material changes:
1. Expendable parts, fuel, materials and supplies- H- 18%

2. Other current assets- H- (8%)
3. Assets held for sale- H- 100%
4. Property and equipment- H- 9%
5. Investment properties- H- 16%
6. Deferred income tax assets- H- (20%)
7. Other noncurrent assets- H- 24%
8. Notes payable- H- 131%, V- 5%
9. Accounts payable- H-32%
10. Accrued expenses and other current liabilities- H- (26%)
11. Unearned transportation revenue- H- 10%
12. Current portion of long-term obligations- H- 81%, V- 5%
13. Long-term obligations-net of current portion- H- 3%
14. Accrued employee benefits- H- 14%
15. Reserves and other noncurrent liabilities- H- 5%
16. Capital stock- H- (57%), V- (9%)
17. Additional paid-in capital- H- 247%, V- 10%
18. Other equity reserves- H- (95%)
19. Other components of equity- H- 67%
20. Deficit- H- 31%
21. Treasury stock – H- (55%)
22. Non-controlling interests - H- (27%)
23. Passenger revenue- H- 14%
24. Cargo revenue- H- 21%
25. Other revenue- H- (49%)
26. Flying operations- V- 7%, H- 32%
27. Maintenance- H- 24%
28. Aircraft and traffic servicing- H- 18%
29. Passenger service - H- 22%
30. Reservation and sales - H- 19%
31. General and administrative - H- 21%
32. Financing charges- H- 17%
33. Other income-net – H- (171%)
34. Income tax expense - H- (100%)
35. Net income - H- (231%)
36. Total other comprehensive income- H- 98%
37. Total comprehensive income - H- (179%)
All of these material changes were explained in the management’s discussion and analysis of
financial condition and results of operations stated above.
vii. PAL experiences a peak in holiday travel during the months of January, April, May, June and
December.
- 34 -
Information on Independent Accountant and other Related Matters
(1) External Audit Fees and Services
a. Audit and Audit-Related Fees
The audit of the Company’s annual financial statements or services is normally provided by
the external auditor in connection with statutory and regulatory filings or engagements for
2017.
The Company will pay its external auditors P =450,000 audit fee plus out-of pocket expenses for
the audit of financial statements as of and for the year ended December 31, 2017.
The Company paid its external auditors P =450,000 audit fee and P =52,600 out-of pocket
expenses for the audit of financial statements as of and for the year ended December 31, 2016.
b. Tax Fees
The Company made no payments to its external auditors in tax fees.
c. All Other Fees
The Company made no further payment of any other fee to its external auditors.
d. The Audit Committee’s approval policies and procedures for the above services:
Upon recommendation and approval of the Audit Committee, the appointment of the external
auditor is being confirmed in the Annual Stockholders’ meeting. On the other hand, financial
statements should be approved by the Board of Directors before its release.
Item 7. Financial Statements
See accompanying Index to Financial Statements and Supplementary Schedules.
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure
There are no changes in, and disagreements with the Company’s accountants on any accounting and
financial disclosure during the past two years ended December 31, 2017 or during any subsequent
interim period.
- 35 -
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Company Registrant
1. Directors, Executive Officers, Promoters and Control Persons
The Company has eleven (11) directors.
Hereunder are the Company’s incumbent directors and executive officers, their names, ages,
citizenship, positions held, term of office as director/officer, period served as director/officer,
business experience for the past five years, and other directorships held in other companies:
Name/ Current Affiliations and Business Term of Office

Age Citizenship
Position Experience in the last 5 years /Period Served
Lucio C. Tan/ 83 Filipino Chairman of Philippine Airlines, 1 Year/
Chairman Inc., Asia Brewery Inc., Eton Oct. 30, 2000 to
Properties Philippines, Inc., present
MacroAsia Corp., Fortune Tobacco
Corp., PMFTC Inc., Grandspan
Development Corp., Himmel
Industries Inc., Lucky Travel Corp.,
LT Group, Inc., Air Philippines
Corporation, Tanduay Distillers,
Inc., The Charter House, Inc., Allied
Bankers Insurance Corp., Absolut
Distillers, Inc., Progressive Farms,
Inc., Foremost Farms, Inc. and Basic
Holdings Corp.; Director of
Philippine National Bank
Jaime J. Bautista/ 61 Filipino Chairman and President of Basic 1 Year/
Director, Capital Investments Corp. and Oct. 23, 2014 to
President and President of Cube Factor Holdings, present
Chief Operating Inc. He is also the Vice Chairman of
Officer the Board of Trustees of the
University of the East. He serves as a
Director/Treasurer of MacroAsia
Corp.; Director of MacroAsia-
Eurest Catering Services, Inc. and
MacroAsia Menzies Airport Services
Corp. He was the President and CEO
of Air Philippines and President of
PNB Forex Inc.
Carmen K. Tan/ 76 Filipino Director of Asia Brewery, Inc., The 1 Year/
Director Charter House, Inc., Foremost Oct. 23, 2014 to
Farms, Inc., Philippine Airlines, Inc., present
LT Group, Inc., Air Philippines
Corporation, Fortune Tobacco Corp.,
Himmel Industries, Inc., Lucky
Travel Corp., Progressive Farms,
Inc., MacroAsia Corp., Philippine
National Bank and PMFTC Inc.
Lucio K. Tan Jr./ 51 Filipino Director/President of Tanduay 1 Year/
Director Distillers, Inc. and Eton Properties July 26, 2006 to
- 36 -
Age Citizenship
Philippines, Inc.; Director/EVP of present
Fortune Tobacco Corp.; Director of
AlliedBankers Insurance Corp.,
Philippine Airlines, Inc., Philippine
National Bank, LT Group, Inc.,
MacroAsia Corp., Victorias
Milling Company Inc., PMFTC
Inc., Lucky Travel Corp., Air
Philippines Corp., Absolut Distillers,
Inc., Asia Brewery, Inc., Foremost
Farms, Inc., Himmel Industries, Inc.,
Progressive Farms, Inc., The Charter
House, Inc., Grandspan
Development Corporation and
Shareholdings, Inc.
Michael G. Tan/ 51 Filipino Director/Chief Operating Officer of 1 Year/
Director and Asia Brewery, Inc.; President/Chief /Director from
Treasurer Operating Officer of LT Group, July 26, 2006 to
Inc.; Director of Tangent Holdings present /
Corp., Eton Properties Philippines, Treasurer from
Inc., Philippine National Bank, Feb. 11, 2015 to
PMFTC Inc., Victorias Milling present
Company, Inc., Tanduay Distillers,
Inc., Abacus Distribution Systems
Philippines, Inc., AlliedBankers
Insurance Corp., Grandwaay
Konstruct Inc., Lucky Travel Corp.,
Maranaw Hotel (Century Park
Hotel), Pan Asia Securities Corp.,
Philippine Airlines, Inc.
Director/Treasurer of Air Philippines
Corporation.
Joseph T. Chua/ 61 Filipino Chairman of J.F. Rubber Philippines, 1 Year/
Director Watergy Business Solutions, Inc., Oct. 23, 2014 to
and Cavite Business Resources, January 2018
Inc.; Director/President and Chief
Operating Officer of MacroAsia
Corp.; Managing Director of
Goodwind Development Corporation
(Guam); Director/President of
MacroAsia Airport Services
Corporation, MacroAsia Air Taxi
Services, MacroAsia Catering
Services, Inc., MacroAsia Properties
Development Corp. and MacroAsia
Mining Corporation; Director/OIC of
Eton Properties Philippines, Inc.;
Director of Lufthansa Technik
Philippines, Inc., Bulawan Mining,
Air Philippines Corporation, LT
Group, Inc., Philippine Airlines,
Inc.; and Board of Advisor of
- 37 -
Age Citizenship
Philippine National Bank, Asia
Brewery Inc., and Tanduay
Distillers, Inc.
Washington Z. 96 Filipino - Founder of SyCip Gorres Velayo & 1 Year/
Sycip*/ American Co.; Chairman Emeritus of the Oct. 23, 2014 to
Director Board of Trustees and Governors of Oct. 7, 2017
the Asian Institute of Management;
Chairman of Cityland Development
Corp., Lufthansa Technik Philippine,
Inc., STEAG State Power, Inc. and
State Properties Corporation;
Independent Director of Asian Eye
Institute, Belle Corporation, Lopez
Holdings Corp., Commonwealth
Foods, Inc., First Philippine
Holdings, Corp., Highlands Prime
Inc., Metro Pacific Investments
Corp., Philippine Equity
Management Inc., Philippine
Hotelier, Inc., Philamlife, Inc.,
Realty Investment Inc., The
PHINMA Group, State Land, Inc.,
and Century Properties Group
Inc.; and Director of Philippine
Airlines, Inc., MacroAsia Corp., LT
Group, Inc. and Philippine
National Bank.
Johnip G. Cua/ 61 Filipino Chairman of the Board of P&Gers 1 Year/
Independent Fund, Inc.; Chairman of the Board of Oct. 23, 2014 to
Director Trustees of Xavier School Inc.; present
Chairman of the Board/President of
Taibrews Corporation; Independent
Director of BDO Private Bank,
PhilPlans First, Inc., STI Education
Systems Holdings Inc., MacroAsia
Corporation, Century Pacific Food
Inc., Philippine Airlines, Inc.,
MacroAsia Properties Development
Corporation, and Eton Properties
Philippines, Inc.; Director of
Interbake Marketing Corporation,
Teambake Marketing Corporation,
Bakerson Corporation, Lartizan
Corporation, Alpha Alleanza
Corporation, Allied Botanical
Corporation; Member of the Board
of Trustees of Xavier School
Educational & Trust Fund; and
Board of Advisor of LT Group,
Inc., Asia Brewery Inc. and Tanduay
Distillers, Inc.
- 38 -
Age Citizenship
Gregorio T. Yu/ 59 Filipino Chairman of the Board and President 1 Year/
Independent of Philequity Fund, Inc., Lucky Star Oct. 23, 2014 to
Director Network Communications present
Corporation, and Domestic Satellite
Corporation of the Philippines;
Chairman of CATS Motors Inc.;
Vice Chairman of Sterling Bank of
Asia Inc.; Director of Prople BPO,
Yehey Corporation, National
Reinsurance Corp. of the
Philippines, e-Ripple Corporation,
Philippine Bank of Communications
Inc., and WSI Corporation; Director/
Treasurer of CMB Partners Inc.; and
Independent Director of Philippine
Airlines, Inc., iRemit Inc. and
Vantage Equities, Inc.
Antonino L. 79 Filipino Chairman of An-Cor Holdings, Inc.; 1 Year/
Alindogan, Jr./ Chairman/President of Landrum Sept. 17, 2007 to
Independent Holdings, Inc.; Independent Director present
of Philippine Airlines, Inc., Eton
Director
Properties Philippines, Inc., Tanduay
Distillers, Inc., Asia Brewery Inc.,
and LT Group, Inc.
John G. Tan 49 Filipino Director of Tanduay Distillers, Inc. 1 Year/
Director Dec. 2, 2015 to
present
Ma. Cecilia L. 65 Filipino Corporate Secretary of PNB Savings Feb. 11, 2015 to
Pesayco/ Bank, East Silverlane Realty and present/
Corporate Development Corp., Trustmark
Secretary Assistant
Holdings Corporation, Zuma
Corporate
Holdings and Management Secretary from
Corporation, LT Group, Inc., Apr. 20, 2012 to
Tanduay Distillers, Inc., Asia Feb. 10, 2015
Brewery Inc., and Air Philippines
Corp., Former Corporate Secretary
of Allied Banking Corp. and Eton
Properties Philippines, Inc.
Susan T. Lee/ 47 Filipino Chief Finance Officer of Trustmark Feb. 11, 2015 to
Chief Finance Holdings Corporation and Zuma present
Officer Holdings and Management
Corporation; VP-Assistant Chief
Finance Officer of Tanduay
Distillers, Inc., and Assistant VP
Finance for LT Group, Inc.
*Deceased ad of October 7, 2017
- 39 -
2. Significant Employees
The Company is not dependent on the services of any one key personnel. It values all of its
employees and expects them to contribute significantly to its business.
3. Family Relationships
Family relationships exist among the directors and Management of the Corporation, to wit:
i. Dr. Lucio C. Tan, the Corporation’s Chairman, is the father of Messrs. Lucio K. Tan, Jr.,
Michael G. Tan, and John G. Tan;
ii. Mrs. Carmen K. Tan is the wife of Dr. Lucio C. Tan and the mother of Mr. Lucio K. Tan,
Jr.
iii. Mr. Joseph T. Chua is the son-in-law of Dr. Lucio C. Tan and Mrs. Carmen K. Tan, and
the brother-in-law of Mr. Lucio K. Tan, Jr.
4. Pending Legal Proceedings (last 5 years)
None of the directors nor any of the executive officers of the Corporation has been, for a period
covering the past five (5) years, involved in any bankruptcy petition by or against any business of
which such person was a general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; any conviction by final judgment, in a criminal proceeding,
domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign,
excluding traffic violations and other minor offenses other than cases which arose out of the
ordinary course of business in which they may have been impleaded in their official capacity;
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining,
barring suspending or otherwise limiting his involvement in any type of business, securities,
commodities or banking activities; and being found by a domestic or foreign court of competent
jurisdiction (in a civil action), the Commission or comparable foreign body, or a domestic or
foreign Exchange or other organized trading market or self-regulatory organization, to have
violated a securities or commodities law or regulation, and the judgment has not been reversed,
suspended, or vacated.
Item 10. Executive Compensation
i. CEO and Top Four (4) Compensated Executive Officers
A fixed basic monthly salary is provided for the Corporation’s Chairman and Chief Executive
Officer (CEO), President and Chief Operating Officer and other officers of the Corporation and
shall continue to be given in 2018. The Corporation has no contract with any of its executive
officers.
ii. Directors and Executive Officers
The directors of the Corporation are entitled to a per diem of P

=25,000.00 for their attendance in
every board meeting and stockholders’ meeting. Additionally, the Independent Directors are
provided monthly transportation and representation allowances of P =30,000.00 while other
directors are given the monthly directors’ allowance of P =30,000.00. Moreover, attendance at a
Board Committee meeting, of which he is a member, entitles the director to a per diem of
P
=15,000.00.
Apart from the foregoing, the directors and executive officers of the Corporation receive no other
remuneration in cash or in kind. None of the directors and executive officers holds any
- 40 -
outstanding warrant or option.
Summary Compensation Table
Year Salary Bonus Others

CEO and Top Four (4) 2018
Management (Estimate) 2,640,000 N/A 1,480,000
2017 2,640,000 N/A 1,410,000
2016 2,640,000 N/A 1,340,000
All other officers and 2018
directors as a group unnamed (Estimate) N/A N/A 4,860,000
2017 N/A N/A 4,840,000
2016 N/A N/A 5,245,000
The following constitute the Corporation’s Chairman and CEO and four most highly compensated
executive officers in 2017 (on a consolidated basis):
1. Mr. Lucio C. Tan is the Chairman of the Board of Directors and CEO of the Corporation.
2. Mr. Jaime J. Bautista is the President and Chief Operating Officer of the Corporation.
3. Mr. Michael G. Tan is the Treasurer of the Corporation.
4. Ms. Susan T. Lee is the Chief Finance Officer of the Corporation.
5. Atty. Ma. Cecilia L. Pesayco is the Corporate Secretary of the Corporation.
a.) Standard Arrangements - Other than the stated salaries and wages and per diem of the
directors, there are no other standard arrangements to which the directors of the Company
are compensated, or are to be compensated, directly or indirectly, for any services
provided as a director, including any additional amounts payable for committee
participation or special assignments, for the last completed fiscal year and the ensuing
year.
b.) Other Arrangements - None
c.) Employment contract or compensatory plan or arrangement - None
Warrants and Options Outstanding: Repricing
a.) There are no outstanding warrants or options held by the Corporation’s CEO, the named
executive officers, and all officers and directors as a group.
b.) This is not applicable since there are no outstanding warrants or options held by the
Corporation’s CEO, executive officers and all officers and directors as a group.
- 41 -
Item 11. Security Ownership of Certain Beneficial Owners and Management as of
December 31, 2017
1. Security Ownership of Certain Record and Beneficial Owners of more than 5%
Title of Name, address of record Name of Citizenship No. of Shares Percent

class owner and relationship with Beneficial Held
Issuer Owner and
Relationship
with Record
Owner
Common Trustmark Holdings Filipino 10,033,776,103 86.42%
Corporation*
SMI Compound, C. *
Raymundo Ave., Maybunga,
Pasig City/(Shareholder)
* Trustmark Holdings Corp. (Trustmark) is 60% owned by Buona Sorte Holdings, Inc. (BSHI) and 40% by Horizon
Global Investments, Ltd. (HGIL). The majority stockholders of BSHI are Dr. Lucio C. Tan and Ms. Carmen K.
Tan. HGIL is a British Virgin Islands (BVI) company and its sole registered shareholder is Blainville Holdings
Limited (BHL), another BVI company. Mr. Chan Yin Tap is the sole registered shareholder of one (1) BHL share.
The Board of Directors of Trustmark, comprised of Dr. Lucio C. Tan, Ms. Carmen K. Tan and Messrs. Lucio K.
Tan, Jr., Joseph T. Chua and Michael G. Tan, has the right to vote or direct the voting or disposition of PHI’s
shares held by Trustmark.
2. Security Ownership of Management as of December 31, 2017
Amount and
Title of Name of Beneficial Nature of Percent of
Position Citizenship
Class Owner Beneficial Class
Ownership
Common Lucio C. Tan Chairman 450 R Filipino Nil

(direct)
Common Jaime J. Bautista President 225 R Filipino Nil
(direct)
Common Carmen K. Tan Director 450 R Filipino Nil
(direct)
Common Lucio K. Tan, Jr. Director 450 R Filipino Nil
(direct)
Common Michael G. Tan Director 450 R Filipino Nil
(direct)
Common Joseph T. Chua Director 225 R Filipino Nil
(direct)
Common Washington Z. Director 225 R American Nil
Sycip* (direct)
Common Johnip G. Cua Independent 225 R Filipino Nil
Director (direct)
Common Gregorio T. Yu Independent 225 R Filipino Nil
Director (direct)
Common Antonino L. Independent 225 R Filipino Nil
Alindogan, Jr. Director (direct)
Common John G. Tan Director 450 R Filipino Nil
(direct)
*Deceased as of October 07, 2017
- 42 -
Security ownership of all directors and officers as a group is 3,600 representing 0% of the
Company’s total outstanding capital stock.
3. Voting Trust Holders of 5% or More
The Company has no recorded stockholder holding more than 5% of the Company’s common
stock under a voting trust agreement.
4. Changes in Control
There are no arrangements which may result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions
In addition to Note 18 of the Notes to the Consolidated Financial Statements, the following are
additional relevant related party disclosures:
The Company’s cash and cash equivalents are deposited/placed with Philippine National Bank (the
“Bank”), an affiliate, at competitive interest rates. The Company also has a contract of lease of space
and stock transfer agency agreement with the Bank at prevailing rates. There is no preferential
treatment in any of its transactions with the Bank. There are no special risks or contingencies involved
since the transactions are done under normal business practice.
a) Business purpose of the arrangements:
The Company does business with related parties due to stronger ties based on trust and
confidence and easier coordination.
b) Identification of the related parties transaction business and nature of relationship:
Philippine National Bank - Bank Deposits

- Rental
- Stock Transfer Services
MacroAsia Corporation Investments
c) Transaction prices are based on prevailing market rates.
d) Transactions have been fairly evaluated since the Company adheres to industry standards and
practices.
e) There are no any ongoing contractual or other commitments as a result of the arrangements.
There are no parties that fall outside the definition of “related parties” with whom the
Company or its related parties have a relationship that enables the parties to negotiate terms of
material transactions that may not be available from other, more clearly independent parties
on an arm’s length basis.
The Company has no transactions with promoters.
- 43 -
PART IV – CORPORATE GOVERNANCE
Item 13. Corporate Governance
This will be filed separately.
PART V - EXHIBITS AND SCHEDULES
Item 14. Exhibits and Reports on SEC Form 17-C
(a) Exhibits - The other exhibits, as indicated in the Index to Exhibits are either not applicable to
the Company or require no answer.
(b) Reports on SEC Form 17-C
SEC Form 17-C (Current Reports) which have been filed during the year are no longer filed as
part of the exhibits.
LIST OF ITEMS REPORTED UNDER SEC FORM 17-C (DURING THE LAST 6 MONTHS)
–JULY TO DECEMBER 2017
Date of Report Subject Matter Disclosed

July 21, 2017 The news clarification where PHI confirmed that PAL has been
granted a Php302 million tax refund on jet fuel imports.
July 24, 2017 The Philippine Airlines, Inc. (PAL), a subsidiary of PAL Holdings,
Inc. (PHI), is setting aside $2B for its fleet expansion program,
which will cover twelve (12) Q400s, two (2) Boeing 777s, and six
(6) airbus 350s.
July 25, 2017 PAL Holdings, Inc. confirms that it is in discussion with a possible
foreign strategic investor. The amount or percentage of investment
has not been agreed upon and the completion of the transaction is
likewise not determined at the time.
August 31, 2017 PAL Holdings, Inc. confirms that PAL, together with a possible
partner, is proposing to construct a P20-billion annex building for
the NAIA Terminal 2, which is being used exclusively by PAL.
September 4, 2017 PAL Holdings, Inc. confirms the plan of PAL to grow its fleet to 96
planes by 2021 from the current 87 aircrafts. Likewise, it confirms
that 18 of its older and less efficient planes will be phased out soon.
In regard to the statement on “20 million passengers by 2021”,

clearly it was an expression of the target or expected number of
passengers that PAL hopes to serve by 2021, subject to the
expectation that the government will take aggressive actions to ease
the terminal and runway congestion at NAIA.
September 5, 2017 The filing of the following applications of the Corporation's
subsidiary, Philippine Airlines, Inc., with the Securities and
Exchange Commission:
1) Application to decrease authorized capital stock from Twenty

Billion Pesos (PhP20,000,000,000.00) to Thirteen Billion Pesos
(PhP13,000,000,000.00) with corresponding decrease of par value
- 44 -
per share from Twenty Centavos (PhP0.20) to Thirteen Centavos
(PhP0.13).
2) Application to increase par value per share from Thirteen

Centavos (PhP0.13) to One Peso (PhP1.00).
September 7, 2017 PAL Holdings, Inc. clarifies that while it is true that the present lease
agreement with the Philippine Amusement and Gaming Corp.
(PAGCOR) is for the use of the property as “an aircraft parking
ramp/apron facility”, PAL has offered to the government, through
the Transportation Department and the NAIA Authorities to build
the terminal facilities as an extension of the Terminal 2 facilities,
which it presently occupies. If the proposal merits the approval of
the appropriate government authority, PAL is prepared to
renegotiate the terms of its contract with PAGCOR.
September 25, 2017 Appointment of Ms. Susan T. Lee as the Data Protection Officer for
PAL Holdings, Inc.
September 26, 2017 The approval by the Securities and Exchange Commission of PAL’s
1) Application to decrease its authorized capital stock from Twenty
Billion Pesos (PhP20,000,000,000.00) to Thirteen Billion Pesos
(PhP13,000,000,000.00) via a decrease in par value per share from
Twenty Centavos (PhP0.20) to Thirteen Centavos (PhP0.13); and
2) Application to increase par value per share from Thirteen

Centavos (PhP0.13) to One Peso (PhP1.00) without increasing the
authorized capital stock and thereby decreasing the number of shares
authorized from One Hundred Billion (100,000,000,000) shares to
Thirteen Billion (13,000,000,000) shares.
September 29, 2017 PAL Holdings, Inc.’s disclosure that it has paid CAAP a total of
PhP688.77 million as of December 31, 2016. Since then, both CAAP
and PAL have been working together to validate these claims in the
hope of arriving at a mutually acceptable settlement. To date,
however, parties have not yet reached any settlement. The issue
should not have any significant impact on PAL’s business and
financial condition. Similar to the MIAA model which proved to be
successful, PAL management will ensure that terms of any
settlement agreement entered are reasonable and mutually
acceptable for both parties.
October 9, 2017 Death of Director Washington Z. SyCip last October 7, 2017
October 9, 2017 PAL Holdings, Inc. confirms that PAL has offered to pay in full the
PhP6 Billion claims of CAAP/MIAA and the DOTr has accepted
said settlement.
October 30, 2017 PAL Holdings, Inc. confirmation of the article entitled “PAL likely
to register loss due to payment of charges.”
November 6, 2017 PAL Holdings, Inc.’s confirmation that PAL is aiming to grow its
passenger traffic to 16.5 to 17 million passengers next year,
anticipating strong demand from Chinese tourists. The projection is
based on the natural historical growth of the airline where it grows
its traffic by around 10-12% annually.
December 18, 2017 PAL Holdings, Inc. disclosure that the company has just been
informed by counsel that the request to undergo equity restructuring
by the Corporation’s subsidiary, Philippine Airlines, Inc. (hereinafter
"PAL"), has been granted by the Securities and Exchange
Commission in a Certificate of Approval of Equity Restructuring
- 45 -
dated 13 December 2017.
Following the grant of the aforementioned request, PAL's additional

paid-in capital of Thirteen Billion Six Hundred Forty One Million
Five Hundred Thirty Eight Thousand Twenty Pesos and Fourteen
Centavos (PhP13,641,538,020.14) will be used to fully wipe off its
deficit of Thirteen Billion Five Hundred Seventy Three Million Six
Hundred Four Thousand Four Hundred Eight Six Pesos
(PhP13,573,604,486.00) as of 31 December 2016."
December 22, 2017 PAL Holdings, Inc.’s disclosure that the Corporation’s request to the
Securities and Exchange Commission for Confirmation of the
Valuation of the shares to be issued in connection with the
acquisition of minority interest in its subsidiary, Philippine Airlines,
Inc. ("PAL"), has been granted in a Certificate dated 18 December
2017.
The request for Confirmation of Valuation of Shares was made in

connection with the Corporation’s share swap transaction with the
shareholders of PAL wherein the Corporation agreed to issue one (1)
share for every five (5) PAL shares surrendered to it (the "PAL
Share Swap Transaction").
With the afore-mentioned confirmation by the SEC of the valuation

used, the Corporation will issue a total of One Hundred Twenty
Three Million Five Hundred Forty Two Thousand Four Hundred
Ninety Seven (123,542,497) shares from its authorized but unissued
capital stock in favor of PAL shareholders who have participated in
the PAL Share Swap Transaction.
December 29, 2017 PAL Holdings, Inc.’s disclosure that the external counsel has
received the Certificate Approving the Valuation for the Zuma swap
dated 21 December 2017.
The request for Confirmation of Valuation of Shares was made in

connection with the Corporation’s share swap transaction with the
shareholders of Zuma Holdings and Management Corporation
(herein, "Zuma"), wherein the Corporation agreed to issue nineteen
(19) shares for every one (1) Zuma share surrendered.
As a result. the Corporation will issue a total of One Billion Six

Hundred Forty Seven Million Nine Hundred Fifty Nine Thousand
Fifty Three (1,647,959,053 shares) from its authorized but unissued
capital stock in favor of Cosmic Holdings Corporation and Horizon
Global Investments Limited.
The following applications of the Corporation have also been

approved by the Securities and Exchange Commission in
Certificates dated 22 December 2017:
1) Application to decrease its authorized capital stock from Thirty

Billion Pesos (PhP30,000,000,000.00) to Thirteen Billion Five
Hundred Million Pesos (PhP13,500,000,000.00) via a decrease in
par value per share from One Peso (PhP1.00) to Forty Five Centavos
(PhP0.45).
- 46 -
2) Application to increase par value from Forty Five Centavos

(PhP0.45) per share to One Peso (PhP1.00) per share thereby
decreasing the number of shares corresponding to the authorized and
subscribed capital stock of the Corporation but without increasing
the authorized capital corresponding thereto.
- 47 -
- 48 -
PAL HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
SEC FORM 17-A
Page No.
FINANCIAL STATEMENTS
Statement of Management’s Responsibility for Financial Statements 50-51

Certificate on the Compilation Services for the Preparation of the Financial Statements 52
Cover Sheet for Audited Financial Statements 53
Report of Independent Auditors 54-62
Consolidated Statements of Financial Position – December 31, 2017, 2016 and 2015 63
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017,
2016 and 2015 64
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2017, 2016 65-67
and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 68-69
2015
Notes to Consolidated Financial Statements 70-151
SUPPLEMENTARY SCHEDULES
Independent Auditor’s Report on Supplementary Schedules 152
A. Financial Assets 153

B. Amounts Receivable from Directors, Officers, Employees, Related Parties, and
Principal Stockholders (Other than Related Parties) 154
C. Amounts Receivable from Related Parties which are Eliminated during the
Consolidation of Financial Statements 155
D. Intangible Assets and Other Assets 156
E. Long-term Obligations 157
F. Indebtedness to Related Parties 158
G. Guarantees of Securities of Other Issuers 159
H. Capital Stock 160
I. Reconciliation of Retained Earnings Available for Dividend Declaration 161
J. Relationships between & among the Group and its parent 162
K. List of Philippine Financial Reporting Standards and Interpretations Effective as of 163-169
December 31, 2017 (7 pages)
L. Financial Soundness Indicators 170
M. Index to Exhibits *
* These schedules, which are required by Part IV(e) of SRC Rule 68, have been omitted because
they are either not required, not applicable or the information required to be presented is included
in the Group’s financial statements.
- 49 -
- 50 -
- 51 -
- 52 -
COVER SHEET
for
AUDITED FINANCIAL STATEMENTS
SEC Registration Number

P W – 9 4
COMPANY NAME
P A L H O L D I N G S , I N C .
( A S u b s i d i a r y o f T r u s t m a r k
H o l d i n g s C o r p o r a t i o n )
A N D S U B S I D I A R I E S
PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

8 t h F l o o r , P N B F i n a n c i a l
C e n t e r , P r e s i d e n t D i o s d a d o
M a c a p a g a l A v e . , C C P C o m p l e x ,
P a s a y C i t y
Form Type Department requiring the report Secondary License Type, If Applicable
A A C F S C R M D N / A
COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number
palholdingsinc2015@gmail.com (02) 816-3451 N/A
No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)
6,507 Last Thursday of May 12/31
CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation
Name of Contact Person Email Address Telephone Number/s Mobile Number
Susan T. Lee susan.lee@tanduay.com (02) 816-3451 N/A
CONTACT PERSON’s ADDRESS
7/F Allied Bank Center, 6754 Ayala Avenue, Makati City
NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within
thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.
2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commission
and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.
53 *SGVFS026729*
SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018
INDEPENDENT AUDITOR’S REPORT
The Stockholders and the Board of Directors

PAL Holdings, Inc.
8th Floor, PNB Financial Center
President Diosdado Macapagal Ave.
Opinion
We have audited the consolidated financial statements of PAL Holdings, Inc. (a subsidiary of Trustmark
Holdings Corporation) and its subsidiaries (the Group), which comprise the consolidated statements of
financial position as at December 31, 2017 and 2016, and the consolidated statements of comprehensive
income, consolidated statements of changes in equity and consolidated statements of cash flows for each
of the three years in the period ended December 31, 2017, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at December 31, 2017 and 2016, and its
consolidated financial performance and its consolidated cash flows for each of the three years in the
period ended December 31, 2017 in accordance with Philippine Financial Reporting Standards (PFRSs).
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)
together with the ethical requirements that are relevant to our audit of the consolidated financial
statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
54 *SGVFS026729*
A member firm of Ernst & Young Global Limited
-2-
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment of
the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
Accounting for acquisition of companies under common control
In 2017, the Group acquired 51% ownership interest in Zuma Holdings, Inc., the parent company of Air
Philippines, Inc. The Group also obtained control of Fortunate Star Ltd (FSL), previously accounted for
as investment in associate, by increasing the Group’s effective ownership interest in FSL from 39.56% to
64.29%. The acquisitions of Zuma Holdings, Inc. and FSL (the “Transactions”) have been accounted for
in the consolidated financial statements as business combination under common control.
We considered the acquisition of the aforementioned companies under common control as a key audit
matter because of its financial significance to the consolidated financial statements.
Refer to Notes 3 and 4 to the consolidated financial statements for the discussion of relevant accounting
policies and significant judgment, and Notes 2, 9 and 29 for the detailed discussions about the
Transactions.
Audit response
We participated in various meetings and discussions with the Group management to understand the
details of the Transactions. We obtained and read the related agreements and announcements made by the
Group in order to review if the Transactions fulfilled the requirements of business combination under
common control and considered the accounting implications of the Transactions on the consolidated
financial statements of the Group. We obtained the supporting documents in relation to the payment
and/or settlement of the considerations for the Transactions. We compared the accounting policies of the
acquired companies against those of the Group and reviewed the adjustments for alignment. We
reviewed the intercompany balances and transactions between the newly acquired companies and the
Group and the related elimination adjustments.
Recognition and measurement of revenue and unearned transportation revenue
Passenger and cargo sales are recognized as revenue when the related passengers and cargoes are flown
or lifted. The amount of passenger and cargo sales, for which the related transportation service has not
yet been rendered at the end of the reporting period, is recorded as unearned transportation revenue in the
consolidated statement of financial position. Passenger tickets that are unused for an extended period are
recognized as revenue based on an assessment of the ticket terms and conditions. In 2017, the revenue
from passenger and cargo sales amounted to P =110.64 billion and =P8.40 billion, respectively, while the
unearned transportation revenue amounted to P =16.34 billion as of December 31, 2017.
The portion of passenger revenue attributable to the awards under the Group’s frequent flyer program is
deferred and estimated based on the expected redemption of the frequent flyer miles using the applicable
ticket fare. This deferred revenue is recognized as income when the awards under the Group’s frequent
flyer program are redeemed by the passenger.
55 *SGVFS026729*
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The Group uses a complex information technology system to determine the timing and the amount of
revenue to be recognized for each flight, which involves exchanges of information with the industry
systems and partner airlines, and also to track the issuance and subsequent redemption of the awards
under the frequent flyer program.
We considered the recognition and measurement of revenue and unearned transportation revenue as a key
audit matter because of the significant amount involved, large volumes of data being processed,
complexity in determining the amount of revenue to be recognized for flown flights, and because it
involves a complex accounting system. Further, the determination of the timing for recognition of
unused tickets and quantification of revenue allocable to the frequent flyer program require significant
judgment and estimates.
Refer to Notes 3 and 4 to the consolidated financial statements for relevant accounting policies and a
discussion of significant estimates.
Audit response
With the involvement of our internal specialist, we obtained an understanding of the revenue recognition
process and tested the relevant controls on the Group’s information technology system such as user
access, program change and the relevant application controls on recognition and measurement of revenue
and unearned transportation revenue. We performed substantive analytical procedures on the Group’s
passenger and cargo revenue and unearned transportation revenue. We also reviewed sample journal
entries related to the revenue and inspected the underlying documentation. For the estimate of the
deferred revenue pertaining to the frequent flyer program, we compared the expected redemption rate to
the actual redemption rates in prior years and analyzed the allocated unit fair value of the miles with
reference to the prices for third party frequent miles sales and flight redemption values.
Classification of aircraft leases
The Group has operating fleet of 86 aircraft, of which 32 and 41 are under finance and operating lease
arrangements with the lessors, respectively. As of December 31, 2017, the carrying amount and the
related obligation of the aircraft under the finance lease included in the consolidated statement of
financial position amounted to P =84.39 billion and =P53.88 billion, respectively. On the other hand, the
undiscounted future minimum lease payments of aircraft under operating leases amounted to
=
P117.94 billion. At the lease inception, management employs significant judgment in assessing whether
the Group bears the risks and rewards incidental to the ownership of the aircraft. In evaluating the
classification of the lease arrangements, consideration is given to the length of the lease periods and any
optional lease extension periods; the option price to acquire the aircraft at the end of the lease or at break
points throughout the lease; the total present value of the minimum lease payments in relation to the fair
value of the leased assets; and the transfer of ownership of the leased asset to the lessee.
We considered the classification of leases as a key audit matter due to the significant impact of the lease
arrangements in the consolidated financial statements, complexity of the lease and financing structures,
and significant judgment by management in assessing the substance of the lease arrangements in
determining the lease classification.
56 *SGVFS026729*
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Refer to Notes 3 and 4 to the consolidated financial statements for the relevant accounting policy and a
discussion of significant judgments, and Notes 15, 18 and 24 for the detailed disclosures of the leased
aircraft under finance and operating lease arrangements.
Audit response
We reviewed the aircraft purchase agreements, lease agreements and other pertinent agreements in
relation to the acquisition of the aircraft in order to obtain an understanding of the significant terms that
are relevant in assessing the classification of the lease arrangements. We evaluated management’s
assumptions by comparing the present value of the minimum lease payments relative to the fair value of
the leased assets at the inception of the lease and the duration of the lease relative to the economic life of
the leased assets and by determining in the lease arrangements the existence of a bargain purchase option
and the transfer of the ownership of the leased assets to the Group.
Accounting for aircraft and related equipment
The Group has aircraft and related equipment as at December 31, 2017 with a carrying amount of
P
=96.95 billion. In accounting for these assets, the Group made estimates about their expected useful lives,
expected residual values and potential impairment, based on the fair value of the assets and the cash
flows they generate.
In evaluating the useful lives and residual values of the aircraft and related assets, management takes into
account the intended life of the fleet being operated, the estimate of the economic life from the
manufacturer, the fleet deployment plans including the timing of fleet replacements, the changes in
technology, as well as the repairs and maintenance program, among others.
The lower market values of certain aircraft assets as compared with the respective amounts carried on the
consolidated statement of financial position, and the continuous earnings volatility have historically
exposed the Group to potential asset impairment.
We considered the accounting for aircraft and related equipment subsequent to initial recognition as a
key audit matter because the changes to the expected useful lives and/or residual values of the Group’s
fleet and potential recognition of impairment loss could have material impact on the financial position
and financial performance of the Group for the year. Further, the determination of useful lives and
residual values and the assumptions for impairment assessment involve significant judgment and
estimates.
discussion of significant judgment and estimates, and Note 10 for the detailed disclosures about the
carrying amounts of the aircraft and related equipment.
Audit response
We obtained an understanding of the Group’s process and controls over estimation of the useful lives of
aircraft. We compared the management’s estimates of the useful lives and residual values with the
Group’s fleet plan, recent aircraft transactions, and contractual rights. We also considered the
developments in the airline industry and compared the estimated useful lives used by the Group with
comparable airlines.
57 *SGVFS026729*
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We reviewed the potential indicators of impairment that would require the impairment testing of the
individual assets and the cash generating units (CGUs). With the involvement of our internal specialist,
we evaluated the key assumptions used to estimate the discounted cash flows of the CGU, which include
the forecasted revenues, operating costs and discount rates, based on our understanding of the Group’s
business plan and compared these assumptions to the relevant market data, as applicable. We also
assessed the current year’s assumptions by comparing these assumptions with the assumptions made in
prior years, as well as the actual results during the year.
Classification and measurement of repairs and maintenance costs, and estimation of asset restoration
obligation
The Group entered into several agreements with maintenance service providers relating to the periodic
inspections and overhauls during the life of the aircraft and aircraft parts. Management assessed and
estimated which portion of the cost incurred for the repairs, maintenance and overhauls under these
agreements, has the economic effect of extending the useful lives of the aircraft and engines, hence, can
be capitalized. Other repairs and maintenance costs are expensed as incurred.
Moreover, actual billings from the repair entities are usually received at a later date after the cut-off date.
Hence, management estimates certain repairs and maintenance costs to be accrued as of cut-off date
based on open work orders and other variable factors. Total aircraft-related repairs and maintenance
costs recognized in profit or loss for the year ended December 31, 2017 amounted to P =18.34 billion,
while the accrued repairs and maintenance costs as at December 31, 2017 amounted to P =8.29 billion.
The Group is also contractually committed to return a number of aircraft held under operating leases to
the lessors in a physical condition agreed at the inception of each lease. Management estimates the
maintenance costs and the costs associated with the restoration of the aircraft and carries the obligation at
amortized cost using the effective interest method. The asset restoration obligation amounted to
P
=1.25 billion as at December 31, 2017. The estimation of the asset restoration obligation requires
significant management judgment and complex estimates, including the utilization of the aircraft and the
expected cost of maintenance.
We considered the classification and measurement of repairs and maintenance cost, and estimation of
assets restoration obligation as key audit matters because of the significant judgment involved in
assessing whether a particular repair will be capitalized or expensed, the inherent risks in assessing the
variable factors in order to estimate the repairs and maintenance costs at the cut-off date, and the
re-assessment of adequacy of the asset restoration obligation recognized in the consolidated statement of
financial position.
discussion of significant estimates, and Notes 10, 14 and 16 for the detailed disclosures on the repairs,
maintenance and overhaul cost and related accrual, and the asset restoration obligation.
58 *SGVFS026729*
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Audit response
We obtained an understanding of the Group’s repairs and maintenance program and tested the relevant
key controls over repairs and maintenance process. We selected sample transactions of repairs,
maintenance and overhauls, and inspected the underlying documentation. We evaluated the classification
of repairs, maintenance and overhauls based on their nature and by considering the Company’s
capitalization and expensing policy.
We reviewed the maintenance agreements with key maintenance service providers and tested the
amounts accrued against the related open work orders.
We evaluated the methodology and compared the key assumptions used by management in estimating the
asset restoration obligation with the contract terms with the operating lessors and repairs and
maintenance experience of the Group. We recalculated the amount of asset restoration obligation. We
inquired with the aircraft engineering personnel about the Group’s planning and monitoring of the
maintenance program, considering the utilization pattern and the expected useful lives of the aircraft.
Recognition of deferred income tax assets
The Group recognized deferred income tax assets amounting to P =4.74 billion, arising from the
carryforward benefits of the net operating losses carried over and certain deductible temporary
differences. The Group recognizes these deferred income tax assets to the extent of probable future
taxable profits and reversing taxable temporary differences that will allow the deferred income tax assets
to be utilized. The probability of recovery is affected by uncertainties regarding the likely timing and
level of future taxable profits considering the expiration date of net operating losses carried over and
timing of reversal of temporary differences.
We considered the recognition of deferred income tax assets as a key audit matter because of the
significant judgment and estimation involved in assessing the probability and level of future taxable
profits that will allow the deferred income tax assets to be utilized.
discussion of significant judgment and estimates, and Note 22 for the detailed disclosures on deferred tax
assets.
Audit Response
We evaluated the management’s assumptions and estimates, which include the forecasted revenues,
operating costs and timing of reversal of temporary differences, in relation to the likelihood of
generating sufficient future taxable profits based on our understanding of the Group’s business plan
and compared these assumptions to the relevant market data, as applicable. We also assessed the current
year’s assumptions by comparing these assumptions with the assumptions made in prior years, as well as
the actual results during the year.
59 *SGVFS026729*
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Assessment and estimation of contingent liabilities and provisions from claims and proceedings
The Group is involved in legal proceedings as well as claims by regulatory bodies and other parties. The
inherent uncertainty over the outcome of these legal proceedings and claims by regulatory bodies and
other parties is brought about by the differences in the interpretation and application of the regulations,
laws and rulings.
The assessment of whether provision should be recognized and the estimation of contingent liabilities
and provisions from claims and proceedings require significant judgment and estimates by management.
As at December 31, 2017, the total provisions for litigations and other contingencies amounted to
P
=2.26 billion.
discussion of significant judgment and estimates, and Note 16 for other disclosures related to contingent
liabilities and provisions from claims and proceedings.
Audit response
Our procedures included, among others, testing the Group’s controls over the identification and
evaluation of legal proceedings and claims, and continuous reassessment of related contingent liabilities
and provisions and of disclosures. We inquired with the Group’s internal legal counsels and finance
officers about the status and potential exposures of the significant legal proceedings and claims, and
obtained representation letter from the Group. We further obtained confirmation letters from external
legal counsels about the progress of the legal proceedings and claims, including their assessment on the
likely outcome and the estimated amount of potential exposures. We also inspected relevant
correspondences with regulatory bodies and other parties, and reviewed the minutes of the meetings of
the Board of Directors, Audit Committee and Executive Committee.
Other Information
Management is responsible for the other information. The other information comprises the information
included in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report
for the year ended December 31, 2017, but does not include the consolidated financial statements and our
auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and
Annual Report for the year ended December 31, 2017 are expected to be made available to us after the
date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we will
not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audits, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
60 *SGVFS026729*
-8-
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with PFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with PSAs will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
· Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
· Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
61 *SGVFS026729*
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· Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is
Josephine H. Estomo.
SYCIP GORRES VELAYO & CO.
Josephine H. Estomo
Partner
CPA Certificate No. 46349
SEC Accreditation No. 0078-AR-4 (Group A),
June 9, 2016, valid until June 9, 2019
Tax Identification No. 102-086-208
BIR Accreditation No. 08-001998-18-2015,
February 27, 2015, valid until February 26, 2018
PTR No. 6621259, January 9, 2018, Makati City
February 26, 2018
62 *SGVFS026729*
PAL HOLDINGS, INC.
(A Subsidiary of Trustmark Holdings Corporation)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)
December 31, January 1,

2016 2016*
December 31, (As restated, (As restated,
2017 Note 29) Note 29)
ASSETS
Current Assets
Cash and cash equivalents (Notes 5 and 18) P
=10,073,653 P9,966,657
= P8,116,888
=
Receivables (Notes 4, 6, 15 and 18) 17,750,751 17,003,372 15,835,915
Expendable parts, fuel, materials and supplies (Notes 4 and 7) 3,493,472 2,950,672 2,617,766
Other current assets (Notes 5, 8 and 27) 3,752,884 4,088,794 8,665,669
35,070,760 34,009,495 35,236,238
Assets held for sale (Notes 4 and 10) 785,045 – 141,354
Total Current Assets 35,855,805 34,009,495 35,377,592
Noncurrent Assets
Property and equipment (Notes 4, 10, 15, 18, 23 and 24):
At cost 121,307,713 111,953,188 102,709,124
At appraised values 1,243,163 707,947 922,546
Investment properties (Notes 4 and 11) 3,643,017 3,150,029 1,366,092
Deferred income tax assets - net (Notes 4 and 22) 658,336 819,968 2,603,339
Other noncurrent assets (Notes 5, 12 and 18) 17,247,520 13,947,534 11,169,240
Total Noncurrent Assets 144,099,749 130,578,666 118,770,341
TOTAL ASSETS P
=179,955,554 =164,588,161
P =154,147,933
P
LIABILITIES AND EQUITY

Current Liabilities
Notes payable (Notes 13 and 18) P
=17,837,493 =7,714,195
P =3,062,670
P
Accounts payable (Note 18) 11,412,845 8,623,591 7,979,036
Accrued expenses and other current liabilities (Notes 4, 13, 14 and 18) 15,020,271 20,161,980 20,397,192
Unearned transportation revenue (Note 4) 16,339,275 14,826,181 13,612,216
Current portion of long-term obligations (Notes 4, 15, 18 and 24) 23,552,996 13,014,152 12,086,975
Total Current Liabilities 84,162,880 64,340,099 57,138,089
Noncurrent Liabilities
Long-term obligations - net of current portion (Notes 4, 15, 18 and 24) 66,712,639 65,005,405 69,085,756
Accrued employee benefits (Notes 4 and 21) 10,202,900 8,925,695 7,683,289
Reserves and other noncurrent liabilities (Notes 4, 10, 16 and 18) 4,899,902 4,656,531 4,450,845
Total Noncurrent Liabilities 81,815,441 78,587,631 81,219,890
Total Liabilities 165,978,321 142,927,730 138,357,979
Equity
Attributable to the equity holders of the parent:
Capital stock (Notes 2 and 17) 9,799,006 23,025,318 23,025,318
Additional paid-in capital (Notes 2, 17 and 18) 25,339,985 7,308,860 7,308,860
Other equity reserves (Notes 2 and 29) 225,637 4,427,932 4,427,932
Other components of equity (Note 19) 2,685,751 1,606,482 1,189,529
Deficit (Notes 2 and 17) (29,952,502) (22,812,859) (27,110,007)
Treasury stock - at cost (Note 17) (25) (56) (56)
8,097,852 13,555,677 8,841,576
Non-controlling interest (Notes 2 and 9) 5,879,381 8,104,754 6,948,378
Total Equity 13,977,233 21,660,431 15,789,954
TOTAL LIABILITIES AND EQUITY =179,955,554 =
P P164,588,161 =P154,147,933
*The opening balances as of January 1, 2016 are the same as the balances as of December 31, 2015.
See accompanying Notes to Consolidated Financial Statements.
63 *SGVFS026729*
PAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands, Except Earnings (Loss) Per Share)
Years Ended December 31

2016 2015
(As restated, (As restated,
2017 Note 29) Note 29)
REVENUE
Passenger (Note 4) =110,635,714
P =96,846,306
P =90,975,991
P
Cargo (Note 4) 8,396,718 6,930,594 7,218,639
Ancillary 10,069,507 9,877,823 8,025,506
Others (Note 18) 407,314 802,339 1,006,320
129,509,253 114,457,062 107,226,456
EXPENSES (Note 20)
Flying operations (Note 18) 67,306,585 51,107,473 53,654,686
Maintenance (Notes 4 and 18) 19,442,234 15,740,657 11,824,359
Aircraft and traffic servicing (Note 18) 17,852,316 15,129,539 12,436,749
Passenger service (Note 18) 12,640,545 10,348,866 8,741,199
Reservation and sales 9,597,713 8,084,106 6,824,637
General and administrative (Note 6) 5,311,683 4,404,469 4,876,800
132,151,076 104,815,110 98,358,430
OTHER CHARGES (INCOME)

Financing charges (Notes 13, 15, 16 and 18) 3,484,374 2,990,424 3,487,362
Other charges (income) - net (Notes 5, 7, 10, 12, 16, 18 and 24) 338,031 (474,881) (1,368,167)
3,822,405 2,515,543 2,119,195
INCOME (LOSS) BEFORE INCOME TAX (6,464,228) 7,126,409 6,748,831
INCOME TAX EXPENSE (Note 22) 2,893 2,198,013 80,978
NET INCOME (LOSS) (6,467,121) 4,928,396 6,667,853
OTHER COMPREHENSIVE INCOME (Note 19)
Other comprehensive income, net of deferred income tax effect 1,856,006 936,106 1,175,086
TOTAL COMPREHENSIVE INCOME (LOSS) (P
=4,611,115) P
=5,864,502 P
=7,842,939
Net income (loss) attributable to:

Equity holders of the Parent Company (P
=7,333,595) =4,132,669
P =6,109,238
P
Non-controlling interests (Note 9) 866,474 795,727 558,615
(P
=6,467,121) =4,928,396
P =6,667,853
P
Total comprehensive income (loss) attributable to:

Equity holders of the Parent Company (P
=5,513,157) P4,708,230
= P6,611,844
=
Non-controlling interest (Note 9) 902,042 1,156,272 1,231,095
(P
=4,611,115) =5,864,502
P =7,842,939
P
Basic/Diluted Earnings (Loss) Per Share*

Computed based on Net Income (Loss) (P
=0.6316) P0.3577
= P0.5287
=
Computed based on Total Comprehensive Income (Loss) (0.4749) 0.4075 0.5722
*Computed using the weighted average number of issued and outstanding shares of stock of 11,610,231,157 for the year ended December 31, 2017
and 11,554,637,033 for the years ended December 31, 2016 and 2015, as if the issuance of 840,459,091 shares resulting from share swap
transaction and reduction of 14,122,334,153 shares in issued and outstanding resulting from equity restructuring in 2017 have been recognized
since January 1, 2015 (see Notes 2 and 17).
See accompanying Notes to Consolidated Financial Statements .
64 *SGVFS026729*
PAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
Other Components of Equity (As restated, Note 29)

Additional Net Changes in Remeasurement
Paid-In Cumulative Fair Values Revaluation Gains (Losses) Total Equity Non-
Capital Stock Capital Effect of Change Translation of Available-for- Increment on Defined Deficit Treasury Attributable to Controlling
(Notes 2 (Notes 2, 17 Other Equity in Ownership Adjustment sale Investments (Notes 10 Benefit Plans (Notes 2 Stock Equity Holders Interest
and 17) and 18) Reserves Interest (Note 27) (Notes 12 and 19) and 19) (Notes 19 and 21) Subtotal and 17) (Note 17) of the Parent (Note 9) Total
BALANCES AT JANUARY 1, 2015,

AS PREVIOUSLY REPORTED P
= 23,025,318 P
= 7,308,860 =
P– P
= 520,769 (P
=199,105) P
= 41,243 P
= 392,699 (P
=121,622) P
= 633,984 (P
=27,358,534) (P
=56) P
= 3,609,572 P
= 74,972 P
= 3,684,544
Effect of restatements (Note 29) – – 4,427,932 – 221,024 – – (24,221) 196,803 (5,999,595) – (1,374,860) 5,642,399 4,267,539

AS RESTATED 23,025,318 7,308,860 4,427,932 520,769 21,919 41,243 392,699 (145,843) 830,787 (33,358,129) (56) 2,234,712 5,717,371 7,952,083
Net income for the year, as previously reported – – – – – – – – – 5,768,378 – 5,768,378 101,960 5,870,338
Other comprehensive income (loss),
as previously reported (Note 19) – – – – 523,199 (9,152) 280,581 (215,032) 579,596 – – 579,596 10,358 589,954
Total comprehensive income (loss) for the year,
as previously reported – – – – 523,199 (9,152) 280,581 (215,032) 579,596 5,768,378 – 6,347,974 112,318 6,460,292
Effect of restatements (Note 29) – – – – (77,644) – – 654 (76,990) 340,860 – 263,870 1,118,777 1,382,647
as restated – – – – 445,555 (9,152) 280,581 (214,378) 502,606 6,109,238 – 6,611,844 1,231,095 7,842,939
Transfer of portion of revaluation increment in
property realized through depreciation, net
of deferred income tax effect and foreign
exchange adjustment – – – – – – (143,864) – (143,864) 138,884 – (4,980) (88) (5,068)
BALANCES AT DECEMBER 31, 2015,

AS RESTATED P
= 23,025,318 =
P7,308,860 P
= 4,427,932 P
= 520,769 P
= 467,474 P
= 32,091 P
= 529,416 (P
=360,221) P
= 1,189,529 (P
=27,110,007) (P
=56) P
= 8,841,576 P
= 6,948,378 P
= 15,789,954
See accompanying Notes to Consolidated Financial Statements
65 *SGVFS026729*
-2-

and 17) and 18) Reserves Interest (Note 27) (Notes 12 and 19) and 19) (Notes 19 and 21) Subtotal and 17) (Note 17) of the Parent (Note 9) Total

= 23,025,318 P
= 7,308,860 =
P– P
= 520,769 P
= 324,094 P
= 32,091 P
= 529,416 (P
=336,654) P
= 1,069,716 (P
=21,451,272) (P
=56) P
= 9,952,566 P
= 187,202 P
= 10,139,768
Effect of restatements (Note 29) – – 4,427,932 – 143,380 – – (23,567) 119,813 (5,658,735) – (1,110,990) 6,761,176 5,650,186

AS RESTATED 23,025,318 7,308,860 4,427,932 520,769 467,474 32,091 529,416 (360,221) 1,189,529 (27,110,007) (56) 8,841,576 6,948,378 15,789,954
Net income for the year, as previously reported – – – – – – – – – 3,530,039 – 3,530,039 62,334 3,592,373
Other comprehensive income (loss),
as previously reported (Note 19) – – – – 633,666 5,571 – (292,530) 346,707 – – 346,707 6,012 352,719
as previously reported – – – – 633,666 5,571 – (292,530) 346,707 3,530,039 – 3,876,746 68,346 3,945,092
Effect of restatements (Note 29) – – – – 226,933 – – 1,921 228,854 602,630 – 831,484 1,087,926 1,919,410
as restated – – – – 860,599 5,571 – (290,609) 575,561 4,132,669 – 4,708,230 1,156,272 5,864,502
exchange adjustment – – – – – – (158,608) – (158,608) 164,479 – 5,871 104 5,975
BALANCES AT DECEMBER 31, 2016,

AS RESTATED P
= 23,025,318 =
P7,308,860 P
= 4,427,932 P
= 520,769 P
= 1,328,073 P
= 37,662 P
= 370,808 (P
=650,830) P
= 1,606,482 (P
=22,812,859) (P
=56) P
= 13,555,677 P
= 8,104,754 P
= 21,660,431
66 *SGVFS026729*
-3-

and 17) and 18) Reserves Interest (Note 27) (Notes 12 and 19) and 19) (Notes 19and 21) Subtotal and 17) (Note 17) of the Parent (Note 9) Total

= 23,025,318 P
= 7,308,860 =
P– P
= 520,769 P
= 957,760 P
= 37,662 P
= 370,808 (P
=629,184) P
= 1,257,815 (P
=17,756,754) (P
=56) P
= 13,835,183 P
= 255,652 P
= 14,090,835
Effect of restatements (Note 29) – – 4,427,932 – 370,313 – – (21,646) 348,667 (5,056,105) – (279,506) 7,849,102 7,569,596

AS RESTATED 23,025,318 7,308,860 4,427,932 520,769 1,328,073 37,662 370,808 (650,830) 1,606,482 (22,812,859) (56) 13,555,677 8,104,754 21,660,431
Net income for the year – – – – – – – – – (7,333,595) – (7,333,595) 866,474 (6,467,121)
Other comprehensive income (loss) (Note 19) – – – – (442,418) 1,799,292 556,801 (93,237) 1,820,438 – – 1,820,438 35,568 1,856,006
Total comprehensive income (loss) for the year – – – – (442,418) 1,799,292 556,801 (93,237) 1,820,438 (7,333,595) – (5,513,157) 902,042 (4,611,115)
Acquisition of a subsidiary under common
control through share swap transactions 840,459 3,361,836 (4,202,295) – – – – – – – – – – –
Acquisition of additional interest in a subsidiary
through a share swap transaction 123,543 494,170 – (617,713) – – – – (617,713) – – – – –
Share issuance cost – (15,164) – – – – – – – – – (15,164) – (15,164)
Effect of change in non-controlling interest as a
result of a share swap transaction – – – 89,303 8,649 10 2,415 (4,140) 96,237 – – 96,237 (96,237) –
Acquisition of non-controlling interest of a –
subsidiary – – – – – – – – – – – (3,013,831) (3,013,831)
Dividend attributable to non-controlling interest – – – – – – – – – – – – (17,063) (17,063)
Reduction in authorized capital stock as a result
of equity restructuring (14,190,314) 14,190,283 – – – – – – – – 31 – – –
exchange adjustment – – – – – – (219,693) – (219,693) 193,952 – (25,741) (284) (26,025)
(13,226,312) 18,031,125 (4,202,295) (528,410) (433,769) 1,799,302 339,523 (97,377) 1,079,269 (7,139,643) 31 (5,457,825) (2,225,373) (7,683,198)
BALANCES AT DECEMBER 31, 2017 P

= 9,799,006 P
= 25,339,985 P
= 225,637 (P
=7,641) P
= 894,304 P
= 1,836,964 P
= 710,331 (P
=748,207) P
= 2,685,751 (P
=29,952,502) (P
=25) P
= 8,097,852 P
= 5,879,381 P
= 13,977,233
67 *SGVFS026729*
PAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

2016 2015
2017 Note 29) Note 29)
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax (P
= 6,464,228) P
=7,126,409 P
=6,748,831
Adjustments for:
Depreciation and amortization (Note 10) 8,241,933 7,367,566 6,809,238
Provision for impairment loss - net (Note 10) 1,853,931 – 475,703
Income on manufacturers’ credits (Note 24) (444,733) (500,579) (551,571)
Financing charges (Notes 13, 15 and 16) 3,484,374 2,990,424 3,487,362
Interest income (Notes 5 and 12) (443,673) (256,243) (457,630)
Fair value changes on derivatives (Note 20) (110,180) (3,238,334) 872,611
Unrealized foreign exchange loss (gain) - net 91,694 (853,656) 17,896
Movement in accrued employee benefits (Note 21) 1,149,114 811,582 1,166,884
Loss on disposal of property and equipment and others (Note 10) – 475,176 502,135
Amortization of deferred lease charges (Note 12) 75,294 156,334 91,656
Provision for litigations, ARO and
other noncurrent liabilities - net (Note 16) 109,889 115,387 226,130
Gain on sale of available-for-sale investment (Note 12) – – (1,899,691)
Dividend income (Note 12) (12,320) (7,040) (6,600)
Operating income before working capital changes 7,531,095 14,187,026 17,482,954
Decrease (increase) in:
Receivables (747,379) (1,220,031) 1,450,099
Expendable parts, fuel, materials and supplies (542,800) (332,906) 107,881
Other current assets 225,938 (499,116) (1,743,352)
Increase (decrease) in:
Accounts payable 3,031,789 1,887,753 (667,560)
Accrued expenses and other current liabilities (5,577,660) 2,736,669 (392,776)
Unearned transportation revenue 1,513,093 1,213,966 490,945
Net movement on derivative transactions 56,070 877,464 1,133,867
Net cash generated from operations 5,490,146 18,850,825 17,862,058
Financing charges paid (3,551,700) (2,943,161) (3,431,124)
Interest received 281,265 85,040 380,475
Income taxes paid (including final and creditable withholding taxes) (565,281) (228,679) (450,715)
Net cash flows from operating activities 1,654,430 15,764,025 14,360,694
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (Notes 10 and 23) (13,431,687) (11,392,939) (1,440,277)
Additions to investment properties (Note 11) (492,853) (1,702,594) –
Additions to software – (4,617) (20,714)
Investments in:
Money market placements (159,903) – (28,554)
Available-for-sale investments – – (9,766)
Proceeds from disposal of:
Property and equipment (Note 10) – 86,741 790,830
Available-for-sale investments (Note 12) – 57,907 2,107,210
Assets held for sale (Note 10) – 47,503 1,363,111
Refund of predelivery payments (Note 24) 970,389 2,400,255 1,652,121
Additions to security deposits (Note 12) (1,323,396) (8,720,459) (5,853,213)
Return of various deposits (Note 12) 42,062 10,308,882 219,786
Dividend received (Notes 12 and 18) 7,040 6,600 –
Net cash flows used in investing activities (14,388,348) (8,912,721) (1,219,466)
(Forward)
68 *SGVFS026729*
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2016 2015
2017 Note 29) Note 29)
CASH FLOWS FROM FINANCING ACTIVITIES
Availments of:
Notes payable (Notes 13 and 18) P
=12,879,444 P
=10,688,257 P
=2,048,048
Long-term obligations (Notes 15, 18 and 24) 19,737,728 3,163,815 23,845,483
Payments of:
Notes payable (Notes 13 and 18) (2,781,101) (6,412,954) (14,948,686)
Long-term obligations (Notes 15, 18 and 24) (13,645,544) (12,270,238) (26,963,833)
Acquisition of non-controlling interest (Note 17) (3,030,894) – –
Payment of stock issuance cost (Note 17) (15,164) – –
Net cash flows from (used in) financing activities 13,144,469 (4,831,120) (16,018,988)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (303,555) (170,415) (355,938)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 106,996 1,849,769 (3,233,698)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 9,966,657 8,116,888 11,350,586
CASH AND CASH EQUIVALENTS AT
END OF YEAR (Note 5) P
=10,073,653 P
=9,966,657 P
=8,116,888
69 *SGVFS026729*
PAL HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands, Except When Otherwise Indicated)
1. Corporate Information and Authorization for Issuance of the Consolidated Financial Statements
Corporate Information
PAL Holdings, Inc. (the Parent Company or PHI) was incorporated in the Philippines on May 10, 1930
to engage in the business of a holding company. On October 5, 1979, the Parent Company applied and
was granted an extension of its corporate life by the Philippine Securities and Exchange Commission
(SEC) for another 50 years from May 1980.
The Parent Company and its subsidiaries (collectively referred to herein as “the Group”), is primarily
engaged in air transport of passengers and cargo within the Philippines and between the Philippines
and several international destinations. The Group operates through its major subsidiaries; Philippine
Airlines, Inc. (PAL), the Philippine national flag carrier, and Air Philippines Corporation (APC), a
subsidiary under common control that was indirectly acquired by the Parent Company through Zuma
Holdings Management Corporation (ZUMA) in 2017 (see Note 2). The Parent Company is 86.42% and
89.78% owned by Trustmark Holdings Corporation (Trustmark) as of December 31, 2017 and 2016,
respectively (see Note 2). In October 2014, Buona Sorte Holdings, Inc. (BSHI) and Horizon Global
Investments Limited (HGIL) acquired 9% and 40%, respectively, of the 49% interest previously held
by San Miguel Equity Investments, Inc. (a subsidiary of San Miguel Corporation) in Trustmark. As of
December 31, 2017 and 2016, Trustmark is 60% owned by BSHI and 40% owned by HGIL. BSHI is
the ultimate parent of the Group. BSHI and Trustmark were likewise incorporated in the Philippines
and are part of the Lucio Tan Group of Companies, while HGIL was incorporated in British Virgin
Islands.
The Parent Company’s previously registered office address is 7th Floor, Allied Bank Center,
6754 Ayala Avenue, Makati City. On February 24, 2015, the Parent Company’s Board of Directors
(BOD) approved to amend its Articles of Incorporation to change its office address to 8th Floor, PNB
Financial Center, President Diosdado Macapagal Ave., CCP Complex, Pasay City, Metro Manila. The
stockholders approved such change on September 30, 2015 and the Philippine SEC approved the
amended Articles of Incorporation on December 9, 2015.
PAL Franchise
PAL operates under a franchise, which extends up to the year 2034, granted by the Philippine
Government under Presidential Decree No. 1590. As provided for under the franchise, PAL is subject
to:

b. franchise tax of 2% of the gross revenue derived from nontransport, domestic transport and
whichever is lower, in lieu of all other taxes, duties, royalties, registration licenses and other fees, and
charges of any kind, nature, or description, imposed, levied, established, assessed, or collected by any
municipal, city, provincial or national authority or government agency, except real property tax.
70 *SGVFS026729*
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APC Franchise
APC operates under a franchise for a term of 25 years from August 8, 1997, the date of effectivity of
Republic Act (RA) No. 8339, with some provisions amended under RA No. 9215 effective
May 5, 2003. As provided for under the franchise, APC is subject to, among others:

b. franchise tax of 5% of the gross revenue derived from non-transport, domestic transport and
whichever is lower, in lieu of all other taxes, duties, fees, and licenses of any kind, nature, or description,
imposed, levied, established, assessed, or collected by any municipal, city, provincial or national
authority or government agency, except real property tax.
As further provided for under PAL’s and APC’s franchises, PAL and APC can carry forward as a
deduction from taxable income, net loss incurred in any year up to five years following the year of such
loss (see Note 22). In addition, the payment of the principal, interest, fees, and other charges on foreign
loans obtained by PAL and APC, and all rentals, interest, fees and other charges paid by PAL and APC
to their lessors for the lease of aircraft, engines, spares, other flight or ground equipment, and other
personal property are exempt from all taxes, including withholding tax, provided that the liability for
the payment of said taxes is assumed by the grantee (PAL or APC, as applicable). Under RA No. 9337
or the E-VAT Act of 2005 which took effect on November 1, 2005, the franchise tax of PAL and APC
was abolished and PAL and APC became subject to the corporate income tax. PAL and APC remain
exempt from any taxes, duties, royalties, registration license, and other fees and charges, as may be
provided under PAL’s and APC’s franchises.
Authorization for Issuance of the Consolidated Financial Statements

These consolidated financial statements as at December 31, 2017 and 2016 and for each of the three
years in the period ended December 31, 2017 were authorized for issue by the Parent Company’s BOD
on February 26, 2018.
2. Group Reorganizations, Equity Restructuring and Status of Operation
a. Group reorganizations
On July 26 and September 19, 2006, at separate meetings, the Parent Company’s BOD, by a vote
of at least a majority of its entire membership, and the stockholders of at least two thirds (2/3) of
the outstanding shares of stock, approved the increase in authorized capital stock of the Parent
Company from = P400.00 million divided into 400 million shares with par value of P =1.00 per share
to =
P20.00 billion divided into 20 billion shares with par value of =
P1.00 per share. Out of the increase
in the authorized capital stock, 5.02 billion shares with a total par value of =
P5.02 billion have been
subscribed and in payment thereof, the Parent Company converted to equity a part of its debt to
Trustmark, in the amount of = P9.04 billion, at a rate of P
=1.80 per share. The increase in authorized
capital stock was approved by the Philippine SEC on January 19, 2007.
As a result of the above transactions, the Parent Company had a P =4.02 billion additional
paid-in capital as of March 31, 2007. On October 17, 2007, the Philippine SEC approved the Parent
Company’s request to undergo equity restructuring to wipe out the deficit of the Parent Company
as of March 31, 2007 amounting to = P253.73 million against the additional paid-in capital.
On June 26 and September 28, 2012, the Parent Company’s BOD, by majority vote, and the
stockholders representing at least 2/3 of the outstanding capital stock, approved the increase in
authorized capital stock from P
=1.00 par value
71 *SGVFS026729*
-3-
per share to =
P23.00 billion divided into 23.00 billion shares with P
=1.00 par value per share. Out of
the increase in the authorized capital stock, P
=2.42 billion have been subscribed and fully paid by
way of cash infusion by Trustmark. Accordingly, as a result of the infusion, Trustmark’s ownership
in the Parent Company increased to 99.45%. The increase in authorized capital stock was approved
by the Philippine SEC on December 12, 2012.
On February 4 and March 15, 2013, the BOD, by majority vote, and the stockholders representing
at least 2/3 of the outstanding capital stock, approved the increase in authorized capital stock of the
Parent Company from = P23.00 billion divided into 23.00 billion shares with P=1.00 par value per
share to =
P30.00 billion divided into 30.00 billion shares with =
P1.00 par value per share. The increase
in authorized capital stock was approved by the Philippine SEC on June 28, 2013. Out of the
increase in the authorized capital stock, = P2.42 billion have been subscribed, of which
P
=603.75 million have been fully paid as of December 31, 2016. As a result of the additional
issuance of shares, Trustmark’s ownership in the Parent Company decreased from 99.45% to
89.78% as of December 31, 2016.
Acquisition of additional interest in PAL

On September 26, 2016, the Parent Company’s BOD approved and authorized the acquisition, in a
share swap transaction, of PAL shares from then existing PAL shareholders. Relative thereto, the
BOD likewise approved the share swap ratio of 5:1 or equivalent to five PAL shares to one PHI
share. On December 18, 2017, the Philippine SEC approved the acquisition of 0.64% non-
controlling interest in PAL. The Parent Company issued 123.54 million new shares from its
authorized but unissued capital stock in favor of PAL shareholders who have participated in the
PAL share swap transaction. As of December 31, 2017, PHI has effective ownership interest in
PAL of 98.91%.
Acquisition of APC through ZUMA

On November 28, 2016, the Parent Company’s BOD approved the acquisition, through share swap
transaction, of the shares of ZUMA, the holding company of APC, from its then existing
shareholders, with a share swap exchange ratio of 19:1 corresponding to 19 PHI shares to one
ZUMA share. On December 21, 2017, the Philippine SEC approved the acquisition of ZUMA
through share swap transaction with its existing shareholders. The Parent Company issued
840.46 million new shares from its authorized but unissued capital stock valued at P
=5.00 per share
in favor of Cosmic Holdings Corporation. Accordingly, as of December 31, 2017, the Parent
Company owns 51% of ZUMA (see Note 9). As of February 26, 2018, the acquisition of the
remaining 49% of ZUMA has been suspended.
As a result of the above transactions, Trustmark’s ownership in the Parent Company decreased
from 89.78% to 86.42%.
b. Equity restructuring
On March 28 and May 25, 2017, the BOD, by majority vote, and by the vote of the stockholders
owning or representing at least 2/3 of the outstanding capital stock of the Parent Company,
approved the decrease in authorized capital stock by changing the par value of the shares from
P
=1.00 to P=0.45 per share. Simultaneously, the BOD approved to increase the par value per share
from =P0.45 to = P1.00 per share, without increasing the authorized capital, thus decreasing the
number of shares corresponding to the authorized and subscribed capital stock. The decrease in the
authorized capital by reducing the par value per share to P =0.45 per share and the subsequent
increase in the par value to =
P1.00 per share by reducing the number of shares corresponding to the
authorized capital stock were approved by the Philippine SEC on December 22, 2017. Accordingly,
authorized capital stock as of December 31, 2017 is composed of 13.50 billion shares, with
11.61 billion shares issued and outstanding (see Note 17).
72 *SGVFS026729*
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c. Status of operations
PAL
PAL reported consolidated total comprehensive income (loss) of (P =7.03 billion), P
=5.37 billion and
P
=8.27 billion for the years ended December 31, 2017, 2016 and 2015, respectively. In 2017, PAL
underwent an equity restructuring to reduce its consolidated deficit to P =6.08 billion as of
December 31, 2017 from = P12.14 billion as of December 31, 2016. The Group reported excess of
consolidated total current liabilities over consolidated total current assets by P
=48.31 billion and
P
=30.33 billion as of December 31, 2017 and 2016, respectively. To further improve its results of
operations, the Group lined up various revenue enhancement programs, cash generation strategies
and cost control initiatives.
APC
APC reported a net income amounting to = P588.64 million in 2017, = P493.23 million in 2016, and
P
=21.36 million in 2015 (see Note 9). On January 10, 2017, upon approval of the Philippine SEC, APC
decreased its authorized capital stock which resulted to additional paid-in capital (APIC) amounting
to =
P7,109.98 million. Consequently, upon the approval of the Philippine SEC, APC used the resulting
APIC from the reduction of its authorized capital stock to reduce its deficit to
=
P3,028.44 million as at December 31, 2017. APC is still in a capital deficiency position amounting
to P
=2,957.07 million and P =3,575.08 million as at December 31, 2017 and 2016, respectively. Also,
APC’s current liabilities have exceeded current assets by P
=4,288.43 million and P =4,834.26 million as
at December 31, 2017 and 2016, respectively. For 2018, APC further pursues its three-fold thrust of:
(1) expanding its network through various domestic hubs, (2) improving operational efficiency,
particularly through the use of technology, and (3) enhancing its service delivery.
3. Summary of Significant Accounting and Financial Reporting Policies
Basis of Preparation
The consolidated financial statements have been prepared using the historical cost convention, except
for buildings and improvements under property and equipment which are carried at revalued amounts,
and available-for-sale (AFS) investments and derivative financial instruments which are carried at fair
value. The consolidated financial statements are presented in Philippine Peso, the Parent Company’s
functional and presentation currency. All amounts are rounded to the nearest thousands, except when
otherwise indicated.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with Philippine Financial
Reporting Standards (PFRSs).
Changes in Accounting Policies

The Group applied for the first time certain pronouncements, which are effective for annual periods
beginning on or after January 1, 2017. Adoption of these amendments does not have significant impact
to the Group’s consolidated financial statements.
· Amendments to PFRS 12, Disclosure of Interests in Other Entities, Clarification of the Scope of
the Standard (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle), clarify that the disclosure
requirements in PFRS 12, other than those relating to summarized financial information, apply to
an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a
joint venture or an associate) that is classified (or included in a disposal group that is classified) as
held for sale.
73 *SGVFS026729*
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· Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative, require entities to provide
disclosure of changes in their liabilities arising from financing activities, including both changes
arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The
Group has provided the required information in Note 23 to the consolidated financial statements.
As allowed under the transition provisions of the standard, the Group did not present comparative
information for the year ended December 31, 2016.
· Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses,
clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against
which it may make deductions upon the reversal of the deductible temporary difference related to
unrealized losses. Furthermore, the amendments provide guidance on how an entity should
determine future taxable profits and explain the circumstances in which taxable profit may include
the recovery of some assets for more than their carrying amount.
New Accounting Standards, Amendments to Existing Standards
and Interpretation Effective Subsequent to December 31, 2017
The standards, amendments and interpretations which have been issued but not yet effective as at
December 31, 2017 are listed below. The Group intends to adopt these standards, amendments and
interpretations, if applicable, when they become effective. Unless otherwise stated, adoption of these
standards, amendments and interpretation are not expected to have any significant impact on the
Group’s consolidated financial statements.
Effective in 2018
· PFRS 15, Revenue from Contracts with Customers, establishes a new five-step model that will
apply to revenue arising from contracts with customers. Under PFRS 15, revenue is recognized at
an amount that reflects the consideration to which an entity expects to be entitled in exchange for
transferring goods or services to a customer. The principles in PFRS 15 provide a more structured
approach to measuring and recognizing revenue.
The new revenue standard is applicable to all entities and will supersede all current revenue
recognition requirements under PFRSs. Either a full retrospective application or a modified
retrospective application is required for annual periods beginning on or after January 1, 2018. Early
adoption is permitted. The Group is currently assessing the impact of adopting this standard.
· PFRS 9, Financial Instruments, reflects all phases of the financial instruments project and replaces
PAS 39, Financial Instruments: Recognition and Measurement, and all previous versions of
PFRS 9. The standard introduces new requirements for classification and measurement,
impairment, and hedge accounting. Retrospective application is required but providing
comparative information is not compulsory. For hedge accounting, the requirements are generally
applied prospectively, with some limited exceptions.
The adoption of PFRS 9 will have an effect on the classification and measurement of the Group’s
financial assets and impairment methodology for financial assets, but will have no impact on the
classification and measurement of the Group’s financial liabilities. The adoption will also have an
effect on the Group’s application of hedge accounting and on the amount of its credit losses. The
Group is currently assessing the impact of adopting this standard.
· Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with

PFRS 4, address concerns arising from implementing PFRS 9, the new financial instruments
standard before implementing the new insurance contracts standard. The amendments introduce
two options for entities issuing insurance contracts: a temporary exemption from applying PFRS 9
and an overlay approach. The temporary exemption is first applied for reporting periods beginning
on or after January 1, 2018. An entity may elect the overlay approach when it first applies PFRS 9
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and apply that approach retrospectively to financial assets designated on transition to PFRS 9. The
entity restates comparative information reflecting the overlay approach if, and only if, the entity
restates comparative information when applying PFRS 9.
The overlay approach and the deferral approach will only be available to an entity if it has not
previously applied PFRS 9. The amendments are not applicable to the Group since none of the
entities within the Group have activities that are predominantly connected with insurance or issue
insurance contracts.
· Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based

Payment Transactions, address three main areas: the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification of a share-based
payment transaction with net settlement features for withholding tax obligations; and the
accounting where a modification to the terms and conditions of a share-based payment transaction
changes its classification from cash settled to equity settled.
On adoption, entities are required to apply the amendments without restating prior periods, but
retrospective application is permitted if elected for all three amendments and if other criteria are
met. Early application of the amendments is permitted. The amendments are not applicable to the
Group as it does not have any share-based compensation plan for its officers and employees.
· Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle), clarify that an entity that is a venture capital
organization, or other qualifying entity, may elect, at initial recognition on an investment-by-
investment basis, to measure its investments in associates and joint ventures at fair value through
profit or loss. They also clarify that if an entity that is not itself an investment entity has an interest
in an associate or joint venture that is an investment entity, the entity may, when applying the equity
method, elect to retain the fair value measurement applied by that investment entity associate or
joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This
election is made separately for each investment entity associate or joint venture, at the later of the
date on which (a) the investment entity associate or joint venture is initially recognized; (b) the
associate or joint venture becomes an investment entity; and (c) the investment entity associate or
joint venture first becomes a parent. The amendments should be applied retrospectively, with earlier
application permitted.
· Amendments to PAS 40, Investment Property, Transfers of Investment Property, clarify when an
entity should transfer property, including property under construction or development into, or out
of investment property. The amendments state that a change in use occurs when the property meets,
or ceases to meet, the definition of investment property and there is evidence of the change in use.
A mere change in management’s intentions for the use of a property does not provide evidence of
a change in use. The amendments should be applied prospectively to changes in use that occur on
or after the beginning of the annual reporting period in which the entity first applies the
amendments. Retrospective application is only permitted if this is possible without the use of
hindsight.
· Philippine Interpretation based on International Financial Reporting Interpretations Committee

(IFRIC) 22, Foreign Currency Transactions and Advance Consideration, clarifies that, in
determining the spot exchange rate to use on initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability
relating to advance consideration, the date of the transaction is the date on which an entity initially
recognizes the nonmonetary asset or non-monetary liability arising from the advance consideration.
If there are multiple payments or receipts in advance, then the entity must determine a date of the
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transactions for each payment or receipt of advance consideration. Entities may apply the
amendments on a fully retrospective basis. Alternatively, an entity may apply the interpretation
prospectively to all assets, expenses and income in its scope that are initially recognized on or after
the beginning of the reporting period in which the entity first applies the interpretation or the
beginning of a prior reporting period presented as comparative information in the financial
statements of the reporting period in which the entity first applies the interpretation.
Since the Group’s current practice is in line with the clarifications issued, the Group does not expect
any effect on its consolidated financial statements upon adoption of this interpretation.
Effective in 2019
· PFRS 16, Leases, sets out the principles for the recognition, measurement, presentation and
disclosure of leases and requires lessees to account for all leases under a single on-balance sheet
model similar to the accounting for finance leases under PAS 17, Leases. The standard includes
two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers)
and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement
date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability)
and an asset representing the right to use the underlying asset during the lease term (i.e., the right-
of-use asset). Lessees will be required to separately recognize the interest expense on the lease
liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount of
the remeasurement of the lease liability as an adjustment to the right-of-use asset.
Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under
PAS 17. Lessors will continue to classify all leases using the same classification principle as in
PAS 17 and distinguish between two types of leases: operating and finance leases.
PFRS 16 also requires lessees and lessors to make more extensive disclosures than under
PAS 17.
Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose to
apply the standard using either a full retrospective or a modified retrospective approach. The
standard’s transition provisions permit certain reliefs. The Group is currently assessing the impact
of adopting this standard.
· Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures, clarify that entities
should account for long-term interests in an associate or joint venture to which the equity method
is not applied using PFRS 9. An entity shall apply these amendments for annual reporting periods
beginning on or after January 1, 2019. Earlier application is permitted.
· Amendments to PFRS 9, Prepayment Features with Negative Compensation, allow debt

instruments with negative compensation prepayment features to be measured at amortized cost or
fair value through other comprehensive income. An entity shall apply these amendments for annual
reporting periods beginning on or after January 1, 2019. Earlier application is permitted.
· Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments, addresses the
accounting for income taxes when tax treatments involve uncertainty that affects the application of
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PAS 12 and does not apply to taxes or levies outside the scope of PAS 12, nor does it specifically
include requirements relating to interest and penalties associated with uncertain tax treatments.
The interpretation specifically addresses the following:
§ Whether an entity considers uncertain tax treatments separately

§ The assumptions an entity makes about the examination of tax treatments by taxation
authorities
§ How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates
§ How an entity considers changes in facts and circumstances
An entity must determine whether to consider each uncertain tax treatment separately or together
with one or more other uncertain tax treatments. The approach that better predicts the resolution of
the uncertainty should be followed. The Group is currently assessing the impact of adopting this
interpretation.
Deferred effectivity
· Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture, address the conflict between PFRS 10 and PAS 28 in dealing with the
loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The
amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint
venture involves a business as defined in PFRS 3, Business Combinations. Any gain or loss
resulting from the sale or contribution of assets that does not constitute a business, however, is
recognized only to the extent of unrelated investors’ interests in the associate or joint venture.
On January 13, 2016, the Financial Reporting Standards Council deferred the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards Board
(IASB) completes its broader review of the research project on equity accounting that may result
in the simplification of accounting for such transactions and of other aspects of accounting for
associates and joint ventures.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Parent Company and its
subsidiaries as at December 31, 2017, 2016 and 2015. The financial statements of the subsidiaries are
prepared using consistent accounting policies as those of the Parent Company.
The subsidiaries and the respective percentages of ownership of the Parent Company as at
December 31are as follows:
2017 2016
Direct Indirect Direct Indirect
PAL 98.56% 0.35% 97.92% 0.35%
Sabre Travel Network (Philippines), Inc. (Sabre) – 83.05% – 81.56%
PAL Receivables Co. Ltd. (PRC) – – – –
Mabuhay Miles Inc. (MMI) – 98.91% – 98.91%
Mabuhay Maritime Express Transport Inc.
(MMET) – 98.91% – 98.91%
Fortunate Star Limited (FSL) – 64.29% – 39.56%
(Forward)
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2017 2016
Direct Indirect Direct Indirect
PR Holdings, Inc. (PRI) 82.33% – 82.33% –
ZUMA 51.00% – – –
APC − 50.98% – –
The subsidiaries’ operation and principal activity are as follows: PAL and APC are primarily engaged
in air transport of passengers and cargo within the Philippines and between the Philippines and several
international destinations; Sabre engages in development and marketing of computerized airline
reservation system; PRC is a structured entity over which the PAL has control; FSL is a holding
company of various entities with whom PAL has operating lease agreements; MMI is intended to
promote the frequent flyer program of PAL; PRI and ZUMA are holding companies; MMET is a
company established in 2016 which will engage in water transportation of passengers and cargoes.
PAL, Sabre, MMI, MMET, PRI, ZUMA and APC are domiciled in the Philippines while PRC and FSL
are incorporated in Cayman Islands. As of December 31, 2017 and 2016, MMI and MMET have not
yet started their commercial operations.
As of December 31, 2014, PAL also controls Pacific Aircraft Ltd. (Pacific), Pearl Aircraft Ltd. (Pearl)
and Peerless Aircraft Ltd. (Peerless) which used to be the trustor or beneficiary in the lease of aircraft
prior to the refinancing of the lease. Pacific, Pearl and Peerless filed for dissolution on January 7, 2015
and was deemed effective on April 7, 2015. The derecognition of these subsidiaries did not have an
impact on the consolidated financial statements.
The Parent Company or its subsidiaries controls an investee if and only if the following criteria are met:
· Power over the investee (i.e., existing rights that give it the current ability to direct the relevant
activities of the investee)
· Exposure, or rights, to variable returns from its involvement with the investee
· The ability to use its power over the investee to affect its returns
When the Parent Company or its subsidiaries have less than a majority of the voting or similar rights
of an investee, the Parent Company or its subsidiaries consider all relevant facts and circumstances in
assessing whether they have power over an investee, including:
· The contractual arrangement with the other vote holders of the investee
· Rights arising from other contractual arrangements
· The Parent Company or its subsidiaries voting rights and potential voting rights
The Parent Company or its subsidiaries reassess whether or not they control an investee if facts and
circumstances indicate that there are changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the Parent Company or its subsidiaries obtain control over
the subsidiary and ceases when it ceases to have control of the subsidiary. Assets, liabilities, income
and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
statement of comprehensive income from the date the Group gains control until the date control is lost.
Profit or loss and each component of OCI are attributed to the equity holders of the Parent Company
and to the non-controlling interests, even if this results in the non-controlling interests having a deficit
balance.
The financial statements of the subsidiaries, except PRI, are prepared for the same reporting period as
the Parent Company. PRI prepares additional financial information as of reporting date for
consolidation. All intra-group balances, transactions, unrealized gains and losses, resulting from intra-
group transactions and dividends are eliminated in full.
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A change in the ownership interest in a subsidiary, without a loss of control, is accounted for as an
equity transaction. When the Parent Company loses control of a subsidiary, it:
· Derecognizes the assets (including goodwill) and liabilities of the subsidiary

· Derecognizes the carrying amount of any non-controlling interests
· Derecognizes the cumulative translation differences recorded in equity
· Recognizes the fair value of the consideration received
· Recognizes the fair value of any investment retained
· Recognizes any surplus or deficit in profit or loss
· Reclassifies the Parent Company’s share of components previously recognized in OCI to profit or
loss or retained earnings, as appropriate, as would be required if the Parent Company had directly
disposed of the related assets or liabilities.
Non-controlling interest represents the interest in the subsidiaries not held by the Parent Company and
are presented separately in the consolidated statement of comprehensive income and consolidated
statement of changes in equity and within equity in the consolidated statement of financial position,
separate from the equity attributable to the parent.
Business Combination under Common Control

Where there are business combinations in which all the combining entities within the Group are
ultimately controlled by the same ultimate parent (i.e., Controlling Shareholders) before and after the
business combination and that the control is not transitory (“business combinations under common
control”), the Group accounts such business combinations similar to a pooling of interests. The assets
and liabilities of the acquired entities and that of the Group are reflected at their carrying values. The
difference in the amount recognized and the fair value of the consideration given, is accounted for as
an equity transaction, i.e., as either a contribution or distribution of equity. Further, when a subsidiary
is disposed in a common control transaction, the difference in the amount recognized and the fair value
of the consideration received, is also accounted for as an equity transaction. The Group recorded the
difference as other equity reserves and presented as separate component of equity in the consolidated
statement of financial position. Comparatives shall be restated to include balances and transactions as
if the entities had been acquired at the beginning of the earliest period presented as if the companies
had always been combined.
Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments
that are readily convertible to known amounts of cash with original maturities of three months or less
from dates of acquisition and that are subject to an insignificant risk of changes in value. Cash and cash
equivalents exclude any restricted cash (presented under “Other current assets” and “Other noncurrent
assets”) that is not available for use by the Group and therefore is not considered highly liquid, such as
cash set aside to collateralize various surety bonds.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist only of
cash and cash equivalents as defined above.
Fair Value Measurement

The Group measures financial instruments, such as AFS investments and derivatives, and nonfinancial
assets such as buildings and improvements carried at revalued amounts, at fair value at the end of
reporting period.
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Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:
· in the principal market for the asset or liability, or

· in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best
interest.
A fair value measurement of a nonfinancial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest
level of input that is significant to the fair value measurement as a whole:
· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
· Level 2 - Valuation techniques for which the lowest level of input that is significant to the fair value
measurement is directly or indirectly observable
· Level 3 - Valuation techniques for which the lowest level of input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-
assessing categorization (based on the lowest level of input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on
the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy.
Financial Instruments
Initial recognition
The Group recognizes a financial asset or a financial liability in the consolidated statement of financial
position when it becomes a party to the contractual provisions of the instrument. All regular way
purchases and sales of financial assets are recognized on the trade date, i.e., the date the Group commits
to purchase or sell the assets. Regular way purchases or sales are purchases or sales of financial assets
that require the delivery of assets within the period generally established by regulation or convention
in the market place.
All financial assets and financial liabilities are recognized initially at fair value. In the case of financial
assets and financial liabilities not classified as at fair value through profit or loss, fair value at initial
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recognition includes any directly attributable transaction costs. Premiums on derivative instruments,
representing the fair value of the instrument at inception, are included in the initial recognition.
Classification of financial instruments

Financial instruments are classified as debt or equity in accordance with the substance of the contractual
arrangement. Interests, dividends, gains, and losses relating to a financial instrument classified as a
debt, are reported as expense or income. Distributions to holders of financial instruments classified as
equity are charged directly to equity.
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or
loss, loans and receivables, held-to-maturity investments or AFS investments, or as derivatives
designated as hedging instruments in an effective hedge as appropriate. Financial liabilities are
classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
The Group determines the classification of its financial instruments upon initial recognition and, where
allowed and appropriate, reevaluates this designation at every reporting date.
“Day 1” difference
Where the transaction price in a non-active market is different from the fair value from other observable
current market transactions in the same instrument or based on a valuation technique whose variables
include only data from observable market, the Group recognizes the difference between the transaction
price and the fair value (a “Day 1” difference) in profit or loss unless it qualifies for recognition as
some other type of asset. In cases where data used is not observable, the difference between the
transaction price and model value is only recognized in profit or loss when the inputs become
observable or when the instrument is derecognized. For each transaction, the Group determines the
appropriate method of recognizing the “Day 1” difference amount.
Financial assets and financial liabilities at fair value through profit or loss
Financial assets and financial liabilities at fair value through profit or loss include financial instruments
held for trading, derivative financial instruments and those designated upon initial recognition as at fair
value through profit or loss.
Financial assets and financial liabilities are classified as held for trading if they are acquired for the
purpose of selling or repurchasing in the near term or are designated by management as at fair value
through profit or loss upon initial recognition. Derivatives, including separated embedded derivatives,
are also classified as held for trading unless they are designated as effective hedging instruments as
defined in PAS 39.
Where a contract contains one or more embedded derivatives, the hybrid contract may be designated
as financial asset at fair value through profit or loss, except where the embedded derivative does not
significantly modify the cash flows or it is clear that separation of the embedded derivative is
prohibited.
Financial instruments may be designated as at fair value through profit or loss by management upon
initial recognition if any of the following criteria is met:
· The designation eliminates or significantly reduces the inconsistent treatment that would otherwise
arise from measuring the assets and liabilities or recognizing gains or losses on them on a different
basis.
· The assets or liabilities are part of a group of financial assets or financial liabilities, or both financial
assets and financial liabilities, which are managed and their performance is evaluated on a fair value
basis, in accordance with a documented risk management or investment strategy.
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· The financial instrument contains an embedded derivative, unless the embedded derivative does
not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be
separately recorded.
Financial assets and financial liabilities classified under this category are carried at fair value in the
consolidated statement of financial position, with any gains or losses on changes in fair values
recognized in profit or loss. Interest earned or incurred is recognized as the interest accrues and dividend
income is recorded when the right to receive payment has been established.
Included under this category are the Group’s derivative assets and liabilities.
Loans and receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments that are
not quoted in an active market. Such assets are carried at amortized cost using the effective interest
method less impairment, gains and losses are recognized in profit or loss when the loans and receivables
are derecognized or impaired, and through the amortization process. Loans and receivables (or portion
of loans and receivables) are included in current assets if maturity is within 12 months from the
reporting date. Otherwise, these are classified as noncurrent assets.
Included under this category are the Group’s cash and cash equivalents, receivables, security deposits,
miscellaneous deposits and deposits on aircraft leases.
Held-to-maturity investments
Quoted nonderivative financial assets with fixed or determinable payments and fixed maturities are
classified as held-to-maturity when the Group has the positive intention and ability to hold them to
maturity. Investments intended to be held for an undefined period are not included in this classification.
Where the Group sells other than an insignificant amount of held-to-maturity investments, the entire
category would be tainted and reclassified as AFS investments. Other long-term investments that are
intended to be held to maturity, such as bonds, are subsequently measured at amortized cost. This cost
is computed as the amount initially recognized minus principal repayments, plus or minus the
cumulative amortization using the effective interest method of any difference between the initially
recognized amount and the maturity amount. This calculation includes fees paid or received between
parties to the contract that are an integral part of the effective interest rate, issuance costs and all other
premiums and discounts. For investments carried at amortized cost, gains and losses are recognized in
profit or loss when the investments are derecognized or impaired, and through the amortization process.
Assets under this category are classified as current assets if maturity is within 12 months from the
reporting date. Otherwise, these are classified as noncurrent assets.
The Group has no held-to-maturity investments as of December 31, 2017 and 2016.
AFS investments
AFS investments are nonderivative financial assets that are designated as available-for-sale or are not
classified in any of the three preceding categories. After initial recognition, AFS investments are
measured at fair value, with unrealized gains or losses recognized in OCI and as a separate component
of equity until the investment is derecognized or until the investment is determined to be impaired, at
which time the cumulative gain or loss previously reported in equity is included in profit or loss. The
effective yield and (where applicable) results of foreign exchange restatement for AFS debt investments
are reported immediately in profit or loss. These financial assets (or portion of these financial assets)
are classified as noncurrent assets unless the intention is to dispose such assets within 12 months from
the reporting date.
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AFS investments represent the Group’s investments in equity instruments and club shares as shown in
Note 12.
Other financial liabilities

Other financial liabilities pertain to financial liabilities that are not held for trading nor designated as at
fair value through profit or loss upon the inception of the liability. These include liabilities arising from
operations (e.g., payables and accruals) or borrowings (e.g., long-term obligations). The liabilities are
recognized initially at fair value and are subsequently carried at amortized cost, taking into account the
impact of applying the effective interest method of amortization (or accretion) of any related premium,
discount and any directly attributable transaction costs. Other financial liabilities (or portions of other
financial liabilities) are included in current liabilities when they are expected to be settled within
12 months from the reporting date or the Group does not have an unconditional right to defer settlement
of the liabilities for at least 12 months from the reporting date.
Included under this category are the Group’s notes payable, accounts payable, accrued expenses,
obligations under finance leases, long-term debt and deposits on subleased aircraft (included under
“Reserves and other noncurrent liabilities” in the consolidated statement of financial position).
Derivatives and Hedge Accounting

Freestanding derivatives
For the purpose of hedge accounting, hedges are classified primarily either as: (a) a hedge of the fair
value of a recognized asset or liability or an unrecognized firm commitment (fair value hedge);
(b) a hedge of the exposure to variability in cash flows attributable to an asset or liability or a forecasted
transaction (cash flow hedge); or (c) hedge of a net investment in a foreign operation. The Group did
not designate its derivative transactions as cash flow or fair value hedge for the years ended
December 31, 2017, 2016 and 2015.
At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which the Group wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge. The documentation includes identification of the hedging
instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will
assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s
fair value or cash flows attributable to the hedged risk. Such hedges are assessed on an ongoing basis
to determine that they actually have been highly effective throughout the financial reporting periods for
which they were designated.
In cash flow hedges, changes in the fair value of a hedging instrument that qualifies as a highly effective
cash flow hedge are included in OCI, net of related deferred income tax. The ineffective portion is
immediately recognized in profit or loss.
If the hedged cash flow results in the recognition of an asset or a liability, gains and losses initially
recognized in equity are transferred from equity to profit or loss in the same period or periods during
which the hedged forecasted transaction or recognized asset or liability affect profit or loss.
When the hedge ceases to be highly effective, hedge accounting is discontinued prospectively. In this
case, the cumulative gain or loss on the hedging instrument that has been reported directly in equity is
recognized in profit or loss.
For derivatives that are not designated as effective accounting hedges, any gains or losses arising from
changes in fair value of derivatives are recognized directly in profit or loss.
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Embedded derivatives
Embedded derivatives are separated from the hybrid contracts and accounted for at fair value through
profit or loss when the entire hybrid contracts (composed of the host contract and the embedded
derivative) are not accounted for at fair value through profit or loss, the economic risks of the embedded
derivatives are not closely related to those of their respective host contracts, and a separate instrument
with the same terms as the embedded derivative would meet the definition of a derivative.
Changes in fair values are included in profit or loss. Derivatives are carried as assets when the fair
value is positive and as liabilities when the fair value is negative.
The Group assesses whether an embedded derivative is required to be separated from the host contract
and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent
reassessment is prohibited unless there is a change in the terms of the contract that significantly
modifies the cash flows that otherwise would be required under the contract, in which case reassessment
is required. The Group determines whether a modification to cash flows is significant by considering
the extent to which the expected future cash flows associated with the embedded derivative, the host
contract or both have changed and whether the change is significant relative to the previously expected
cash flows on the contract.
Derecognition of Financial Assets and Financial Liabilities

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognized when:
· the rights to receive cash flows from the asset have expired
· the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay them in full without material delay to a third party under a “pass-through” arrangement
· the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred
substantially all the risks and rewards of ownership of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of ownership of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred
nor retained substantially all the risks and rewards of ownership of the asset nor transferred control of
the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset.
If a transfer of financial asset does not result in derecognition since the Group has retained substantially
all the risks and rewards of the ownership of the transferred asset, the Group continues to recognize the
transferred asset in its entirety and recognizes a liability for the consideration received.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or
has expired.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such modification is
treated as the derecognition of the carrying value of the original liability and the recognition of a new
liability at fair value, and any resulting difference is recognized in profit or loss.
Impairment of Financial Assets

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or
group of financial assets is impaired. If such evidence exists, any impairment loss is recognized in
profit or loss.
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Financial assets carried at amortized cost

The Group first assesses whether impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually
significant. If it is determined that no objective evidence of impairment exists for an individually
assessed financial asset, whether significant or not, the asset is included in a group of financial assets
with similar credit risk characteristics and that group of financial assets is collectively assessed for
impairment. Assets that are individually assessed for impairment and for which an impairment loss is,
or continues to be recognized, are not included in a collective assessment of impairment.
For financial assets carried at amortized cost, whenever it is probable that the Group will not collect all
amounts due according to the contractual terms of the receivables, an impairment loss has been
incurred. In relation to receivables, a provision for impairment is made when there is objective evidence
(such as the probability of insolvency or significant financial difficulties of the debtor) that the Group
will not be able to collect all of the amounts due under the original terms of the invoice. The amount of
the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the financial asset’s original effective interest rate. The
carrying amount of the asset is reduced either directly or through the use of an allowance account. Any
loss determined is recognized in profit or loss.
Impaired receivables are derecognized when there is no realistic prospect of future recovery and all
collateral has been realized.
If, in a subsequent period, the amount of the estimated impairment loss decreases because of an event
occurring after the impairment was recognized, the previously recognized impairment loss is reversed
to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
Any subsequent reversal of an impairment loss is recognized in profit or loss.
AFS investments
In case of equity investments classified as AFS investments, objective evidence of impairment would
include a significant or prolonged decline in the fair value of the investments below their cost. When
there is evidence of impairment loss, the cumulative loss, measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognized in profit or loss, is removed from OCI and recognized in profit or loss.
Impairment losses on investment in equity instruments are not reversed through income. Increases in
fair value after impairment are recognized in OCI.
In the case of debt instruments classified as AFS, impairment is assessed based on the same criteria as
financial assets carried at amortized cost. Future interest income continues to be accrued based on the
reduced carrying amount using the rate of interest used to discount cash flows for the purpose of
measuring impairment loss. If, in subsequent year, the fair value of a debt instrument increases and the
increase can be objectively related to an event occurring after the impairment loss was recognized in
profit or loss, the impairment loss is reversed through profit or loss.
Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities
simultaneously. The Group assesses that it has a currently enforceable right of offset if the right is not
contingent on a future event, and is legally enforceable in the normal course of business, event of
default, and event of insolvency or bankruptcy of the Group and all of the counterparties.
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Expendable Parts, Fuel, Materials and Supplies

Expendable parts, fuel, materials and supplies are stated at the lower of cost and net realizable value.
Cost, which includes the purchase price and other costs incurred in bringing these expendable parts,
fuel, materials and supplies to their present location or condition, is determined using the moving
weighted average method. Net realizable value represents replacement cost of these expendable parts,
fuel, materials and supplies, considering factors such as age and physical condition of these assets.
Prepayments
Prepayments include advance payments of various materials, various rentals and other services that are
yet to be delivered and from which future economic benefits are expected to flow to the Group within
the normal operating cycle or within 12 months from the reporting date. They are initially measured at
the amount paid in advance by the Group for the purchase of goods and services and are subsequently
decreased by the amount of expense incurred. Prepayments are included in “Other current assets”
account in the consolidated statement of financial position.
Assets Held for Sale

Noncurrent assets are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. The asset must be available for immediate
sale in its present condition subject only to terms that are usual and customary for sales of such asset
and its sale must be highly probable. For the sale to be highly probable, (a) an appropriate level of
management must be committed to a plan to sell the asset, (b) an active program must have been
initiated, (c) the asset must be actively marketed for sale at a price that is reasonable in relation to its
current fair value, (d) the sale should be expected to qualify for recognition as a completed sale within
one year from the date of classification and (e) actions required to complete the plan should indicate
that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Noncurrent assets classified as held for sale are measured at the lower of their previous carrying
amount, net of any impairment, and fair value less costs to sell.
Impairment loss is recognized for any subsequent write-down of the asset to fair value less costs to sell.
Gain for any subsequent increase in fair value less costs to sell of an asset is also recognized, but not in
excess of the cumulative impairment loss that has been previously recognized.
If the Group has classified an asset as held for sale but the criteria as set out above are no longer met,
the Group ceases to classify the asset as held for sale. The Group measures a noncurrent asset that
ceases to be classified as held for sale at the lower of (a) its carrying amount before the asset was
classified as held for sale, adjusted for any depreciation, amortization or revaluations that would have
been recognized had the asset not been classified as held for sale, and (b) its recoverable amount at the
date of the subsequent decision not to sell.
Property and Equipment

Property and equipment (except buildings and improvements) are stated at cost less accumulated
depreciation and any impairment in value. Buildings and improvements are stated at revalued amounts
less accumulated depreciation and any impairment in value. Revalued amounts were determined based
on valuations performed by various qualified, independent and Philippine SEC-accredited appraisers.
Revaluations are made with sufficient regularity.
For subsequent revaluations, the accumulated depreciation at the date of the revaluation is eliminated
against the gross carrying amount of the asset. The amount of adjustment to accumulated depreciation
forms part of the increase or decrease in the carrying amount. Any resulting increase in the asset’s
carrying amount as a result of the revaluation is recognized as OCI credited directly to equity as
“Revaluation increment - net of deferred income tax”. Any resulting decrease is directly charged against
86 *SGVFS026729*
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the related revaluation increment previously recognized in respect of the same asset and any excess is
charged against profit or loss.
The portion of revaluation increment is transferred to deficit when these are realized through
depreciation or upon the disposal or retirement of buildings and improvements.
The initial cost of property and equipment comprises its purchase price, any related capitalizable
borrowing costs attributed to predelivery payments incurred on account of aircraft acquisition and other
qualifying assets under construction, and other directly attributable costs of bringing the asset to its
working condition and location for its intended use. Manufacturers’ credits received from aircraft and
engine manufacturers which were directly applied against the purchase price of the aircraft are recorded
upon delivery of the related aircraft and engines as a reduction from the cost of the property and
equipment (including those under finance lease). Manufacturer’s credits that are not applied to aircraft
and engines purchased, and whose risks and rewards are retained with the Group, are recognized as
income as it is earned.
Expenditures incurred after the property and equipment have been put into operation, such as repairs
and maintenance costs, are normally charged to profit or loss in the period in which the costs are
incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an
increase in the future economic benefits expected to be obtained from the use of an item of property
and equipment beyond its originally assessed standard of performance, the expenditures are capitalized
as additional cost of property and equipment.
Expenditures for scheduled and mandatory heavy maintenance on aircraft’s airframe and landing gear
are capitalized at cost and depreciated over the estimated number of years until the next major overhaul.
Generally, heavy maintenance visits are required every six to eight years for airframe and ten years for
landing gear. Engine overhauls are expensed as incurred.
Depreciation, which commences when the asset is available for its intended use, is computed on a
straight-line basis over the following estimated useful lives of the assets:
Number of Years
Passenger aircraft (owned and under finance lease) 4 to 20
Engines 4 to 20
Leasehold improvements 4 to 12
Buildings and improvements 5 to 40
Rotable and reparable parts 3 to 18
Ground property and equipment 3 to 8
Depreciation ceases at the earlier of the date that the item is classified as held for sale (or included in a
disposal group that is classified as held for sale) in accordance with PFRS 5, Noncurrent Assets Held
for Sale and Discontinued Operations, and the date the asset is derecognized.
Leasehold improvements are amortized over the term of the lease or life of the improvements of three
to four years, whichever is shorter. Assets under finance lease are depreciated over the term of the lease
or the useful life of the asset, whichever is shorter, unless there is reasonable certainty that the
ownership of the asset will transfer to the Group (e.g., bargain purchase option). In which case, the
asset is depreciated over its useful life.
The estimated useful lives, depreciation and amortization method and residual values are reviewed
periodically to ensure that the periods, method of depreciation and amortization and residual values are
consistent with the expected pattern of economic benefits from items of property and equipment. Any
changes in the estimates arising from the review are accounted for prospectively.
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When items of property and equipment are sold or retired, their costs, accumulated depreciation and
amortization, any impairment in value and related revaluation increment are eliminated from the
accounts. Any gain or loss resulting from their disposal is recognized in profit or loss.
“Construction in progress” represents aircraft, vessels, buildings and improvements and other ground
property under construction, while “Predelivery payments” represent advance payments for aircraft
acquisition. “Construction in progress” and “Predelivery payments” are not depreciated until such time
when the construction of the relevant assets is completed and when assets are available for their
intended use.
Asset Restoration Obligation (ARO)

PAL is required under various aircraft lease agreements to restore the leased aircraft to their original
condition and to bear the cost of dismantling and restoration at the end of the lease term. For certain
lease agreements, PAL provides for these costs over the terms of the leases through contribution to a
maintenance reserve fund (MRF), based on aircraft hours flown and engine cycles until the next
scheduled checks. If the estimated cost of dismantling and restoration is expected to exceed the
cumulative MRF or where the lease agreement does not require contribution of MRF, an additional
obligation is recognized over the remaining term of the leases. The amount of obligation is carried at
amortized cost using the effective interest method.
Investment Properties
Investment properties include parcels of land, buildings and improvements not used in operations.
Investment properties are measured initially at cost, including any transaction costs. The carrying
amount includes the cost of replacing part of an existing investment property at the time that cost is
incurred (if the recognition criteria are met) and excludes the costs of day-to-day servicing of an
investment property.
Investment properties (except land) are subsequently measured at cost less accumulated depreciation
and any impairment in value. Land is subsequently carried at cost less any impairment in value.
Depreciation of depreciable investment properties, which commences when the asset is available for
its intended use, is calculated on a straight-line basis over the estimated useful lives ranging from six
to eight years.
Depreciation ceases at the earlier of the date that the item is classified as held for sale (or included in a
disposal group that is classified as held for sale) in accordance with PFRS 5 and the date the asset is
derecognized.
Transfers are made to investment properties when, and only when, there is a change in use, evidenced
by cessation of owner-occupation or commencement of an operating lease to another party. Transfers
are made from investment properties when, and only when, there is a change in use, evidenced by
commencement of owner-occupation or commencement of development with a view to sell.
When an item of property and equipment previously carried at revalued amount is transferred to
investment properties, the carrying value at the date of reclassification is retained as the new cost of the
investment property. The related revaluation increment is closed to retained earnings or deficit.
Investment properties are derecognized when they are either disposed of or permanently withdrawn
from use and no future economic benefit is expected from their disposal. Any gains or losses on the
retirement or disposal of an investment property are recognized in profit or loss.
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Impairment of Property and Equipment and Investment Properties

The carrying values of property and equipment and investment properties are reviewed for impairment
when events or changes in circumstances indicate that the carrying values may not be recoverable. If
any such indication exists and where the carrying values exceed the estimated recoverable amounts, the
assets or cash generating units (CGU) are written down to their recoverable amounts. The recoverable
amount is the greater of fair value less costs to sell and value-in-use. In assessing value-in-use, the
estimated future cash flows are discounted to their present value using a pretax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For an asset
that does not generate largely independent cash inflows, the recoverable amount is determined for the
CGU to which the asset belongs. Impairment losses, if any, are recognized in profit or loss.
Recovery of impairment losses recognized in prior periods is recorded when there is an indication that
the impairment losses recognized for the asset no longer exist or have decreased. The recovery is
recognized in profit or loss. However, the increased carrying amount of the asset due to reversal of an
impairment loss is recognized only to the extent that it does not exceed the carrying amount (net of
accumulated depreciation and amortization) that would have been determined had impairment loss not
been recognized for that asset in prior years.
Compensation from third parties for the items of property and equipment that were impaired is included
in profit or loss when the compensation becomes receivable (i.e., recovery becomes virtually certain).
Impairment or losses of items of property and equipment, related claims for or payments of
compensation from third parties and any subsequent purchase or construction of replacement assets are
considered as separate economic events and are accounted for separately.
Leases
The determination of whether the arrangement is, or contains a lease, is based on the substance of the
arrangement at inception date of whether the fulfillment of the arrangement depends on the use of a
specific asset or assets and the arrangement conveys a right to use the asset. A reassessment is made
after the inception of the lease if any of the following applies: (a) there is a change in contractual terms,
other than a renewal or extension of the arrangement; (b) a renewal option is exercised or extension
granted, unless the term of the renewal or extension was initially included in the lease term; (c) there is
a change in the determination of whether fulfillment is dependent on a specified asset; or (d) there is
substantial change to the asset.
Where the reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios (a), (c), or (d) above, and at the
date of renewal or extension period for scenario (b).
Group as Lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to
ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased
property or, if lower, at the present value of the minimum lease payments. Obligations arising from
aircraft under finance lease agreements are classified in the consolidated statement of financial position
as part of “Long-term obligations”.
Lease payments are apportioned between financing charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Financing charges are
charged directly against profit or loss.
Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are
classified as operating leases. Operating lease expense is recognized in profit or loss on a straight-line
89 *SGVFS026729*
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basis over the terms of the lease agreements. Contingent rents (e.g., lease payments that are based on
market indices) are charged as expense in the period in which they are incurred. The aggregate benefit
of incentives provided by the lessor is recognized as a reduction of rental expense over the lease term
on a straight-line basis.
A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset. If
a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is at fair
value, any profit or loss is recognized immediately. If the sale price is below fair value, any profit or
loss is recognized immediately except that, if the loss is compensated for by future lease payments at
below market price, it is deferred and amortized in proportion to the lease payments over the period for
which the asset is expected to be used. If the sale price is above fair value, the excess over fair value
is deferred and amortized over the period for which the asset is expected to be used. If a sale and
leaseback transaction results in a finance lease, any difference between the sales proceeds and the
carrying amount is deferred and amortized over the lease term.
Group as Lessor
Leases where the Group does not transfer substantially all the risks and rewards of ownership of the
assets are classified as operating leases. Lease income is recognized on a straight-line basis over the
lease term. Initial direct costs incurred in negotiating operating leases are added to the carrying amount
of the leased asset and recognized over the lease term on the same basis as the rental income.
Contingent rents are recognized as revenue in the period in which they are earned.
Provisions and Contingencies

Provisions are recognized when (a) the Group has a present obligation (legal or constructive) as a result
of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; and (c) a reliable estimate of the amount of the obligation can be made.
Where the Group expects a provision to be reimbursed, for example, under an insurance contract, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.
If the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pretax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as interest expense.
Contingent liabilities are not recognized in the consolidated statement of financial position. They are
disclosed in the notes to consolidated financial statements unless the possibility of an outflow of
resources embodying economic benefits is remote. A contingent asset is not recognized in the
consolidated statement of financial position but disclosed in the notes to consolidated financial
statements when an inflow of economic benefits is probable. If it is virtually certain that an inflow of
economic benefits will arise, the asset and the related income are recognized in the consolidated
financial statements.
Equity
Capital stock is measured at par value of all shares issued. Incremental costs incurred directly
attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax.
When the shares are sold at premium, the difference between the proceeds and the par value is credited
to the “Additional paid-in capital” account.
Deficit represents the cumulative balance of net income or loss, net of any dividend declaration.
90 *SGVFS026729*
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Treasury Stock
Where the Parent Company purchases its own capital stock (treasury shares), the consideration paid,
including any directly attributable incremental costs (net of related taxes), is deducted from equity until
the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued,
any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effect, is included in equity attributable to the Parent Company’s equity holders.
Revenue and Related Commissions

Passenger ticket, cargo waybill sales and related fuel and insurance surcharges, excluding portion
relating to awards under the frequent flyer program, are initially recorded as “Unearned transportation
revenue” in the consolidated statement of financial position until recognized as “Revenue” in the
consolidated statement of comprehensive income when the transportation service is rendered (e.g.,
when passengers and cargo are flown/lifted). Passenger tickets that are unused for extended period are
recognized as revenue based on an assessment of the ticket terms and conditions and refund processing
period. Revenue from charter, mail, excess baggage and other transport-related and ancillary services
revenue are recognized upon completion of services rendered. Revenue from charter arrangements is
recognized when the related charter service is rendered. Commission income earned by Sabre is
recognized upon acceptance of bookings through Sabre’s computerized reservation system. Revenue
from in-flight sales are recognized upon delivery to and acceptance of the goods by customers.
Revenue is measured at the fair value of the consideration received or receivable, excluding sales taxes,
discounts and commissions
The related commission is recognized as expense when the transportation service is provided and is
included as part of “Reservation and sales” in the consolidated statement of comprehensive income.
Commissions under codeshare arrangements where PAL is the marketing airline and is considered an
agent are recognized as revenue when the passenger or cargo is flown or lifted by the operating airline.
Revenue is recognized on a net basis.
PAL and APC determine whether they are acting as principal or agent in their revenue arrangements.
Considerations to determine that PAL and APC are acting as principal include: (1) PAL and APC have
the primary responsibility to provide the service to the customer, (2) PAL and APC bear the inventory
and credit risks, and (3) PAL and APC have the latitude in establishing prices.
Liability Under Frequent Flyer Program

PAL operates a frequent flyer program called “Mabuhay Miles”. A portion of passenger revenue
attributable to the award of frequent flyer miles, estimated based on expected utilization of these
benefits, is deferred until utilized. The fair value of the consideration received in respect of the initial
sale is allocated to the award credits based on its fair value. The fair value of the miles expected to be
redeemed is estimated using the applicable fare based on the historical redemption and the residual
amount from the consideration received is allocated to the service already rendered. The deferred
revenue is included under “Reserves and other noncurrent liabilities” in the consolidated statement of
financial position. Any remaining unutilized benefits are recognized as revenue upon redemption or
expiry.
Interest and Dividend Income

Interest on cash, cash equivalents and other short-term and long-term cash investments is recognized
as interest accrues using the effective interest method. Dividend income from AFS equity investments
is recognized when the Group’s right to receive payment is established.
91 *SGVFS026729*
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Short-term Employee Benefits

Short-term employee benefits include items such as salaries and wages, social security contributions
and nonmonetary benefits, if expected to be settled wholly within 12 months after the reporting date in
which the employees rendered the related services. Short-term employee benefits are recognized as
expense as incurred. When an employee has rendered service to the Group during the reporting period,
the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in
exchange for that service as a liability (accrued expense), after deducting any amount already paid.
Retirement Benefits Cost and Other Long-term Employee Benefits

Accrued employee benefits, as presented in the consolidated statement of financial position, consist of
retirement benefits under defined benefit plans and other long-term employee benefits.
Retirement benefits - defined benefits plans

Accrued retirement benefits is the present value of the defined benefit obligation at the end of the
reporting period reduced by the fair value of plan assets, adjusted for any effect of limiting a net defined
benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits
available in the form of refunds from the plan or reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method. The retirement benefits cost comprises of service cost, net interest on the
net defined benefit liability or asset and remeasurements of net defined benefit liability or asset.
Service costs which include current service costs, past service costs and gains or losses on non-routine
settlements are recognized as expense in profit or loss. Past service costs are recognized when plan
amendment or curtailment occurs. These amounts are calculated periodically by independent qualified
actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net defined
benefit liability or asset that arises from the passage of time which is determined by applying the
discount rate based on government bonds to the net defined benefit liability or asset at the beginning of
the year, taking account of any changes in the net defined benefit liability or asset during the period as
a result of contribution or benefit payment. Net interest on the net defined benefit liability or asset is
recognized as expense or income in profit or loss.
Remeasurements comprising actuarial gains and losses, difference between interest income and actual
return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined
benefit liability) are recognized immediately in OCI in the period in which they arise. Remeasurements
are not reclassified to profit or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not available
to the creditors of the Group, nor can they be paid directly to the Group. The fair value of plan assets
is based on market price information. When no market price is available, the fair value of plan assets is
estimated by discounting expected future cash flows using a discount rate that reflects both the risk
associated with the plan assets and the maturity or expected disposal date of those assets (or, if they
have no maturity, the expected period until the settlement of the related obligations). If the fair value
of the plan assets is higher than the present value of the defined benefit obligation, the measurement of
the resulting defined benefit asset is limited to the present value of economic benefits available in the
form of refunds from the plan or reductions in future contributions to the plan.
The Group’s right to be reimbursed of some or all of the expenditures required to settle a defined benefit
obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually
certain.
92 *SGVFS026729*
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Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of an employee’s
employment as a result of either the Group’s decision to terminate an employee’s employment before
the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the
termination of employment.
A liability and expense for termination benefit is recognized at the earlier of when the entity can no
longer withdraw the offer of those benefits and when the entity recognizes related restructuring costs.
Initial recognition and subsequent changes to termination benefits are measured in accordance with the
nature of the employee benefit, as either post-employment benefits, short-term employee benefits, or
other long-term employee benefits.
Other long-term employee benefits

Other long-term employee benefits such as vacation leave and sick leave commutation and retention
programs are measured using the projected unit credit method. Actuarial gains and losses on these
employee benefits are recognized in full in profit or loss.
Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of a
qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset
are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are
capitalized until the assets are substantially ready for their intended use.
To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a
qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by
applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the
weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding
during the period, other than borrowings made specifically for the purpose of obtaining a qualifying
asset. The amount of borrowing costs that the Group capitalizes during a period shall not exceed the
amount of borrowing costs it incurred during that period. All other borrowing costs are expensed as
incurred.
Expenses
Expenses are recognized when incurred. These are measured at the fair value of the consideration paid
or payable.
Other Comprehensive Income

Other comprehensive income comprises items of income and expense (including items previously
presented under the consolidated statement of changes in equity) that are not recognized in profit or
loss for the year in accordance with PFRS. Other comprehensive income of the Group includes gains
and losses on changes in fair value of AFS investments, changes in revaluation increment of property
and equipment, remeasurement gains or losses on defined benefit plans and effect of foreign exchange
translation of the assets and liabilities of PAL from its functional currency into presentation currency
of the Group.
Income Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amounts are those that have been enacted or substantively enacted as of end of reporting
period.
93 *SGVFS026729*
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Current income tax relating to items recognized directly in equity is recognized in equity and not in
profit or loss. Management periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes provisions
where appropriate.
Deferred income tax

Deferred income tax is provided using the liability method on all temporary differences between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the
reporting date.
Deferred income tax liabilities are recognized for all taxable temporary differences, including asset
revaluations. Deferred income tax assets are recognized for all deductible temporary differences, carry
forward benefits of unused tax credits from the excess of minimum corporate income tax (MCIT) over
the regular corporate income tax and unused net operating loss carryover (NOLCO), to the extent that
it is probable that sufficient future taxable profits will be available against which the deductible
temporary differences and carry forward benefits of unused tax credits and unused NOLCO can be
utilized. Deferred income tax, however, is not recognized when it arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss. Deferred income tax liabilities are not
provided on nontaxable temporary differences associated with investments in domestic subsidiaries.
With respect to investments with other subsidiaries, deferred income tax liabilities are recognized
except where the timing of reversal of the temporary differences can be controlled by the parent or
investor and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient future taxable profits will be available to allow all
or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are
reassessed at each reporting date and are recognized to the extent that it has become probable that
sufficient future taxable profits will allow the deferred income tax asset to be recovered.
Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are
expected to apply in the period when the asset is realized or the liability is settled, based on tax rates
and tax laws that have been enacted or substantively enacted as of reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly
in equity.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right
exists to set off current income tax assets against current income tax liabilities and the deferred income
taxes relate to the same taxable entity and the same taxation authority.
Foreign Currency-denominated Transactions and Translations

Transactions denominated in currencies other than the Philippine Peso are recorded using the exchange
rate prevailing at the date of the transaction. Outstanding monetary assets and liabilities denominated
in foreign currencies are translated using the closing rate of exchange at the end of the reporting period.
Any resulting foreign exchange gains or losses are taken to income or loss in the consolidated statement
of comprehensive income.
The functional currency of PAL is the US Dollar (USD). As of the reporting date, the assets and
liabilities of this subsidiary are translated into the presentation currency of the Group at the rate of
exchange ruling at the reporting date and its statement of comprehensive income accounts are translated
94 *SGVFS026729*
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at the weighted average exchange rates for the year. The exchange differences arising on the translation
are recognized in the consolidated statement of comprehensive income and reported as a separate
component of equity as “Cumulative translation adjustment”. On disposal of a foreign subsidiary, the
deferred cumulative amount recognized in equity relating to that particular foreign operation shall be
recognized in profit or loss. Exchange differences arising from elimination of intragroup balances and
intragroup transactions are recognized in profit or loss.
Basic/Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated based on net income (loss) and total comprehensive income
(loss) for the period. Earnings (loss) per share is calculated by dividing net income (loss) before OCI
or total comprehensive income (loss) for the period by the weighted average number of issued and
outstanding shares of stock during the period, after giving retroactive effect to any stock dividends
declared or stock rights exercised. The Group has no dilutive potential common shares.
Events After the Reporting Date

Post year-end events that provide additional information about the Group’s position at the reporting
date (adjusting events), if any, are reflected in the consolidated financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to consolidated financial statements when
material.
4. Summary of Significant Accounting Judgments, Estimates and Assumptions
The preparation of these consolidated financial statements in accordance with PFRS requires
management to make judgments, estimates and assumptions that affect the amounts reported in the
consolidated financial statements. These judgments, estimates and assumptions are based on
management’s evaluation of relevant facts and circumstances as of the end of the reporting period.
Future events may occur which will cause the assumptions used in arriving at the estimates to change.
The effects of any change in estimates are reflected in the consolidated financial statements as they
become reasonably determinable. Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that period, or in the period of the revision and
future periods if the revision affects both current and future periods.
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on amounts
recognized in the consolidated financial statements:
Determination of functional currency

Judgment is exercised in assessing various factors in determining the functional currency of each entity
within the Group, including prices of goods and services, competition, cost and expenses and other
factors including the currency in which financing is primarily undertaken by each entity. Additional
factors are considered in determining the functional currency of a foreign operation, including whether
its activities are carried as an extension of that of the Parent Company rather than being carried out with
significant autonomy.
The Parent Company, based on the relevant economic substance of the underlying circumstances, has
determined its functional currency to be the Philippine peso. It is the currency of the primary economic
environment in which it operates. The functional currency of PAL, its major subsidiary, has been
determined to be USD.
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Assessment of control on investees

The Parent Company or its subsidiaries make an assessment whether or not it controls an investee by
considering all relevant facts and circumstances that indicates that the Parent Company or its
subsidiaries are exposed, or have rights, to variable returns from their involvement with the investee
and have the ability to affect those returns through its power over the investee. A reassessment is made
if circumstances indicate that there are changes in these control elements. The Parent Company has
determined that it controls its subsidiaries.
An entity is considered a structured entity and included in consolidation even in case where the Group
owns less than one-half or none of the structured entity’s equity, when the substance of the relationship
indicates that the structured entity is being controlled by the Group. While PAL has no ownership
interest in PRC, the latter’s purpose is to facilitate PAL’s sale of receivables and obtain financing from
a third party bank. In substance, the majority of the benefits from the activities of PRC flow to PAL
and ultimately to the Parent Company. Based on these facts and circumstances, management has
concluded that PAL has control over PRC, and therefore, included PRC in the consolidated financial
statements of the Group.
Assessment of business combination under common control

The Parent Company acquired Zuma and FSL as part of the group reorganization plan. The Parent
Company, Zuma and FSL are under the common control of the Tan Family before and after the business
combination. Thus, management assessed that the acquisition of Zuma and FSL are considered business
combination under common control for which pooling of interest method was applied in the preparation
of the consolidated financial statements (see Notes 9 and 29).
Classification of financial instruments

In 2015, PAL sold its rights to the cash flows arising from certain credit card receivables including
future credit card receivables, for a cash consideration of P=15.31 billion ($325.00 million). In 2015,
PAL also sold its rights to the cash flows arising from passenger and cargo receivables denominated in
Japanese Yen through certain agents in Japan, including future receivables, for a cash consideration of
P
=9.42 billion ($200.00 million). PAL has determined that substantially all the risks and rewards of the
portfolios sold in 2015 have been retained and consequently, the receivables were not derecognized.
PAL accounted for the transaction as a collateralized borrowing and recorded the cash received as a
financial liability. The carrying value of these financial liabilities amounted to P=26.46 billion and
P
=18.70 billion as of December 31, 2017 and 2016, respectively (see Note 15).
Classification of assets held for sale

The Group classifies a noncurrent asset as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use. For this to be the case, the
asset must be available for immediate sale in its present condition and its sale must be highly probable.
In December 2017, management determined that certain aircraft and engines are available for
immediate sale in their present condition within the next 12 months. Management reclassified these
aircraft and engines from “Property and equipment - at cost” into “Assets held for sale” in the
consolidated statement of financial position as of December 31, 2017 (see Note 10).
In 2015, management reclassified certain rotable and reparable parts from “Property and equipment -
at cost” account into “Assets held for sale” account in the consolidated statement of financial position
as of December 31, 2015. These rotable and reparable parts with carrying value amounting to
=
P0.15 million as of December 31, 2015 were sold in 2016 (see Note 10).
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Impairment of AFS investments

The Group treats AFS equity investments as impaired when there has been a significant or prolonged
decline in the fair value below its cost or where other objective evidence of impairment exists. The
determination of what is “significant” or “prolonged” requires judgment. The Group considers the
decline in value as significant when the value generally decreased by 20% or more and prolonged if the
decline persisted for a period longer than 12 months for equity securities. In addition, the Group
evaluates other factors, including normal volatility in share price for quoted equity shares and financial
performance of the investee company for unquoted equity shares. No objective evidence of impairment
on AFS equity investments was identified during the years ended December 31, 2017 and 2016, thus
no impairment was recognized. The carrying value of AFS equity investments amounted to
P
=2.07 billion and P
=269.50 million as of December 31, 2017 and 2016, respectively (see Note 12).
Determination of whether the Group is acting as principal or agent

Management exercises judgment in determining whether the Group is acting as a principal or as an
agent under its arrangements. Management has determined that PAL is acting as principal under the
Joint Marketing and Licensing Agreement and Block Space Code Share Agreement (Code Share
Agreement)(see Note 18) considering that it has the primary responsibility of providing the service to
the passengers, bears the seat utilization and credit risks, and has significant control in setting
the prices of the ticket. Management, on the other hand, has determined that PAL is acting as an agent
on other codeshare arrangements where it is acting as the marketing airline considering that the risks
and rewards are with the operating airlines.
Determination of whether an arrangement contains a lease

Management exercises judgment in determining whether an arrangement is, or contains, a lease, which
requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a
specific asset or assets and the arrangement conveys a right to use the asset. Management has
determined that its Code Share Agreement with Air Philippines Corporation (APC) does not contain a
lease considering that the fulfillment of the obligation is not restricted in the use of specific aircraft and
APC maintains the right to control and operate the aircraft (see Note 18).
Classification of leases - Group as lessee

Management exercises judgment in determining whether substantially all the significant risks and
rewards of ownership of the leased assets are transferred to the Group. Lease contracts which transfer
to the Group substantially all the risks and rewards incidental to ownership of the leased items are
classified as finance leases. Otherwise, they are considered as operating leases.
PAL has lease agreements covering some of its aircraft and engines where the lease terms approximate
the estimated useful lives of the assets, the present value of the minimum lease payment amounts to at
least substantially all of the fair value of the leased assets or has bargain purchase option, which indicate
that the risks and rewards related to the assets are transferred to PAL or that the purchase option is
reasonably certain to be exercised. These leases are classified as finance leases. The net carrying value
of these aircraft and engines amounted to P =84.39 billion and =P82.92 billion, while the related obligation
under finance lease amounted to P =53.88 billion and = P56.21 billion as of December 31, 2017 and 2016,
respectively (see Notes 10, 15 and 24).
PAL also has lease agreements covering some of its aircraft and engines, and certain ground properties
where it has determined, based on certain criteria (e.g., no bargain purchase option and transfer of
ownership at the end of the lease term), that the risks and rewards related to the assets are retained with
the lessors. These leases are accounted for as operating leases. These lease agreements include aircraft
sale and operating leaseback transactions that PAL entered into, as discussed in Note 24.
97 *SGVFS026729*
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Classification of leases - Group as lessor

PAL has sublease agreements covering some of its aircraft under operating and finance leases with the
original lessors where it has determined that it has retained substantially all the risks and rewards
incidental to ownership of the leased assets. These leases are classified as operating leases
(see Note 24).
Contingencies
The Group is involved in various labor disputes, litigations, claims and tax assessments that are normal
to its business. Based on the opinion of the Group’s legal counsels on the progress and legal grounds
of these cases, the Group believes that it may have a present obligation arising from a past event on
some cases but that their likely outcome and estimated potential cash outflow cannot be determined
reasonably as of this time. As such, no provision was made for these contingencies (see Note 16).
Estimates
The key assumptions concerning the future and other key sources of estimation and uncertainty at the
end of the reporting period, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
Recognition and measurement of passenger and cargo revenue

Passenger and cargo sales are recognized as revenue when the related passengers and cargoes are flown
or lifted. Passenger tickets that are unused for an extended period are recognized as revenue based on
an assessment of the ticket terms and conditions and refunds processing period. These are estimated
based on historical trends and experiences by the Group whereby the ticket uplift occurs within one
year. The carrying amount of unearned transportation revenue as of December 31, 2017 and 2016
amounted to = P16.34 billion and P=14.83 billion, respectively.
A portion of passenger revenue attributable to the award of frequent flyer miles is deferred until they
are utilized. The deferment of the revenue is estimated based on historical trends of breakage and
redemption, which are then used to project the estimated utilization of the miles earned. Any remaining
unredeemed miles are recognized as revenue upon expiration. The remaining unredeemed miles are
measured at fair value estimated using the applicable fare based on the historical redemption. Changes
in the estimates of expected redemption could have a significant effect on the Group’s financial results.
Deferred revenue included as part of “Reserves and other noncurrent liabilities” amounted to
P
=453.26 million and = P420.00 million as of December 31, 2017 and 2016, respectively (see Note 16).
Estimation of allowance for doubtful accounts

The Group maintains allowance for doubtful accounts at a level considered adequate to provide for
uncollectible receivables. The Group reviews the age and the status of receivables, designed to identify
accounts with objective evidence of impairment, and provide the appropriate allowance for impairment.
The allowance for doubtful accounts relating to receivables which were individually assessed as
impaired is estimated as the difference between the carrying amount of the receivables (at amortized
cost) and the present value of estimated future cash flows (using the original effective interest rate).
Accounts which were not subject to specific impairment are collectively assessed for impairment and
the amount of allowance is determined based on historical loss rate and age of receivables. The amount
and timing of recorded expenses for any period could therefore differ based on the estimates made.
The carrying value of receivables, net of allowance for doubtful accounts, as of December 31, 2017
and 2016 amounted to = P17.75 billion and =P17.00 billion, respectively. The allowance for doubtful
accounts as of December 31, 2017 and 2016 amounted to P =5.81 billion (see Note 6).
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Determination of fair value of financial instruments (including derivatives)

The Group initially records all financial instruments at fair value and subsequently carries certain
financial assets and financial liabilities at fair value, which requires use of estimates and judgment.
Valuation techniques are used particularly for financial assets and financial liabilities (including
derivatives) that are not quoted in an active market. Where valuation techniques are used to determine
fair values (e.g., discounted cash flow, option models), they are periodically reviewed by qualified
personnel who are independent of the trading function. All models are calibrated to ensure that outputs
reflect actual data and comparative market prices. To the extent practicable, models use only
observable data as valuation inputs. However, other inputs such as credit risk (whether that of the
Group or the counterparties), forward prices, volatilities and correlations, require management to
develop estimates or make adjustments to observable data of comparable instruments. The amount of
changes in fair values would differ if the Group uses different valuation assumptions or other acceptable
methodologies. Any change in fair value of these financial instruments (including derivatives) would
affect either profit or loss or other comprehensive income. The fair value of the Group’s financial assets
and financial liabilities are presented in Note 27.
Determination of net realizable value of expendable parts, fuel, materials and supplies
The Group’s estimates of the net realizable values of expendable parts, fuel, materials and supplies are
based on the most reliable evidence (e.g., age and physical condition of the inventory) available at the
time the estimates are made of the amount that these assets are expected to be realized. A new
assessment is made of the net realizable value in each subsequent period. When the circumstances that
previously caused expendable parts, fuel, materials and supplies to be written down below cost no
longer exist or when there is a clear evidence of an increase in net realizable value because of change
in economic circumstances, the amount of the write-down is reversed so that the new carrying amount
is the lower of the cost and the revised net realizable value. The carrying amount of expendable parts,
fuel, materials and supplies as of December 31, 2017 and 2016 amounted to P =3.49 billion and
P
=2.95 billion, respectively. The allowance for expendable parts obsolescence amounted to
P
=528.26 million and = P499.25 million as of December 31, 2017 and 2016, respectively (see Note 7).
Valuation of property and equipment under revaluation basis

The Group’s buildings and improvements are carried at revalued amounts, which approximate their fair
values at the date of the revaluation, less any subsequent accumulated depreciation and any
accumulated impairment losses. The valuations of buildings and improvements are performed by
professionally qualified independent appraisers using generally acceptable valuation techniques and
methods. The key assumptions used to determine the fair value of these assets and sensitivity analyses
are disclosed in Note 10. Revaluations are made regularly to ensure that the carrying amounts do not
differ materially from those which would be determined using fair values at reporting date.
Management believes that the basis of fair market value is still appropriate considering that there are
no significant changes in the properties and the surrounding area from the date of valuation up to and
from financial reporting date. The revaluation increment, net of related deferred income tax, in the
valuation of these assets based on appraisal reports in December 2017 and June 2015 amounted to
P
=718.16 million and P =377.34 million as of December 31, 2017 and 2016, respectively. The carrying
value of property and equipment carried at appraised value amounted to P =1,243.16 million and
P
=707.95 million as of December 31, 2017 and 2016, respectively (see Note 10).
Valuation of assets held for sale

The Group measures its assets held for sale at the lower of their carrying amount and fair value less
costs to sell. Management has determined the fair value less costs to sell of the Group’s assets
held for sale based on offer price of prospective buyers. The carrying value of assets held for sale as
of December 31, 2017 amounted to P =785.05 million and nil as of December 31, 2016 (see Note 10).
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Classification and measurement of repairs and maintenance cost and ARO

PAL entered into several agreements with maintenance service providers relating to the periodic
inspections and overhauls during the life of the aircraft and aircraft parts. Management assessed and
estimated which portion of the cost incurred for the repairs, maintenance and overhauls under these
agreements has the economic effect of extending the useful lives of the aircraft and engines, hence, can
be capitalized. Other repairs and maintenance costs are expensed as incurred.
Moreover, management estimates certain repairs and maintenance costs to be accrued as of cut-off date
based on the open work orders and other variable factors. Total aircraft-related repairs and maintenance
costs recognized in profit or loss amounted to P =18.34 billion in 2017, = P14.69 billion in 2016 and
P
=10.69 billion in 2015 (see Note 20). Accrued maintenance as of December 31, 2017 and 2016
amounted to =P8.29 billion and =
P7.93 billion, respectively (see Note 14).
PAL is also contractually committed to return a number of aircraft held under operating leases to the
lessors in a physical condition agreed at the inception of each lease. PAL estimates the costs of heavy
maintenance on the leased aircraft and engines required on the redelivery to the lessor, and recognizes
an obligation for the excess of estimated costs over the cumulative MRF or for the total estimated costs
where the lease agreement does not require contribution of MRF. The amount of obligation is carried
at amortized cost using the effective interest method. ARO, included as part of “Reserves and other
noncurrent liabilities”, amounted to P
=1.25 billion and =
P1.20 billion as of December 31, 2017 and 2016,
respectively (see Note 16).
Estimation of useful lives and residual values of property and equipment

The Group estimates the useful lives of property and equipment based on internal technical evaluation
and experience with similar assets. The estimated useful lives and residual values are reviewed
periodically and updated if expectations differ from previous estimates due to physical wear and tear,
technical and commercial obsolescence and other limits on the use of the assets. In 2017, management
recognized impairment loss amounting to P =865.34 million on certain passenger aircraft that will be
early retired (see Note 10). The carrying amount of depreciable property and equipment, net of
accumulated depreciation, amounted to P =100.40 billion and =
P100.10 billion as of December 31, 2017
and 2016, respectively (see Note 10).
Impairment of property and equipment and investment properties
The Group determines whether its property and equipment and investment properties are impaired,
when events or changes in circumstances indicate that the carrying values may not be recoverable. If
any such indication exists and where the carrying values exceed the estimated recoverable amounts, the
assets are written down to their recoverable amounts. The recoverable amount of property and
equipment and investment properties is the greater of the asset’s fair value less costs to sell and value-
in-use. Determination of impairment of property and equipment and investment properties requires an
estimation of the value-in-use of the CGU to which the assets belong. Estimating the value-in-use
requires the Group to make an estimate of the expected future cash flows from the CGU and applying
an appropriate discount rate in order to calculate the present value of those cash flows. In discounting,
the Group uses a discount rate based on the weighted average cost of capital adjusted to reflect the way
that the market would assess the specific risks associated with the cash flow and exclude risks that are
not relevant to the cash flow. Other assumptions used in projecting the future cash flows include
passenger load factor, passenger yield, fuel surcharge rate and fuel costs, among others.
The Group recognized loss amounting to P =286.85 million for the two aircraft retired in 2017. In
addition, the Group recognized impairment loss amounting to P =988.60 million for certain aircraft and
engines that are intended to be sold in 2018 and =
P865.33 million for the aircraft that will be early retired
(see Note 10).
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In 2015, rotable and reparable parts related to the passenger aircraft and engines sold in 2014 and 2015
were identified with the intention of selling these parts. Based on offer price from a potential buyer, an
impairment loss on rotable and reparable parts amounting to P =331.90 million was recognized in 2015.
In addition, an impairment loss amounting to P =143.80 million was recognized for the rotable and
reparable parts that remained in the warehouse (see Note 10).
As of December 31, 2017 and 2016, the aggregate net carrying value of the Group’s property and
equipment and investment properties amounted to P
=126.19 billion and =
P115.81 billion, respectively
(see Notes 10 and 11).
Estimation of retirement and other long-term employee benefits cost

The Group’s retirement and other long-term benefits costs relating to its defined benefit plans are
actuarially computed. These entail using certain assumptions like discount rates and future salary
increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date.
In determining the appropriate discount rate, management considers the interest rates of long term
Philippine government bonds to correspond with the expected term of the defined benefit obligation.
Further details about pension obligations are given in Note 21. Accrued employee benefits as of
December 31, 2017 and 2016 amounted to P =10.20 billion and P
=8.93 billion, respectively (see Note 21).
Provisions
The Group provides for present obligations (legal or constructive) where it is probable that there will
be an outflow of resources embodying economic benefits that will be required to settle the said
obligations. Management exercises judgment in assessing the probability of the Group becoming
liable. An estimate of the provision is based on known information as of reporting date. The amount
of provision is being reassessed at least on an annual basis to consider new and relevant information.
Provisions recognized amounted to P =2.26 billion and P
=2.83 billion as of December 31, 2017 and 2016,
Recognition of deferred income tax assets

The Group assesses at each reporting date and recognizes deferred income tax assets to the extent of
probable future taxable profits and reversing taxable temporary differences that will allow the deferred
income tax assets to be utilized. Management uses judgment and estimates in assessing the probability
and level of future taxable profits, considering management’s future plan of actions, including the
timing of reversal of deferred income tax liability, aided by forecasting and budgeting techniques.
Deferred income tax assets recognized amounted to P =4.74 billion and P
=4.11 billion as of December 31,
2017, and 2016, respectively (see Note 22).
5. Cash and Cash Equivalents
2017 2016 2015

Cash on hand and in banks (Note 18) P
=8,553,572 =9,537,012
P =5,986,655
P
Cash equivalents (Note 18) 1,520,081 429,645 2,130,233
P
=10,073,653 =9,966,657
P =8,116,888
P
Cash in banks and cash equivalents earned interest at the respective bank deposit rates totaling
P
=76.33 million, P
=71.31 million and =
P78.03 million for the years ended December 31, 2017, 2016 and
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2015, respectively (included under “Other charges (income) - net” in the consolidated statements of
comprehensive income).
Cash and cash equivalents used to collateralize margin call requirements on fuel derivatives are
presented as part of “Other current assets” (see Note 8), while those used to collateralize various surety
bonds issued in connection with certain litigations and sinking fund related to asset-backed securities
are presented as part of “Other noncurrent assets” (see Note 12).
6. Receivables
2017 2016 2015

General traffic (Note 15)* = 7,806,705
P =
P6,969,116 =
P7,807,695
Related parties (Note 18) 7,652,401 8,493,949 7,329,445
Non-trade** 8,096,933 7,350,095 6,415,043
23,556,039 22,813,160 21,552,183
Less allowance for doubtful accounts 5,805,288 5,809,788 5,716,268
= 17,750,751
P =
P17,003,372 =
P15,835,915
*General traffic includes receivables pledged as collateral for secured loans.
**Non-trade receivables include, among others, accounts under litigation, receivables from employees and other
receivables.
Movements in allowance for doubtful accounts, presented by class, are as follows:
2017
General Traffic Related Parties Non-trade Total
Balance at beginning of year =1,662,038
P =52,458
P =4,095,292
P =5,809,788
P
Charges for the year 211,349 6,154 81,461 298,964
Reversal (295,654) – (25,926) (321,580)
Foreign exchange difference (33,971) 106 51,981 18,116
Balance at end of year =1,543,762
P =58,718
P =4,202,808
P =5,805,288
P
Individual impairment =1,154,525

P =–
P =3,671,153
P =4,825,678
P
Collective impairment 389,237 58,718 531,655 979,610
Balance at end of year =1,543,762
P =58,718
P =4,202,808
P =5,805,288
P
2016
Balance at beginning of year =
P1,600,086 =
P96,828 =
P4,019,354 =
P5,716,268
Charges for the year 193,719 998 36,530 231,247
Reversal and write-off (207,613) (48,548) (179,895) (436,056)
Foreign exchange difference 75,846 3,180 219,303 298,329
Balance at end of year =
P1,662,038 =
P52,458 =
P4,095,292 =
P5,809,788
Individual impairment P
=924,745 P
=39,218 P
=3,667,428 P
=4,631,391
Collective impairment 737,293 13,240 427,864 1,178,397
P1,662,038 =
P52,458 =4,095,292
P =5,809,788
P
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2015
Balance at beginning of year =
P1,004,776 =127,151
P =3,987,900
P =5,119,827
P
Charges for the year 637,885 – 40,005 677,890
Reversal and write-off 9,978 (35,818) (214,362) (240,202)
Foreign exchange difference (52,553) 5,495 205,811 158,753
P1,600,086 =96,828
P =4,019,354
P =5,716,268
P
Individual impairment =
P1,443,172 P
=94,613 P
=3,803,082 P
=5,340,867
Collective impairment 156,914 2,215 216,272 375,401
P1,600,086 =96,828
P =4,019,354
P =5,716,268
P
Impairment assessment
The main considerations for impairment assessment include whether any payments are overdue or if
there are any known difficulties in the cash flows of the counterparties. The Group assesses impairment
into two areas: (a) individually assessed allowances and (b) collectively assessed allowances.
The Group determines allowance for each significant receivable on an individual basis. Among the
factors that the Group considers in assessing impairment is the inability to collect from the counterparty
based on the contractual terms of the receivables. Receivables included in the specific assessment are
the accounts that have been endorsed to the legal department, nonmoving accounts receivable, accounts
of defaulted agents and accounts from closed stations.
For collective assessment, allowances are assessed for receivables that are not individually significant
and for individually significant receivables where there is no objective evidence of individual
impairment. Impairment losses are estimated by taking into consideration the age of the receivables,
historical losses, collection experience and other factors that may affect recoverability. The fair value
of any collateral is considered in the evaluation.
The net reversal of impairment losses on receivables recognized in the consolidated statements of
comprehensive income under “General and administrative expenses” amounted to P =22.62 million in
2017 and =P204.81 million in 2016. The net provision for impairment losses on the receivables
recognized in the consolidated statement of comprehensive income under “General and administrative
expenses” amounted to P=437.69 million for the year ended December 31, 2015.
7. Expendable Parts, Fuel, Materials and Supplies
2017 2016 2015

At cost:
Fuel P
=839,731 =880,035
P =960,915
P
Materials and supplies 428,941 378,979 265,887
Expendable parts 1,874,067 1,371,107 1,183,790
3,142,739 2,630,121 2,410,592
At net realizable value - expendable parts 350,733 320,551 207,174
P
=3,493,472 =2,950,672
P =2,617,766
P
The cost of expendable parts carried at net realizable value amounted to = P878.99 million and
P
=819.80 million as of December 31, 2017 and 2016, respectively. Provisions for inventory
obsolescence amounted to =
P46.76 million in 2017, P
=61.43 million in 2016 and P
=273.11 million in 2015.
Expendable parts recognized as maintenance expense amounted to P =949.24 million in 2017,
P
=677.49 million in 2016 and =
P401.45 million in 2015 (see Note 20).
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8. Other Current Assets
2017 2016 2015

Deposits and prepayments P
=2,177,867 =1,905,063
P =1,481,530
P
Security deposits (Notes 5 and 27) 1,065,810 1,866,394 4,868,955
Derivative assets (Notes 26 and 27) 40,053 150,233 1,980,856
Others - net of allowance for probable loss
of =
P7,156, =P4,682 and =
P4,294 as of
December 31, 2017, 2016, and 2015,
respectively (Note 18) 469,154 167,104 334,328
P
=3,752,884 =4,088,794
P =8,665,669
P
Deposits and prepayments pertain to advance payments for materials and supplies, prepaid rentals and
miscellaneous payments.
Security deposits as of December 31, 2016 include deposits related to option derivatives amounting to
P
=753.50 million (nil in 2017, see Note 5). “Others” includes claims for compensation on damaged
assets, other insurance claims and as well as short-term investments with maturity of more than three
months.
9. Investments in Subsidiaries with Material Non-controlling Interest
In 2017, the Parent Company acquired 51% ownership in ZUMA (see Note 2), which in turn owns
99.97% interest in APC, giving the Parent Company an effective interest of 50.98% in APC. The
Group, through PAL, also obtained control in FSL, previously accounted for as investment in
associate, by increasing PAL’s ownership interest in FSL from 40% to 65%, giving the Parent
Company an effective interest of 64.29% in FSL. The acquisitions of ZUMA and FSL have been
accounted for in the consolidated financial statements as business combination under common control
using pooling of interest method of accounting (see Notes 4 and 29). Accordingly, the Group presented
as non-controlling interest the ownership interests which were not acquired by the Group. APC and
FSL are the significant subsidiaries with material non-controlling interest.
The following are the summarized financial information of APC as of and for the years ended
December 31:
2017 2016 2015

Current assets P
=5,575,518 =3,693,337
P =3,324,277
P
Noncurrent assets 1,549,961 1,473,336 1,286,447
Current liabilities 9,863,946 8,527,595 8,502,969
Noncurrent liabilities 218,606 214,153 186,699
Capital deficiency (2,957,073) (3,575,075) (4,078,943)
Revenue 10,256,411 7,887,628 7,659,815
Net income 588,636 493,235 21,356
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The Group’s share in equity (capital deficiency), net income and total comprehensive income of APC
is as follows:
2017 2016 2015

Equity (capital deficiency) attributable to:
Equity holders (P
=1,508,107) (P
=1,823,288) (P
=2,080,261)
Non-controlling interest (1,448,966) (1,751,787) (1,998,682)
Net income attributable to:
Equity holders 588,460 493,087 21,350
Non-controlling interest 176 148 6
Total comprehensive income attributable to:
Equity holders 617,817 503,717 24,517
Non-controlling interest 185 151 7
The following are the summarized financial information of FSL translated to Philippine peso as of and
for the years ended December 31:
2017 2016 2015

Current assets P
=9,227,014 P9,190,634
= P8,986,446
=
Noncurrent assets 42,852,311 44,658,944 44,492,409
Current liabilities 5,337,218 5,108,805 4,577,542
Noncurrent liabilities 26,057,929 30,011,628 32,539,620
Equity 20,684,178 18,729,145 16,361,693
Revenue 5,693,027 4,889,028 4,940,181
Net income 1,912,600 1,381,400 1,287,661
The Group’s share in equity, net income and total comprehensive income of FSL is as follows:
2017 2016 2015

Equity attributable to:
Equity holders P
=13,444,716 =12,173,944
P =10,635,100
P
Non-controlling interest 7,239,462 6,555,201 5,726,593
Net income/Total comprehensive income
attributable to:
Equity holders 1,243,190 897,910 836,980
Non-controlling interest 669,410 483,490 450,681
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10. Property and Equipment

2017
December 31, Disposals/ Reclassifications Foreign Exchange December 31,
2016 Additions Retirements and Others Difference 2017
At Cost
Cost:
Passenger aircraft, engines and
leasehold improvements
(Notes 15, 16 and 24) =
P118,521,992 =
P8,588,104 (P
= 974,759) (P
= 7,125,517) P
= 257,417 =
P119,267,237
Rotable and reparable parts
(Note 15) 12,034,145 1,997,431 (1,660,712) 35,477 30,586 12,436,927
Ground property and equipment 12,423,106 707,528 (130,176) (63,219) 38,851 12,976,090
142,979,243 11,293,063 (2,765,647) (7,153,259) 326,854 144,680,254
Accumulated Depreciation:
leasehold improvements (27,270,605) (6,415,795) 685,355 5,326,164 (81,060) (27,755,941)
Rotable and reparable parts (5,924,024) (894,135) 859,916 (501) (20,969) (5,979,713)
Ground property and equipment (10,238,962) (618,899) 113,395 6,888 (30,224) (10,767,802)
(43,433,591) (7,928,829) 1,658,666 5,332,551 (132,253) (44,503,456)
Accumulated Impairment:
leasehold improvements – (1,853,931) – 988,598 – (865,333)
Rotable and reparable parts (151,895) – – – (460) (152,355)
(151,895) (1,853,931) – 988,598 (460) (1,017,688)
Net book value 99,393,757 1,510,303 (1,106,981) (832,110) 194,141 99,159,110
Construction in progress 12,559,431 14,130,172 – (4,902,462) 361,462 22,148,603
Total P
= 111,953,188 P
= 15,640,475 (P
= 1,106,981) (P
= 5,734,572) P
= 555,603 P
= 121,307,713
At Revalued Amount
Buildings and improvements:
Revalued amount P
= 1,152,936 P
= 21,108 =
P– P
= 104,799 P
= 2,682 P
= 1,281,525
Accumulated depreciation and
amortization (444,989) (295,006) – 706,583 (4,950) (38,362)
Net Book Value P
= 707,947 (P
= 273,898) =
P– P
= 811,382 (P
= 2,268) P
= 1,243,163
2016
At Cost
Cost:
(Notes 15, 16 and 24) P
=108,139,207 P
=4,058,076 (P
=16,298) =
P– P
=6,341,007 P
=118,521,992
(Note 15) 10,903,867 1,901,999 (1,256,451) (50,629) 535,359 12,034,145
Ground property and equipment 11,334,735 709,739 (153,698) (105,575) 637,905 12,423,106
130,377,809 6,669,814 (1,426,447) (156,204) 7,514,271 142,979,243
leasehold improvements (20,108,071) (5,769,897) 16,298 – (1,408,935) (27,270,605)
Rotable and reparable parts (5,458,938) (773,439) 572,547 21,643 (285,837) (5,924,024)
Ground property and equipment (9,321,564) (543,571) 147,900 – (521,727) (10,238,962)
(34,888,573) (7,086,907) 736,745 21,643 (2,216,499) (43,433,591)
Rotable and reparable parts (143,804) – – – (8,091) (151,895)
Net book value 95,345,432 (417,093) (689,702) (134,561) 5,289,681 99,393,757
Construction in progress 7,363,692 7,593,075 – (3,076,205) 678,869 12,559,431
Total P
=102,709,124 P
=7,175,982 (P
=689,702) (P
=3,210,766) P
=5,968,550 P =111,953,188
At Revalued Amount
Revalued amount P
=1,074,921 P
=18,892 (P
=2) =
P– P
=59,125 P
=1,152,936
amortization (152,375) (272,043) 2 – (20,573) (444,989)
Net Book Value P
=922,546 (P
=253,151) =
P– =
P– P
=38,552 P
=707,947
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2015
At Cost
Cost:
(Notes 15, 16 and 24) =
P98,953,924 =
P6,835,750 (P
=3,197,074) =
P40,962 P
=5,505,645 P
=108,139,207
(Note 15) 11,494,770 1,444,930 (659,698) (1,886,481) 510,346 10,903,867
Ground property and equipment 10,107,182 524,552 (270,788) 438,308 535,481 11,334,735
120,555,876 8,805,232 (4,127,560) (1,407,211) 6,551,472 130,377,809
leasehold improvements (16,301,560) (5,313,691) 2,460,876 (6,732) (946,964) (20,108,071)
Rotable and reparable parts (5,782,265) (808,965) 375,317 830,619 (73,644) (5,458,938)
Ground property and equipment (8,625,059) (478,257) 230,402 – (448,650) (9,321,564)
(30,708,884) (6,600,913) 3,066,595 823,887 (1,469,258) (34,888,573)
Rotable and reparable parts – (475,703) – 331,899 – (143,804)
Net book value 89,846,992 1,728,616 (1,060,965) (251,425) 5,082,214 95,345,432
Construction in progress 10,593,703 246,975 – (4,019,186) 542,200 7,363,692
Total =
P100,440,695 P
=1,975,591 (P
=1,060,965) (P
=4,270,611) P
=5,624,414 P=102,709,124
At Revalued Amount
Revalued amount P
=946,429 =
P2,116 =
P– =
P73,878 P
=52,498 P
=1,074,921
amortization (275,979) (208,325) – – 331,929 (152,375)
Net Book Value P
=670,450 (P
=206,209) =
P– P
=73,878 P
=384,427 P
=922,546
The Group recognized a write down amounting = P286.85 million for the two aircraft retired in 2017, an
impairment loss amounting to P=988.60 million for certain aircraft and engines that are intended to be
sold in 2018 and P
=865.33 million for the aircraft that will be early retired.
In 2015, impairment loss amounting to =P143.80 million was recognized for rotable and reparable parts
that remained in the warehouse related to aircraft and engines which were sold in 2015 and 2014.
Construction in progress mainly includes predelivery payments for aircraft acquisitions. Predelivery
payments include capitalized borrowing costs (see Notes 13 and 15).
Outstanding liabilities pertaining to purchases of property and equipment, excluding obligations under
finance lease, amounted to = P486.02 million and = P324.79 million as of December 31, 2017 and 2016,
respectively (see Note 23). These are included under “Accounts payable” in the consolidated statements
of financial position.
Property and equipment with carrying value of P

=1.70 billion as of December 31, 2017 used to secure
long-term debt are described in Note 15.
Movements in Fleet
Airbus 320-200
In July and August 2015, PAL sold two of its Airbus 320-200 aircraft to a third party resulting in a gain
of =P54.92 million recognized in “Other charges (income) - net” in the consolidated statement of
comprehensive income. In 2017 and 2016, PAL redelivered one and six Airbus 320-200, respectively,
to their respective operating lessors.
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Airbus 321-231
PAL entered into finance lease agreements covering one aircraft in 2016 and three aircraft in 2015.
PAL also accepted the delivery of four aircraft in 2016 and two aircraft in 2015 under sale and operating
leaseback arrangements with a third party lessor. These deliveries are under the 2012 Purchase
Agreement (see Notes 15 and 24).
Boeing 777-300ER
In December 2017, PAL accepted the delivery of two Boeing 777-300ER under operating lease
agreement with a third party lessor.
In October and December 2016, PAL accepted the delivery of two Boeing 777-300ER under operating
lease agreement with a third party lessor.
Bombardier DHC 8-400

In July, August, September, October and November 2017, PAL accepted the delivery of five
Bombardier DHC 8-400 (Q400 Next Gen) under finance lease agreement with third party lessors. Also
in December 2017, PAL retired two Bombardier DHC 8-400 aircraft.
The fleet as of December 31 follows (see Notes 15, 18 and 24):
2017 2016 2015

Owned:
Bombardier DHC 8-400 3 5 5
Bombardier DHC 8-300 4 4 4
Airbus 340-300 6 6 6
Under finance lease:
Boeing 777-300ER 4 4 4
Airbus 330-300 5 5 5
Airbus 321-231 10 10 9
Airbus 320-200 8 8 8
Bombardier DHC 8-400 5 – –
Under operating lease:
Boeing 777-300ER 6 4 2
Airbus 330-300 10 10 10
Airbus 321-231 14 14 10
Airbus 320-200 11 12 18
86 82 81
Assets held for sale

In December 2017, PAL’s BOD approved the sale of certain passenger aircraft and engines within
12 months. Management determined that the fair value less costs to sell of these passenger aircraft and
engines based on offer price of prospective buyers amounted to P =785.05 million as of
December 31, 2017. Accordingly, these were classified under “Assets held for sale” in the consolidated
statements of financial position after an impairment loss amounting to =
P988.60 million was recognized
in 2017.
In 2015, certain rotable and reparable parts pertaining to the passenger aircraft and engines that were
sold in 2015 and 2014 were identified with the intention of selling the parts. Management determined
108 *SGVFS026729*
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that the fair value less costs to sell of these rotable and reparable parts based on offer price as of
December 31, 2015 amounting to = P141.35 million as their recoverable value. Accordingly, these were
classified under “Assets held for sale” account after an impairment loss amounting to P=331.90 million
was recognized in 2015. These rotable and reparable parts were sold at carrying value in 2016.
Buildings and Improvements

Buildings and improvements, whose fair value can be measured reliably, are carried at appraised values
determined based on valuations performed by various qualified and independent appraisers. The
appraised values as of December 31, 2017 and 2016 are based on appraisal studies done in
December 2017 and June 2015, respectively. In the valuation process using market comparison method
(a market approach), the appraisers compared the fair market value of similar assets adjusted for
dissimilarities and considered the best use of the properties at hand (Level 3). Significant unobservable
valuation input in determining the fair value of buildings and improvements includes adjusted offer
prices of similar properties. Increases (decreases) in estimated inputs would result in a significantly
higher (lower) fair value. Management believes that there were no developments in the properties which
could significantly affect their fair market value from the valuation date up to the end of reporting
periods.
The additional revaluation increase, net of deferred income tax effect of P

=241.26 million, recorded for
the year ended December 31, 2017 amounted to P =562.94 million.
If buildings and improvements were carried at cost less accumulated depreciation, the amounts as of
December 31 would be as follows:
2017 2016 2015

Cost P
=8,688 P8,660
= P8,199
=
Accumulated depreciation (8,688) (8,112) (6,973)
P
=– =548
P =1,226
P
11. Investment Properties
2017
Buildings and
Land Improvements Total
Cost
Beginning of year P
=3,150,029 P
=39,566 P
=3,189,595
Additions 282,078 210,775 492,853
Translation adjustment 6,073 (5,810) 263
End of year 3,438,180 244,531 3,682,711
Accumulated depreciation
Beginning of year – (39,566) (39,566)
Translation adjustment – (128) (128)
End of year – (39,694) (39,694)
Net book value P
=3,438,180 P
=204,837 P
=3,643,017
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2016
Buildings and
Cost
Beginning of year =1,366,092
P =37,459
P =1,403,551
P
Additions 1,707,505 – 1,707,505
Translation adjustment 76,432 2,107 78,539
End of year 3,150,029 39,566 3,189,595
Translation adjustment – (2,107) (2,107)
End of year – (39,566) (39,566)
Net book value =3,150,029
P =–
P =3,150,029
P
2015
Buildings and
Cost
Beginning of year =1,297,147
P =35,568
P =1,332,715
P
End of year 1,366,092 37,459 1,403,551
Translation adjustment – (1,891) (1,891)
End of year – (37,459) (37,459)
Net book value =1,366,092
P =–
P =1,366,092
P
PAL acquired a property in October 2017 for a total consideration of P

=370.00 million and a parcel of
land in December 2016 amounting to =P1.71 billion.
The aggregate fair value of investment properties amounted to P =4.21 billion and =
P3.72 billion as of
December 31, 2017 and 2016, respectively. The fair value of investment properties with carrying value
of P
=1.45 billion as of December 31, 2017 has been determined based on valuation reports by various
qualified, independent and accredited appraisers dated December 2017. The valuation undertaken
considered the fair market value of similar or substitute properties and related market data and
established estimated value by processes involving comparison (Level 3).
The valuation techniques used and key inputs to valuation on investment properties are as follows:
Valuation technique Significant unobservable input

Land Sales comparison approach Adjusted sales price of comparable
and income approach properties, rental rates
Buildings and Sales comparison approach Adjusted sales price of comparable
improvements properties
Significant increases (decreases) in estimated inputs above would result in a significantly higher (lower)
fair value of the properties.
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These properties were held by the Group for capital appreciation, which also represents their current
use. The appraisers determined that the highest and best use of these properties is for residential,
agricultural and commercial utility. For strategic reasons, the properties are not currently used in this
manner.
The Group has no restrictions on the realizability of its investment properties and no contractual
obligations to either purchase, construct or develop investment properties or for repairs, maintenance
and enhancements.
Direct costs related to these investment properties (e.g., property taxes, among others) amounted to
P
=2.97 million, P
=3.00 million and P
=3.15 million for the years ended December 31, 2017, 2016 and 2015,
respectively.
12. Other Noncurrent Assets
2017 2016 2015

Long-term security deposits
(Notes 5, 15 and 18) P
=11,304,745 P
=10,162,090 P
=7,886,295
Deposits on aircraft leases
(Notes 18, 24, 26 and 27) 1,542,302 1,556,834 1,751,216
Manufacturers’ credits (Note 24) 2,055,189 1,875,733 1,200,023
Derivative assets (Notes 26 and 27) 237,217 – –
AFS investments (Note 27) 2,071,105 269,501 260,905
Others 36,962 83,376 70,801
P
=17,247,520 =13,947,534
P =11,169,240
P
Long-term Security Deposits

Long-term security deposits include the following, among others:
· Cash amounting to = P668.11 million and = P815.02 million as of December 31, 2017 and 2016,
respectively, set aside to collateralize various surety bonds issued (as required under the legal
proceedings) in connection with certain litigations.
· Standby letters of credit amounting to P
=2.33 billion and =P2.04 billion as of December 31, 2017 and
2016, respectively.
· Security deposits required under certain lease agreements to cover qualifying maintenance events,
which amounted to P =2.16 billion and P
=2.01 billion as of December 31, 2017 and 2016, respectively.
· Sinking fund amounting to = P1.15 billion and = P1.09 billion as of December 31, 2017 and 2016,
respectively, set aside to guarantee the periodic payments of asset-backed securities
(see Note 15).
Total interest income earned on long-term security deposits amounted to P

=50.69 million in 2017,
P
P13.10 million in 2015.
Deposits on Aircraft Leases

PAL’s deposits on aircraft leases are carried at amortized cost. Accretion on these deposits, included
under “Other charges (income) - net” in the consolidated statements of comprehensive income,
amounted to =
P149.18 million in 2017, = P132.92 million in 2016 and =P64.22 million in 2015.
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AFS Investments
The Group’s AFS investments include investments in MacroAsia Corporation (MAC) amounting to
P
=1.98 billion and =
P212.08 million as of December 31, 2017 and 2016, respectively. This account also
includes certain quoted equity investments and club shares amounting to = P3.99 million and
P
=3.33 million, and unquoted equity investments amounting to P
=55.42 million and P
December 31, 2017 and 2016, respectively.
In 2015, PAL sold its investment in Abacus International Holdings Limited to a third party resulting to
a gain of P
=1.89 billion recognized in “Other charges (income) - net” in the consolidated statement of
comprehensive income.
The fair value of quoted equity investments and club shares is determined by reference to quoted market
prices as of the end of each reporting period.
The movements in “Net changes in fair values of available-for-sale investments”, net of deferred
income tax effect, pertaining to quoted equity investments and club shares are as follows:
2017 2016 2015

Balance at beginning of year P
=37,690 =32,114
P =41,272
P
Mark-to-market gain (loss) recognized
as OCI 1,799,298 5,576 (9,158)
1,836,988 37,690 32,114
Less share of non-controlling interests 24 28 23
Balance at end of year P
=1,836,964 =37,662
P =32,091
P
The fair values of investment in share of stock of MAC were determined based on published prices in
the active market while other quoted equity investments were determined by reference to quoted market
prices as of the end of each reporting period. The unquoted equity investments include the Group’s
investments in shares of stock of various private companies. These are carried at cost since fair value
cannot be reliably estimated due to lack of reliable estimate of future cash flows and discount rates
necessary to calculate fair value. The Group has no intention of disposing these investments in the near
future.
Dividend income from investment in shares of stock of MAC amounting to = P12.32 million in 2017,
P
=7.04 million in 2016 and = P6.60 million in 2015 are included as part of “Other revenue” of the
consolidated statements of comprehensive income (see Note 18).
13. Notes Payable
Notes payable as of December 31, 2017 and 2016 include unsecured short-term loans from local banks
totaling =
P17.84 billion and =
P7.71 billion, respectively.
Interest rates on these notes payable range from 2.9% to 4.25% in 2017, 3.50% to 3.75% in 2016 and
3.50% to 4.50% in 2015. Interests incurred on these loans for the year ended December 2016
amounting to P =93.99 million were capitalized as part of property and equipment based on 3.53%
capitalization rate (see Note 10). The related interest expense that was charged to profit or loss
amounted to = P376.74 million in 2017, =P77.24 million in 2016, and P
=408.93 million in 2015. Interest
payable relating to short-term notes payable amounting to P =20.32 million and =P13.59 million as of
December 31, 2017 and 2016, respectively, are included in “Others” under “Accrued expenses” (see
Note 14).
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14. Accrued Expenses and Other Current Liabilities
2017 2016 2015

Accrued expenses:
Maintenance (Note 18) P
=8,290,002 =7,931,531
P =4,854,094
P
Landing and take-off fees 1,251,558 7,503,170 6,926,688
Ground handling charges (Note 18) 1,415,026 1,097,232 805,165
Passenger food and supplies 566,710 609,517 628,380
Income taxes 442,720 376,020 299,680
Others (Note 13) 2,916,401 1,999,391 2,092,129
Derivative liabilities 137,854 645,119 4,791,056
P
=15,020,271 =20,161,980
P =20,397,192
P
Other accrued expenses pertain to accruals for advertising expenses, salaries and wages, foreign station
expenses, interest expense and other operating expenses.
In November 2017, PAL paid its disputed liabilities with Civil Aviation Authority of the Philippines
(CAAP) and Manila International Airport Authority (MIAA) amounting to = P5.68 billion and
P
=258.59 million, respectively, included under “Landing and take-off fees”.
15. Long-term Obligations
2017 2016 2015

Obligations under aircraft finance
leases (Note 24) P
=53,875,163 P
=56,205,805 P
=58,595,521
Long-term debt (Note 18) 36,390,472 21,813,752 22,577,210
90,265,635 78,019,557 81,172,731
Less current portion 23,552,996 13,014,152 12,086,975
P
=66,712,639 =65,005,405
P =69,085,756
P
Note 26 presents the undiscounted contractual maturity analysis of financial liabilities, including long-
term obligations.
Obligations under Aircraft Finance Leases

The present value of minimum lease commitments for PAL’s obligations under finance leases as of
December 31 follows:
2017 2016 2015

2016 P
=– =–
P =9,010,187
P
2017 – 9,564,955 8,853,048
2018 10,121,111 9,333,181 8,636,541
2019 10,651,767 9,802,005 9,084,350
2020 9,065,241 8,228,757 7,598,861
2021 and thereafter 30,799,171 26,368,512 23,642,352
Minimum lease payments 60,637,290 63,297,410 66,825,339
Interest and others (6,762,127) (7,091,605) (8,229,818)
53,875,163 56,205,805 58,595,521
P
=45,494,786 =48,417,398
P =51,455,936
P
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As a result of obtaining control over FSL, the Group consolidated the carrying value of the aircraft and
engines and the related obligation under aircraft finance leases of FSL, which pertain to one Boeing
B777-300ER aircraft, five Airbus A330-300 aircraft and six Airbus A321-231 aircraft and three spare
engines (see Note 29).
Boeing 777-300ER Aircraft

As of December 31, 2017 and 2016, the Group has four Boeing 777-300ER aircraft under finance lease
which were delivered under the 2006 Purchase Agreement with The Boeing Company (Boeing).
Interest paid on these finance leases are based on fixed rates of 1.69% to 2.65%. Principal payments
amounted to = P2.37 billion in 2017, =
P2.18 billion in 2016 and P
Airbus 330-300 Aircraft

As of December 31, 2017 and 2016, the Group has five Airbus 330-300 under finance lease. The leases
require quarterly lease payments at interest rate ranging from 2.15% to 3.75% plus three-month LIBOR.
Principal payments amounted to P =2.32 billion in 2017, P=2.18 billion in 2016, and =
P2.09 billion in 2015.

For its Airbus 321-231 aircraft under the 2012 Purchase Agreement, the Group entered into finance
lease agreements covering one aircraft in 2016, three aircraft in 2015, and six aircraft in 2013. The
leases are for a period of 10 to 12 years and provide for quarterly lease payments, at interest rate ranging
from 2.1% to 3.75% plus three-month LIBOR. The leases also contain a purchase option at the end of
the lease term. Principal payments amounted to P =2.21 billion in 2017, P=2.09 billion in 2016 and
P

As of December 31, 2017 and 2016, PAL has eight Airbus 320-200 under finance lease. These aircraft
were deliveries under the 2005 Purchase Agreement with Airbus. The finance lease arrangements
covering these aircraft provide for purchase or remarketing options. They also provide for quarterly or
semi-annual installments with maturities generally not longer than 12 years, including balloon
payments for certain finance leases at the end of the lease term, at fixed rates ranging from 2.30% to
6.58% and/or floating interest rates based on certain margins over three-month or six-month LIBOR,
as applicable. Principal payments amounted to P =1.08 billion in 2017, = P1.03 billion in 2016 and
P
=986.47 million in 2015.
Bombardier DHC 8-400

In 2017, PAL accepted the delivery of five Bombardier DHC 8-400 (Q400 Next Gen) under finance
lease agreements with third party lessors. The leases are for a period of 10 to 12 years and provide for
quarterly lease payments, at interest rate ranging from 2.0% to 2.50% plus three-month LIBOR.
Principal payments amounted to P =77.49 million in 2017.
The carrying value of aircraft under finance lease amounted to P

=84.39 billion and P
=82.92 billion as of
December 31, 2017 and 2016, respectively (see Note 10).
Long-term Debt
2017 2016 2015

Secured loans, net of
debt issuance costs (Note 18) P
=36,390,472 P
=21,813,752 P
=22,577,210
P
=21,217,853 =16,588,007
P =17,629,820
P
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Secured Loans
$325.00 million and $260.00 million asset-backed securities
In July 2011, PAL obtained = P2.11 billion ($50.00 million) asset-backed security from a foreign bank
for additional working capital. The security is secured by future collections from passenger sales made
in the United States through designated credit card companies. In 2014 and 2013, PAL obtained
additional =
P2.24 billion ($50.00 million) and = P6.66 billion ($150.00 million) securities, respectively,
from the same foreign bank under the same terms as the original loan.
In August 2015, PAL repaid the balance of the original securities and obtained a new asset-backed
security of =
P15.31 billion ($325 million) using the same collateral. The security is repaid through
monthly installment for 60 months subject to interest of one-month LIBOR plus margin.
In September 2017, PAL obtained additional =

P12.98 billion ($260 million) from the same foreign bank
and entered into an amendment agreement to extend the term up to 48 months from the original
maturity.
As of December 31, 2017 and 2016, outstanding balance of these securities amounted to P=21.48 billion
and P
=11.75 billion, with current portion amounting to P
=3.25 billion and = P3.23 billion, respectively.
Total financing charges related to these securities amounted to P =528.20 million in 2017,
P
The debt issuance costs incurred amounting to P =75.15 million in 2017, P =74.30 million in 2016 and
P
=41.23 million in 2015 were included in the amortization of the security. The unamortized debt issuance
costs amounted to P =168.81 million and = P129.70 million as of December 31, 2017 and 2016,
respectively. The outstanding pledged receivables amounted to = P155.13 million as of
December 31, 2017 and = P72.86 million as of December 31, 2016 (see Note 6). The receivables collected
through the credit card companies will be applied against the monthly installment due. As discussed in
Note 12, a sinking fund amounting to P =956.70 million as of December 31, 2017 and P =893.15 million
as of December 31, 2016 was set aside to guarantee these securities. These securities are subject to
certain covenants which include, among others, maintenance of a coverage ratio. As of December 31,
2017, PAL is in compliance with the covenants.
$200.00 million asset-backed security

In June 2015, PAL obtained a P =9.42 billion ($200.00 million) asset-backed security from a third party.
The security is secured by current and future passenger and cargo receivables which are sold in Japanese
Yen through identified agents in Japan. The security is repaid through monthly installment for
60 months subject to interest of one-month LIBOR plus margin.
As of December 31, 2017 and 2016, outstanding balance of this asset-backed security amounted to
P
=4.98 billion and P=6.95 billion, with current portion amounting to P
=2.00 billion and =
P1.99 billion,
respectively. Total financing charges related to this security amounted to P
=314.25 million in 2017,
P
=349.58 million in 2016 and = P189.38 million in 2015.
As of December 31, 2017 and 2016, the outstanding pledged receivables amounted to P =335.08 million
and P=305.83 million, respectively (see Note 6). The receivables collected through the identified agents
in Japan will be applied against the monthly installment due. As discussed in Note 12, a sinking fund
amounting to P =193.83 million and = P199.42 million was set aside to guarantee this security as of
December 31, 2017 and 2016, respectively. This security is subject to certain covenants which include
maintenance of a coverage ratio. As of December 31, 2017, PAL is in compliance with the covenants.
115 *SGVFS026729*
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$127.14 million term loan from a local bank

In December 2016, a facility for P=6.33 billion was obtained from a local bank to finance predelivery
payments related to the acquisition of four Airbus 350-900 aircraft due for delivery in 2018 and 2019.
PAL availed half of the loan amounting to =P3.16 billion in the same month with the remaining balance
availed in 2017. The loan requires quarterly payments of interest based on three-month LIBOR plus
margin. Principal repayments are to be made on each aircraft delivery date.
The loan is secured by aircraft and spare engine with aggregate carrying value of P=1.70 billion and
P
=2.97 billion as of December 31, 2017 and 2016, respectively. Interest incurred on this loan amounting
to =
P260.27 million in 2017 and = P1.14 million in 2016 were capitalized as part of property and
equipment (see Note 10). Total accrued financing charges related to this loan amounted to
P
=12.88 million and P =1.19 million as of December 31, 2017 and 2016, respectively. In addition, debt
issuance costs incurred amounted to P=99.24 million in 2016.
The loan is subject to certain covenants which include, among others, maintenance of an interest
coverage and Net Debt to Earnings before interest, taxes, depreciation and amortization (EBITDA)
ratio. The Company is in compliance with its debt covenant as of December 31, 2017, except for a
financial ratio as of December 31, 2017.
$71.74 million term loan from a foreign bank

In June 2017, PAL obtained a facility for P =3.58 billion from a foreign bank to finance predelivery
payments related to the acquisition of two Airbus 350-900 due for delivery in 2018. The loan requires
quarterly payments of interest based on three-month LIBOR plus margin. Principal repayments are to
be made on each aircraft delivery date.
Interests and debt issuance costs incurred on this loan amounting to =

P86.68 million and =
P90.12 million
were capitalized as part of property and equipment (see Note 10). Total accrued financing charges
related to this loan amounted to P
=13.98 million as of December 31, 2017.
16. Reserves and Other Noncurrent Liabilities
2017 2016 2015

Provisions P
=2,255,246 =2,830,463
P =2,706,034
P
ARO (Note 10) 1,245,079 1,196,994 1,092,902
Derivative liabilities 183,107 – –
Other noncurrent liabilities (Note 18) 1,216,470 629,074 651,909
P
=4,899,902 =4,656,531
P =4,450,845
P
Other noncurrent liabilities include, among others, deposits on subleased aircraft and deferred revenue
under the Frequent Flyer Program (see Note 4).
Provisions
Provisions consist substantially of probable claims and other litigations involving PAL. The timing of
the cash outflows of these provisions is uncertain as it depends upon the outcome of PAL’s negotiations
and/or legal proceedings, which are currently ongoing with the parties involved.
2017 2016 2015

=2,830,463 =2,706,034
P =2,096,874
P
Additions 109,771 109,923 617,646
Reversal (688,111) (9,501) (25,441)
Balance at end of year P
=2,255,246 =2,830,463
P =2,706,034
P
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Disclosure of additional details beyond the present disclosures may seriously prejudice PAL’s position.
Thus, as allowed by PAS 37, only general descriptions were provided.
ARO
2017 2016 2015

=1,196,994 =1,092,902
P =827,153
P
Additions 44,667 40,663 214,226
Balance at the end of year P
=1,245,079 =1,196,994
P =1,092,902
P
In 2014 and 2013, PAL entered into several operating lease agreements covering Airbus 321-231 and
Airbus 330-300 aircraft. Under the agreement, PAL is obliged to return the assets held under lease to
the configuration that existed as at the inception of the lease.
In 2015, upon termination of the sublease with APC, the asset restoration obligation on
Airbus 330-300 aircraft was recognized by PAL. Additional provisions for asset restoration obligation
include accretion amounting to P
=43.83 million in 2017, =
P40.67 million in 2016 and =P34.27 million in
2015, presented as part of “Financing charges” in the consolidated statements of comprehensive
income.
17. Equity
The Parent Company’s capital stock as of December 31 consists of:
No. of Shares Amount

2017 2016 2017 2016
Authorized (P
=1 par value) 13,500,000,000 30,000,000,000 =13,500,000
P =30,000,000
P
Issued and subscribed 11,610,256,172 24,836,567,685 =9,799,006

P =23,025,318
P
Treasury stock (25,015) (55,589) (25) (56)
11,610,231,157 24,836,512,096 =9,798,981
P =23,025,262
P
a. Issued and outstanding shares are held by 6,507 and 6,556 equity holders as of December 31, 2017
and 2016, respectively.
b. The Parent Company has 25,015 and 55,589 treasury shares amounting to P =25.00 and P =56.00 as of
December 31, 2017 and 2016. Future earnings are restricted from dividend declaration to the extent
of the cost of these treasury shares.
c. The Parent Company’s track record of registration of securities under the Securities Regulation
Code is as follows:
Date of approval Number of Shares Licensed Issue/Offer Price

August 2, 1930 18,000 =100.00
P
August 2, 1930 2,000,000 0.10
January 6, 1951 7,000,500 0.10
December 4, 1957 30,000,000 0.10
March 25, 1970 200,000,000 0.10
April 14, 1975 5,000,000,000 0.01
March 7, 1977 12,500,000,000 0.01
117 *SGVFS026729*
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In 1996, the Philippine SEC approved the decrease in authorized capital stock from 20 billion
shares to 200 million shares while the par value was increased from P =0.01 per share to = P1.00 per
share. In 2000, the Philippine SEC approved the increase in the authorized capital stock from
200 million shares to 400 million shares with P =1.00 par value per share. Further, as discussed in
Note 1, the authorized capital stock was again increased from 400 million shares to 20 billion shares
in 2007.
The Parent Company’s BOD and stockholders approved the increase in the Parent Company’s
authorized capital stock from P
=20.00 billion divided into 20.00 billion shares at P
=1.00 par value per
share to =
P23.00 billion divided into 23.00 billion shares at P
=1.00 par value per share in separate
meetings held on June 26, 2012 and September 28, 2012, respectively. Out of the increase in the
authorized capital stock, P
=2.42 billion have been subscribed and fully paid by way of cash infusion
by Trustmark. The increase in authorized capital stock and the amended Articles of Incorporation
were approved by the Philippine SEC on December 12, 2012. The Parent Company incurred filing
fees of =
P6.09 million and Documentary Stamp Tax (DST) of P =85.00 million on the issuance of
shares, which were recognized as a reduction from additional paid-in capital.
d. In fiscal year 2013, Trustmark subscribed to 17.00 billion shares at P

=1.00 per share amounting to
P
=17.00 billion, of which 14.58 billion shares were issued out of the unissued capital stock of the
Parent Company, and the balance of 2.42 billion shares were issued out of the increase in the
authorized capital stock.
In 2015, the Parent Company incurred PSE listing fee of P

=17.00 million for the 17.00 billion shares
private placement transaction with Trustmark. This was included under “General and
administrative expenses” in the statement of comprehensive income.
e. On February 4 and March 15, 2013, the BOD and the stockholders approved the increase in the
Parent Company’s authorized capital stock from = P23.00 billion divided into 23.00 billion shares at
=
P1.00 par value per share to =
P30.00 billion divided into 30.00 billion shares at P
=1.00 par value per
share and the amendment of its Articles of Incorporation to reflect the aforementioned increase.
The Parent Company’s application for the increase in authorized capital stock was approved by the
Philippine SEC on June 28, 2013.
Out of the increase in capital stock, 2.42 billion shares were subscribed, of which, 603.75 million
shares have been fully paid for as of December 31, 2017 and 2016. The Parent Company incurred
filing fees of =
P14.14 million and DST of P =12.08 million on the issuance of shares, which were
recognized as a reduction from additional paid-in capital.
f. On September 26, 2016, the Parent Company’s BOD approved and authorized the acquisition, in a
share swap transaction, of Philippine Airlines, Inc. (PAL) shares from existing PAL shareholders.
Relative thereto the BOD likewise approved the share swap ratio of 5:1 or equivalent to five PAL
shares to one PHI share. On December 18, 2017, the Philippine SEC approved the acquisition of
0.64% non-controlling interest in PAL. The Parent Company issued 123.54 million new shares
from its authorized but unissued capital stock in favor of PAL shareholders who have participated
in the PAL share swap transaction.
118 *SGVFS026729*
- 50 -
The Parent Company incurred filing fees of P

=1.25 million and DST of P
=1.06 million on the issuance
of shares, which were recognized as a reduction from additional paid-in capital.
On November 28, 2016, the Parent Company’s BOD also approved the acquisition, through share
swap transaction, of the shares of ZUMA from its existing shareholders with a share swap exchange
ratio of 19:1 corresponding to 19 PHI shares to one ZUMA share. On December 21, 2017, the
Philippine SEC approved the acquisition of ZUMA through share swap transaction from its existing
shareholders. The Parent Company issued 840.46 million new shares from its authorized but
unissued capital stock valued at P =5.00 per share in favor of Cosmic Holdings Corporation.
Accordingly, as of December 31, 2017, the Parent Company owns 51% of ZUMA. As of
February 26, 2018, the acquisition of the remaining 49% has been suspended.
The Company also incurred filing fees of P

=8.49 million and DST of = P4.37 million on the issuance
of shares, which were recognized as a reduction from additional paid-in capital.
g. On March 28 and May 25, 2017, the BOD, by majority vote and by the vote of the stockholders
owning or representing at least 2/3 of the outstanding capital stock of the Parent Company,
approved the decrease in authorized capital stock by changing the par value of the shares from
P
=1.00 to P=0.45 per share. Simultaneously, the BOD approved to increase the par value per share
from =P0.45 to = P1.00 per share, without increasing the authorized capital, thus decreasing the
number of shares corresponding to the authorized and subscribed capital stock. The decrease in the
authorized capital by reducing the par value per share to P =0.45 per share and the subsequent
increase in the par value to =
P1.00 per share by reducing the number of shares corresponding to the
authorized capital stock were approved by the Philippine SEC on December 22, 2017. Accordingly,
authorized capital stock as of December 31, 2017 is composed of 13.50 billion shares, with
10.52 billion shares issued and outstanding and 1.09 billion shares subscribed.
18. Related Party Transactions
Related party relationship exists when one party has the ability to control, directly or indirectly, through
one or more intermediaries, or exercise significant influence over the other party in making financial and
operating decisions. Such relationships also exist between and/or among entities which are under common
control with the reporting entity and its key management personnel, directors or stockholders. Key
management personnel, including directors and officers of the Parent Company and close members of the
family of these individuals, and companies associated with these individuals also constitute related
parties. In considering each possible related party relationship, attention is directed to the substance of the
relationship and not merely the legal form.
The following tables present the amounts and outstanding balances of the Group’s transactions with its
related parties which are not eliminated:
2017
Outstanding
Receivable
Transactions Volume (Payable) Terms and Conditions
Immediate parent
Non-interest bearing; unsecured;
Receivable (Note 6) P
=– P
=265,289 unimpaired
Entities under common control
Cash and money placements, including interest
income (Notes 5 and 12) 52,696 7,740,310 Partly secured; unimpaired
Dividend receivable 12,320 12,320 AFS investment; unsecured
(Forward)
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2017
Outstanding
Receivable
Receivables (Note 6) P
=– P
=8,288,380 unimpaired
Notes payable (Note 13)
Principal 2,411,619 (3,909,519) Bears interest based on prevailing market
Financing charges 56,552 (999) rates; secured; payable in 180 days
Short term investment, including interest income 866 186,677 Interest bearing; unimpaired
Sales and other income (Note 6) 259,699 386,398 Receivable in 30 days; unimpaired
Groundhandling and other charges
(Notes 14 and 20) 1,635,506 (321,544) Payable after 30 days
Entities under significant shareholder group
Sales and other income (Note 6) 10,521 110,328 Receivable in 30 days
Aircraft maintenance and other charges
(Notes 14 and 20) 10,980,845 (2,812,439) Payable after 15 to 30 Days
2016
Outstanding
Receivable
Immediate parent
Receivable (Note 6) =
P– P
=264,965 unimpaired
53,729 6,132,642
income (Notes 5 and 12) Partly secured; unimpaired
Dividend receivable (Note 6) 7,040 7,040 AFS investment; unsecured
Receivables (Note 6) 379,840 8,261,654 unimpaired
Notes payable (Note 13)
Principal 1,424,400 (1,493,070) Bears interest based on prevailing market
Financing charges 1,924 (2,017) rates; secured; payable in 180 days
Short term investment, including interest income 392 26,724 Interest bearing, unimpaired
Sales and other income (Note 6) 365,216 52,981 Receivable in 30 days
2015
Outstanding
Receivable
Immediate parent
Receivable (Note 6) =
P– P
=259,861 Unsecured, unimpaired
income (Notes 5 and 12) 1,514,135 5,292,848 Partly secured; unimpaired
Dividend receivable (Note 6) 6,600 6,600 AFS investment; unsecured
Receivables (Note 6) – 7,461,977 Unsecured, unimpaired
Notes payable (Note 13) Bears interest based on prevailing market
Principal 12,066,468 – rates; secured; payable in 180 days
Financing charges 252,892 –
Short term investment, including interest income 560 18,824 Interest bearing, unimpaired
Receivable in 30 days; with impairment
Sales and other income (Note 6) 11,871 141,173 amounting to P=97,074
120 *SGVFS026729*
- 52 -
a. In 2017 and 2016, the Parent Company owns 88 million common shares (7.13% equity interest) of
MAC. Certain members of the Parent Company’s BOD are also officers and members of the BOD
of MAC. Dividends received or receivable from this investment amounted to =
P12.32 million in
2017 and =
P7.04 million in 2016 and =
P6.60 million in 2015 (see Note 6).
b. As of December 31, 2017 and 2016, cash and cash equivalents (included under “Cash and cash
equivalents” and “Other noncurrent assets” in the consolidated statements of financial position)
with banks under common control amounted to P =7.74 billion and P
=6.13 billion, respectively (see
Notes 5 and 12). The related interest income on these investments and cash deposits amounted to
P
=52.42 million in 2017, P=54.04 million in 2016 and =
P20.86 million in 2015. These cash and cash
equivalents with entities under common control include money placements for standby letters of
credit amounting to P=207.72 million and = P200.47 million as of December 31, 2017 and 2016,
The retirement plan assets of PAL are managed by a bank under common control (see Note 21).
c. As of December 31, 2017 and 2016, PAL has outstanding short-term notes payable amounting to
P
=3.91 billion and =
P1.49 billion, respectively, which bear interest based on prevailing market rates,
with entities under common control (see Note 13). The related financing charges on these short-
term notes payable amounted to P =56.55 million in 2017 and P=1.95 million in 2016.
In 2015, PAL paid the outstanding short-term notes payable and long term debt (included under
“Long-term obligations”) amounting to P =11.87 billion and accrued interest amounting to
P
=18.21 million with entities under common control. The related financing charges on these loans
amounted to =
d. PAL has an operating lease agreement with an entity under common control for the lease of a
portion of the PNB Financial Center Building. Rental expenses incurred by PAL amounted to
P
=43.76 million in 2017, = P52.76 million in 2016 and = P33.82 million in 2015. As of
December 31, 2017, the outstanding rental liability relating to the said lease contract amounted to
P
=3.20 million (nil in 2016) (see Note 24).
e. PAL and Lufthansa Technik Philippines (LTP), an entity under significant shareholder group,
entered into a General Terms and Agreement for Maintenance, Repair and Overhaul Services
(GTA) effective September 2010. Under the GTA, the scope of LTP’s service includes line
maintenance, component maintenance, C-check of certain aircraft and other support services. The
GTA was for a period of one year, renewable upon consent of both parties. The last renewal of the
GTA ended in August 2015.
In September 2015, the PAL entered into a five-year GTA with LTP covering line maintenance,
component maintenance, C-check, D-check and other support services. The GTA will
automatically renew unless terminated by either party.
In February 2009, PAL and LTP also entered into an Engine Maintenance Services (EMS) for
CFM56-5B Engines agreement for a period of twelve years. LTP has the option to extend the
agreement for another two years by giving six-month prior notice.
Total LTP-related maintenance and repair costs charged to operations amounted to P=8.23 billion in
2017, P
=5.91 billion in 2016 and =P3.92 billion in 2015. In addition, related expendable parts sold
to LTP amounted to = P6.01 million in 2017, =P2.76 million in 2016 and P
=10.79 million in 2015. As
of December 31, 2017 and 2016, PAL has outstanding amounts payable to and estimated unbilled
121 *SGVFS026729*
- 53 -
charges from LTP totaling =P2.51 billion and = P2.56 billion (included under “Accounts payable” in
the consolidated statements of financial position), net of revolving fund and unapplied credits from
and advance payments to LTP amounting to nil and P =21.80 million, respectively.
PAL, in the normal course of its business, renders various services to LTP. Revenues earned from
these services are included under “Other charges (income) - net” in the consolidated statements of
comprehensive income. Receivables from LTP amounted to P =54.87 million and =P186.83 million
as of December 31, 2017 and 2016, respectively (see Note 6).
f. PAL has a ground handling agreement with MacroAsia Airport Services Corporation (MASC), an
entity under significant shareholder group. On October 1, 2011, the parties executed a supplement
to the agreement specifying the locations, agreed services and charges. The supplement is effective
for a period of five years. Related ground handling expenses amounted to P=458.29 million in 2017,
P
=262.47 million in 2016 and = P148.73 million in 2015. Outstanding payable to MASC amounting
to =
P96.54 million and = P63.16 million as of December 31, 2017 and 2016, respectively, is included
under “Accounts payable” in the consolidated statements of financial position.
g. APC has also a ground handling agreement with MASC to provide ramp, passenger and cargo
handling, and other ground services to the Company. Related groundhandling expenses amounted
to =
P313.15 million in 2017, =
P147.68 million in 2016 and =P143.08 million in 2015. Outstanding
payable to MASC amounting to P =109.50 million and =
P31.91 million as of December 31, 2017 and
2016, respectively, is included under “Accounts payable” in the consolidated statements of
financial position.
h. The compensation of key management personnel of the Group, consisted of short-term employee
benefits amounting to =
P47.55 million, P
=49.06 million and =P49.27 million and retirement benefits
amounting to P
=6.42 million, P
=7.22 million and =
P5.51 million in 2017, 2016 and 2015, respectively.
The following are the balances among related parties which are eliminated in the consolidated financial
statements:
Assets Liabilities
Recognized Recognized Years Ended December 31
by: by: Terms 2017 2016 2015
Noninterest-bearing, unsecured,
PHI PAL
not impaired P
=91,091 P
=91,091 P
=91,091
Non-interest bearing,
PAL APC
unsecured, not impaired 2,279,970 1,807,165 1,690,588
Noninterest-bearing, due and
refundable at the end of the
lease term, not impaired 11,090 11,339 11,034
Amortized over the lease term,
not impaired 2,790 6,937 8,954
refundable at the end of the
lease term, not impaired 335,526 326,296 356,390
Noninterest-bearing, unsecured,
APC PAL
not impaired 6,250,479 5,358,356 5,140,313
ZUMA APC
demandable, not impaired 62,972 62,972 62,972
a. As of December 31, 2017 and 2016, PAL has various aircraft and engines lease agreements with
the subsidiaries of FSL covering Airbus 330-300, Airbus 321-231 and Boeing 777-300ER aircraft
and spare engines (see Notes 10 and 24).
b. The transactions with APC, an entity under common control, include joint services and code share
agreements, and maintenance services.
122 *SGVFS026729*
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Effective March 2014, PAL entered into the Code Share Agreement with APC. This arrangement
superseded the existing Reciprocal Free Flow Code Share Agreement. Under the Code Share
Agreement, PAL markets the codeshare flights while APC operates the flights.
In 2015, PAL pre-terminated the Technical Services Agreement (TSA) with APC for the aircraft
maintenance requirements of PAL.
As of December 31, 2017, PAL has outstanding operating lease agreements with APC covering
Airbus 321-200, Airbus 320-200 aircraft, Bombardier DHC 8-300 and Bombardier DHC 8-400
aircraft, for a period of 36 to 120 months (see Notes 10 and 24). In 2017, two Bombardier were
redelivered and five additional Bombardier DHC 8-400 were subleased.
19. Other Comprehensive Income
Movements in other comprehensive income are as follows:
2017 2016 2015

OCI to be reclassified to profit or loss in subsequent periods:
Cumulative translation adjustments:
Balance at beginning of year =2,357,741 P
P =1,135,876 =18,414
P
Effect of foreign exchange translation* (426,194) 1,221,865 1,117,462
End of year 1,931,547 2,357,741 1,135,876
Net changes in fair values of available-for-sale investments (Note 12):
Balance at beginning of year, net of deferred income tax effect 37,690 32,114 41,272
Gain (loss) on changes in fair values (net of deferred income
tax effect of P
=0.24 in 2017 and P =0.05 in both 2016 and 2015) 1,799,298 5,576 (9,158)
End of year 1,836,988 37,690 32,114
3,768,535 2,395,431 1,167,990
OCI not to be reclassified to profit or loss in subsequent periods:
Revaluation increment (Note 10):
Balance at beginning of year, net of deferred income tax effect 377,335 538,735 399,612
Revaluation increment for the year 804,196 – 407,886
Deferred income tax effect on the revaluation increment for the year (241,259) – (122,366)
Transfer of portion of revaluation increment in property
realized through sale and depreciation, net of deferred
income tax effect and foreign exchange adjustment (222,117) (161,400) (146,397)
End of year 718,155 377,335 538,735
Remeasurement losses on defined benefit obligation (Note 21):
Balance at beginning of year, net of deferred income tax effect (677,972) (386,637) (167,899)
Remeasurement losses for the year (126,923) (420,750) (313,841)
Deferred income tax effect on remeasurement losses for the year 46,888 129,415 95,103
End of year (758,007) (677,972) (386,637)
(39,852) (300,637) 152,098
Total other comprehensive income at the end of the year =3,728,683 =
P P2,094,794 =
P1,320,088
Other comprehensive income attributable to:
Equity holders of the Parent Company P
=2,693,389 P1,085,713
= P668,760
=
Non-controlling interests 1,035,294 1,009,081 651,328
P
=3,728,683 =2,094,794
P =1,320,088
P
*Represent the effect of translating the US Dollar consolidated financial statements of Philippine Airlines, Inc., a subsidiary, using the applicable year-end
exchange rates of P=49.93, =P 49.769 and P
=47.118 to US$1 as of December 31, 2017, 2016 and 2015, respectively, and the monthly average exchange rates for
the years then ended.
123 *SGVFS026729*
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20. Expenses
The significant components of expenses by nature are as follows:
2017 2016 2015

Fuel and oil (Note 27) P38,427,675
= =27,852,562
P =
P30,419,523
Repairs and maintenance (Notes 7 and 18) 13,967,727 10,751,717 10,878,930
Crew and staff costs (Note 21) 15,160,391 12,790,134 11,680,730
Aircraft lease rentals (Notes 18 and 24) 8,981,366 7,108,720 6,724,023
Ground handling charges (Note 18) 8,569,688 7,174,239 6,180,570
Depreciation, amortization and
obsolescence (Notes 7 and 10) 8,214,072 7,132,584 7,018,871
Landing and take-off fees 6,610,049 5,654,338 4,442,109
Passenger food (Note 18) 4,451,631 3,706,515 3,148,876
Reservation and selling costs 2,924,494 2,344,364 1,899,169
Flight amenities 2,389,556 1,776,371 1,379,384
Fuel and oil includes the effect of fair value gain (loss) of various fuel derivatives used as economic
hedges of fuel cost amounting to P =584.82 million in 2017, P =3.24 billion in 2016 and
(P
=835.80 million) in 2015.
21. Accrued Employee Benefits
Characteristics of the Plan

The Group Retirement Plans are noncontributory defined benefit plans covering all regular employees.
Benefits are based on the employees’ years of service and final plan salary.
The Trustee is responsible for the administration of the plan assets and for the definition of the
investment strategy.
The retirement plans meet the minimum retirement benefit specified under Republic Act 7641,
The Retirement Pay Law.
The Group’s accrued employee benefits as of December 31 consisted of the following:
2017 2016 2015

Regular retirement benefits P
=5,011,893 =4,436,428
P =3,677,518
P
Other long-term benefits:
Sick leave and vacation leave 838,914 794,087 892,556
Others 4,352,093 3,695,180 3,113,215
= 10,202,900
P =
P8,925,695 =
P7,683,289
“Others” includes benefits from pilot loyalty program, pilot occupational disability program, pilots’
retirement plan and retirement benefits for foreign stations’ employees.
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The components of retirement costs (income) included under “Expenses” in the consolidated statements
of comprehensive income are as follows:
Regular retirement benefits Sick leave and vacation leave benefits

2017 2016 2015 2017 2016 2015
Current service cost =395,036 =
P P348,289 = P301,317 =43,733 =
P P123,813 =
P107,615
Net interest cost 237,279 178,193 143,342 40,067 42,734 28,509
Remeasurements on other
long-term benefits (161,872) (180,730) (183,538) 81,768 (221,572) 178,925
P470,443
= =
P345,752 =
P261,121 =165,568
P (P
=55,025) =
P315,049
Remeasurement gains (losses) on regular retirement benefits recognized in OCI are as follows:
2017 2016 2015

Defined benefit obligation (P
=111,470) (P
=381,295) (P
=320,497)
Plan assets (15,453) (39,455) 12,450
(P
=126,923) (P
=420,750) (P
=308,047)
The net amounts in the consolidated statements of financial position arising from the Group’s obligation
in respect of its defined benefit plan and sick leave and vacation leave benefits are as follows:

2017 2016 2015 2017 2016 2015
Present value of obligation
(PVBO) P5,637,949 =
= P5,043,982 =
P4,309,900 =
P948,126 =
P902,497 =
P973,195
Fair value of plan assets
(FVPA) (626,056) (607,554) (632,382) (109,212) (108,410) (80,639)
P5,011,893 =
= P4,436,428 =3,677,518
P =
P838,914 =794,087
P P892,556
=
Changes in the PVBO are as follows:

2017 2016 2015 2017 2016 2015
Beginning of year P5,043,982 P
= =4,309,900 P =3,912,175 =
P902,497 =973,195
P =753,572
P
Current service cost 395,036 348,289 301,317 43,733 123,813 107,615
Interest expense 260,402 203,545 170,238 45,503 46,705 31,794
Benefits paid (172,941) (199,047) (394,327) (120,741) (37,822) (102,316)
Remeasurement loss (gain)
arising from:
Financial assumptions (175,738) (238,153) (181,233) 77,134 (203,394) 182,530
Experience adjustments 288,923 672,465 506,265 – – –
Change in demographic
assumption (1,715) (53,017) (4,535) – – –
End of year P5,637,949 P
= =5,043,982 P
=4,309,900 =
P948,126 =902,497
P =973,195
P
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Changes in the FVPA are as follows:

2017 2016 2015 2017 2016 2015
Beginning of year =
P607,554 =632,382
P =585,081
P =
P108,410 =80,639
P =73,749
P
Interest income 23,123 25,352 26,896 5,436 3,971 3,285
Contributions 178,523 193,117 402,282 46,746 37,822 102,316
Benefits paid (167,691) (198,220) (394,327) (46,746) (37,822) (102,316)
Remeasurement gain (loss)
arising from return on plan
assets (15,453) (39,455) 12,450 (4,634) 18,178 3,605
Reallocated assets – (5,622) – – 5,622 –
End of year =
P626,056 =607,554
P =632,382
P P
=109,212 =108,410
P =80,639
P
The movements in accrued employee benefits are as follows:

2017 2016 2015 2017 2016 2015
Beginning of year =
P4,436,428 =3,677,518
P =3,327,094
P =
P794,087 P892,556
= P679,823
=
Retirement cost 632,315 526,482 444,659 83,800 166,547 136,124
Remeasurement losses (gains)
recognized in OCI 126,923 420,750 308,047 81,768 (221,572) 178,925
Contributions (178,523) (193,117) (402,282) (46,746) (37,822) (102,316)
Benefits paid (5,250) (827) – (73,995) – –
Reallocated Assets – 5,622 – – (5,622) –
End of year P
=5,011,893 =4,436,428
P =3,677,518
P =
P838,914 =794,087
P =892,556
P
The retirement plan’s assets and investments which are being maintained by a trustee bank under
common control (see Note 18), consist of the following:
· Cash and cash equivalents, which include regular savings and time deposits, earning interest at their
respective bank deposit rates; and
· Investments in debt instruments, consisting of both short and long-term corporate notes of foreign
commercial banks, which earn interest ranging from 8.50% to 9.03% and have maturities from
February 1, 2017 to March 15, 2029.
The major categories of the plan assets of the Group as percentages of the fair value of total plan assets
as of December 31 are as follows:
2017 2016 2015

Cash and cash equivalents 92% 91% 84%
Investment in debt securities:
Thailand 4% 3% 3%
Argentina − 5% 9%
Pakistan − − 2%
Investment in equity securities 3% − −
Receivables 1% 1% 2%
100% 100% 100%
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The discount rates and future salary increase rates used in determining retirement obligation for the
defined benefit plans are as follows:
2017 2016 2015

Discount rate 5.67% to 5.79% 4.67% to 5.55% 4.36% to 5.19%
Future salary increase rate
Ground employees 5.00% 5.00% 5.00%
Cabin crew P
=3,000 to P
=5,500 10.00% 10.00%
Pilots P
=5,500 =2,500 to P
P =10,000 P
=2,500 to P
=10,000
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant actuarial assumption on the defined benefit obligation as of December 31 assuming all other
assumptions were held constant:
2017 2016 2015

Increase Effect on Increase Effect on Increase Effect on
(decrease) PVBO (decrease) PVBO (decrease) PVBO
Discount rate per annum 1.00% (P =368,847) 1.00% (P
=381,633) 1.00% (P=353,534)
(1.00%) 438,546 (1.00%) 456,389 (1.00%) 424,686
Future annual salary
increase rate:
Ground employees 1.00% 211,254 1.00% 200,691 5.00% 1,566,681
(1.00%) (174,796) (1.00%) (165,970) (5.00%) (676,617)
Cabin crew +P=4,000 681,794 1.00% 88,290 1.00% 34,208
+P=2,000 340,872 (1.00%) (73,459) (1.00%) (31,239)
Pilots +P=4,000 177,601 +P
=4,000 179,965 +P
=4,000 177,494
+P=2,000 88,825 +P
=2,000 89,982 +P
=2,000 88,723
The weighted average duration of the defined benefit obligation as of December 31, 2017 is
19.68 to 23.54 years (19.64 to 22.5 years as of December 31, 2016). Expected contribution to the
retirement plan in 2018 amounts to =
P1.20 billion.
The table below shows the payments that are to be made in the future years out of the defined benefit
obligation as of December 31:
2017 2016 2015

Within one year P
=793,748 =436,052
P =392,210
P
More than one year to 5 years 1,925,302 1,560,345 989,910
More than 5 years to 10 years 3,341,979 2,724,489 2,636,123
More than 20 years 4,986,920 13,851,843 8,426,748
The funds are invested significantly in short-term investments and corporate and government bonds.
The Group’s management ensures that there will be sufficient assets to pay retirement benefits as they
fall due.
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22. Income Taxes
a. The income tax expense consists of the following:
2017 2016 2015

Current income tax P
=59,681 =228,679
P =303,461
P
Deferred income tax (56,788) 1,969,334 (222,483)
P
=2,893 =2,198,013
P =80,978
P
b. The Group’s recognized net deferred income tax assets, all relating to PAL, as of December 31 are
as follows:
2017 2016 2015

Deferred income tax items recognized in
profit or loss:
Deferred income tax assets on:
NOLCO and MCIT P
=2,766,266 =1,417,989
P =2,519,038
P
Allowance for inventory losses 116,531 106,902 85,124
Impairment loss on assets held for
sale − − 129,855
Unamortized past service cost 157,676 225,863 287,840
Fair value adjustments - net 11,545 146,972 841,678
Reserves and others 516,408 650,064 562,644
Unrealized foreign exchange
adjustments - net 765,971 1,197,755 327,903
4,334,397 3,745,545 4,754,082
Deferred income tax liabilities on:
Prepaid commission and others (1,399,001) (781,296) (625,110)
Changes in exchange rates related
to nonmonetary assets and
liabilities - net (2,224,449) (2,227,820) (1,399,269)
(3,623,450) (3,009,116) (2,024,379)
710,947 736,429 2,729,703
Deferred income tax items recognized in OCI:
Deferred income tax assets on
remeasurement losses on accrued
retirement benefits 409,725 361,669 222,180
Deferred income tax liabilities on:
Revaluation increment in property (368,272) (184,432) (259,869)
Net changes in fair value of AFS (1,562) (1,494) (1,382)
Investment property carried at
deemed cost (92,502) (92,204) (87,293)
(52,611) 83,539 (126,364)
Net deferred income tax assets = 658,336
P =
P819,968 =2,603,339
P
The utilization of the net deferred income tax assets is dependent on future taxable income in excess
of the income arising from the reversal of the taxable temporary differences. The future taxable
income is based on the forecast prepared by management considering the revenue enhancement
programs (see Notes 2 and 4).
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The Group did not recognize deferred income tax assets on the following deductible temporary
differences as of December 31:
2017 2016 2015

NOLCO =8,112,211
P =6,313,418
P =7,013,965
P
Excess of MCIT over RCIT 568,990 72,286 35,065
Allowances for:
Doubtful accounts 5,805,288 5,809,788 5,716,268
Obsolescence 140,666 145,867 162,174
Accrued retirement benefits 8,833,490 7,729,317 6,948,311
Unrealized foreign exchange loss - net − 101,761 211,595
Impairment loss on assets held for sale 1,275,449 − −
Provisions 2,275,273 2,285,347 2,180,511
Asset retirement obligation − 17,538 14,714
Advances from charterers − 22,542 −
c. As of December 31, 2017, the Parent Company’s NOLCO that are available for deduction against
future taxable income are as follows:
Year incurred Amount Expired Balance Available Until

December 31, 2017 =
P26,780 =−
P =
P26,780 December 31, 2020
December 31, 2016 17,427 − 17,427 December 31, 2019
December 31, 2015 29,386 − 29,386 December 31, 2018
December 31, 2014 8,975 (8,975) − December 31, 2017
=82,568
P (P
=8,975) =73,593
P
PAL’s outstanding NOLCO as of December 31, 2017 that are available for deduction against future
taxable income are as follows:
Year incurred Amount Applied Expired Balance Available Until

December 31, 2017 =
P8,826,068 =
P– =
P– = P8,826,068 December 31, 2022
December 31, 2014 477,183 – – 477,183 December 31, 2019
December 31, 2013 2,122,150 (7,588) – 2,114,562 December 31, 2018
March 31, 2013 1,399,643 (1,399,643) – – December 31, 2017
March 31, 2012 2,921,453 (2,921,453) – – December 31, 2016
March 31, 2010 1,370,433 – (1,370,433) – December 31, 2014
=
P17,116,930 (P
=4,328,684) (P
=1,370,433) P
=11,417,813
In 2016 and 2015, PAL applied outstanding NOLCO against taxable income amounting to
P
=4.12 billion and =
P234.81 million, respectively.
As of December 31, 2017, Zuma’s NOLCO that can be claimed as deduction from future taxable
income are as follows:
Year Incurred Amount Applied Expired Balance Available Until

December 31, 2017 P61,449
= =–
P =–
P =61,449
P December 31, 2020
December 31, 2014 60,676 – (60,676) – December 31, 2017
=246,597
P =–
P (P
=60,676) =185,921
P
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PAL’s outstanding MCIT as of December 31, 2017 is available for application against future
taxable income as follows:
Year incurred Amount Expired Balance Available Until

December 31, 2016 P187,349
= =–
P P187,349
= December 31, 2019
December 31, 2015 266,708 – 266,708 December 31, 2018
December 31, 2014 186,409 (186,409) – December 31, 2017
=696,946
P (P
=242,889) =454,057
P
APC’s outstanding NOLCO as of December 31, 2017 that are available for deduction against
future taxable income are as follows:
Year Incurred Amount Applied Expired Balance Available until

December 31, 2014 P1,281,913
= =–
P =– P
P =1,281,913 December 31, 2019
December 31, 2013 2,838,251 – – 2,838,251 December 31, 2018
December 31, 2012 3,295,210 (1,491,498) (1,803,712) – December 31, 2017
=7,415,374 (P
P =1,491,498) (P
=1,803,712) P
=4,120,164
APC’s NOLCO incurred in 2012 was applied against the Company’s taxable income amounting to
P
P1,157.87 million in 2016 and 2015.
APC’s outstanding MCIT as of December 31, 2017 is available for application against future
income tax dues:
Year Incurred Amount Expired Balance Available until

December 31, 2017 P43,883
= =–
P P43,883
= December 31, 2020
=116,169
P (P
=1,237) =114,932
P
d. The reconciliation between the statutory tax rate and the Group’s effective tax rate follows:
2017 2016 2015

Statutory tax rate (30.00%) 30.00% 30.00%
Adjustments resulting from:
Movement in deductible temporary
differences for which no deferred
income tax assets were recognized 12.47% 1.35% 8.75%
Derecognition of deferred income tax
assets on NOLCO and MCIT 17.20% – –
Deductible temporary differences
used/recognized in current
year but for which no deferred
income tax assets were recognized
in prior years 0.14% 0.08% (22.74%)
Interest income subjected to final tax or
exempted from tax (0.31%) (0.39%) (0.35%)
Nondeductible portion of interest
expense 0.10% 0.13% 0.12%
Nondeductible expenses
and others - net 0.44% (0.33%) (14.58%)
Effective income tax rate 0.04% 30.84% 1.20%
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e. RR No. 10-2002 defines expenses to be classified as entertainment, amusement and recreation

(EAR) expenses and sets a limit for the amount that is deductible for tax purposes, i.e., 1% of net
revenue for sales of services and 0.50% of net sales for sales of goods. EAR expenses amounted to
P
=21.07 million, P
=22.58 million and = P14.35 million in 2017, 2016 and 2015, respectively.
f. Republic Act (RA) No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) was
signed into law on December 19, 2017 and took effect January 1, 2018, making the new tax law
enacted as of the reporting date. The TRAIN changes existing tax law and includes several
provisions that will generally affect businesses on a prospective basis. The management is assessing
the impact on the financial statements for the calendar year 2018.
23. Notes to Consolidated Statements of Cash Flows
As discussed in Note 3, the Group adopted the Amendments to PAS 7 in 2017. Changes in liabilities
arising from financing activities are as follows:
Cash flows
January 1, Translation December 31,
2017 Availments Payments Adjustment Net New leases Others 2017
Notes payable P
=7,714,195 P
=12,879,444 (P
=2,781,101) P
=24,955 P
=10,123,298 P
=– P
=– P
=17,837,493
Current portion of
long-term loans 5,225,745 – (5,242,650) 16,905 (5,225,745) – 15,172,619 15,172,619
Current portion of
obligations
under finance
lease 7,788,407 – (8,402,894) 924,634 (7,478,260) – 8,070,230 8,380,377
Noncurrent portion
of long- term
loans 16,588,007 19,737,728 – 53,548 19,791,276 – (15,161,430) 21,217,853
Noncurrent portion
of obligations
under finance
lease 48,417,398 – – – – 5,147,618 (8,070,230) 45,494,786
Total liabilities
from financing
activities P
=85,733,752 P
=32,617,172 (P
=16,426,645) P
=1,020,042 P
=17,210,569 P
=5,147,618 P
=11,189 P
=108,103,128
“Others” includes the effect of reclassification of non-current portion to current due to the passage of
time and amortization of direct costs capitalized. The Group classifies interest paid as cash flows from
operating activities.
Noncash investing activities include unpaid acquisition of property and equipment amounting to
P
=5.15 billion, =
P2.24 billion and =
P6.26 billion as of December 31, 2017, 2016 and 2015, respectively.
24. Commitments
Aircraft Purchase Agreements and Finance Leases

Airbus aircraft
In August 2012, PAL entered into two separate Purchase Agreements with Airbus. The first Purchase
Agreement is for a firm order of 44 Airbus “A320 family” aircraft and options for 20 Airbus “A320
family” aircraft for delivery in years 2013 to 2020. The “A320 family” consist of 34 Airbus 321-231
CEO and 10 Airbus 321-231 NEO. The other Purchase Agreement is for a firm order of 10 Airbus
330-300 aircraft and options for 10 Airbus 330 -300 aircraft for delivery in years 2013 to 2016. In
131 *SGVFS026729*
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September 2012, PAL exercised its right to purchase all of the 10 Airbus 330-300 option aircraft by
virtue of an amendment agreement to the Purchase Agreement. In March 2014, PAL entered into an
amendment agreement with Airbus and reduced its Airbus 330-300 aircraft orders by five and
simultaneously exercised eight of its options for the Airbus “A320 family” aircraft and purchased
Airbus 321-231 NEO aircraft for delivery in years 2020 to 2022. PAL did not exercise the remaining
12 options.
In January 2015, by virtue of another amendment to the Purchase Agreement, PAL purchased two
additional Airbus 321-231 NEO aircraft and revised the delivery of its firm orders of 10 Airbus 321-
231 CEO aircraft from the original schedule of delivery in years 2015 to 2016 to years 2020 to 2024,
and converted the same into Airbus 321-231 NEO aircraft.
In February 2016, PAL entered into a Memorandum of Understanding with Airbus for the purchase of
six Airbus 350-900 aircraft with an option to acquire six additional aircraft. These firm aircraft are
expected to be delivered in 2018 to 2019. PAL also signed a term sheet with an engine manufacturer
for maintenance support and purchase of spare engines to power the Airbus 350-900 aircraft. The cost
of the engines to be installed on the aircraft are included in the aircraft purchase price. The definitive
Purchase Agreement was executed in April 2016 for six firm A350-900 aircraft for delivery in 2018
(four aircraft) and 2019 (two aircraft) with purchase options for six additional aircraft. The purchase of
the six firm A350-900 aircraft also coincided with the reduction of nine A321-231 NEO aircraft from
PAL’s existing order, thereby reducing the total A321-231 NEO order from 30 to 21 aircraft, deliveries
of which are scheduled between 2018 and 2024. In the same year, the agreements with an engine
manufacturer for maintenance support and purchase of spare engines to power the Airbus 350-900
aircraft was also executed.
As of December 31, 2016, 24 Airbus 321-231 CEO and 15 Airbus 330-300 have been delivered to and
accepted by the Group under the Purchase Agreements. As of the same date, the remaining aircraft
that are for delivery in the future include six A350-900 and 21 Airbus 321-231 NEO. Total predelivery
payments relating to the acquisition of the remaining undelivered Airbus aircraft under the Purchase
Agreements amounted to P =17.03 billion and = P10.98 billion as of December 31, 2017 and 2016,
respectively (see Note 10). Predelivery payments amounting to nil, P =2.51 billion and P
=1.57 billion were
returned in 2017, 2016 and 2015, respectively, upon delivery of the aircraft.
As presented in Note 10, the Group has existing finance lease agreements for ten Airbus 321-231 CEO,
five Airbus A330-300 under the August 2012 Purchase Agreement and eight Airbus 320-200 aircraft
under the 2005 Purchase Agreement as of December 31, 2017 (see Note 15). The carrying value of
these aircraft under finance lease amounted to P =51.83 billion and P =54.20 billion as of
December 31, 2017 and 2016, respectively (see Note 10). The remaining aircraft received under the
above Purchase Agreement are on operating lease arrangement.
The Group’s capital expenditure commitments relate principally to the acquisition of aircraft fleet
aggregating to P
=120.20 billion and P
=114.89 billion as of December 31, 2017 and 2016, respectively.
Boeing aircraft
As discussed in Note 15, the Group has four Boeing 777-300ER aircraft under finance lease as of
December 31, 2017 and 2016 (see Note 15). These aircraft orders were covered by a Purchase
Agreement executed in 2006. The carrying values of these Boeing aircraft under finance lease
amounted to =
P27.24 billion and =
P28.72 billion as of December 31, 2017 and 2016, respectively (see
Note 10).
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Bombardier aircraft
In December 2016, PAL signed a Purchase Agreement with Bombardier, Inc. for the acquisition of five
DHC 8-400 (Q400 NextGen) turbo propeller aircraft for delivery from July to November 2017, with
purchase rights for an additional seven aircraft. As of December 31, 2017, five DHC 8-400
(Q400 NextGen) have been delivered and accepted by PAL. The carrying value of these aircraft under
finance lease amounted to P=5.32 billion. In June 2017, PAL exercised the purchase rights for an
additional seven aircraft. Total predelivery payments relating to the acquisition of remaining
undelivered Bombardier aircraft under the Purchase Agreements amounted to P =877.52 million and
P
=739.17 million as of December 31, 2017 and 2016 respectively (see Note 10). Predelivery payments
amounting to =P575.69 million were returned in 2017 upon delivery of the aircraft.
Operating Leases - Group as Lessee

Airbus aircraft
In connection with the August 2012 Purchase Agreement with Airbus, PAL accepted the deliveries of
additional four Airbus 321-231 CEO in 2016 under sale and operating leaseback arrangements with
third party lessors.
PAL redelivered one Airbus A320-200 in 2017 and six in 2016 to their respective operating lessors.
As presented in Note 10, PAL has operating lease agreements covering 35 and 36 Airbus aircraft as of
December 31, 2017 and 2016, respectively. Aircraft and engine lease rentals amounted to P =9.90 billion
in 2017, P
=9.26 billion in 2016 and =
P9.24 billion in 2015. Security deposits amounted to P
=752.59 million
and =
P718.76 million as of December 31, 2017 and 2016, respectively.
In 2016, PAL recognized gain from sale and operating leaseback arrangements amounting to
P
=783.81 million (nil in 2017), inclusive of unapplied manufacturers’ credit, covering four Airbus
aircraft with a third party lessor.
In 2015, a change in the lessor of one Airbus 330-300, one Airbus 320-200 and two Airbus 321-231
aircraft under operating lease arrangements was executed under Deed of Release and Reassignment.
In 2017 and 2016, a change in lessor of one Airbus 320-200, six Airbus 321-231 and three Airbus 320-
200, respectively was also executed.
In 2015, PAL recognized gain from sale and operating leaseback arrangements amounting to
=
P390.04 million, inclusive of unapplied manufacturers’ credit, covering two Airbus aircraft with a third
party lessor.
Both the gain on sale and leaseback and the manufacturers’ credits were recognized under “Other
charges (income) - net” in the consolidated statements of comprehensive income.
Boeing aircraft
As presented in Note 10, the Group has existing operating lease agreements covering six and four
Boeing 777-300ER aircraft as of December 31, 2017 and 2016, respectively. Aircraft and engine lease
rentals amounted to P
=3.35 billion in 2017, P
=1.63 billion in 2016 and P
Aircraft engine
As of December 31, 2017 and 2016, PAL has short-term lease agreements on various aircraft engines
ranging from three to 13 months.
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The future minimum lease payments related to the operating lease agreements on aircraft and aircraft
engines as of December 31 are as follows:
2017 2016 2015

Due within one year P
=15,095,636 =13,627,797
P =11,034,235
P
Due after one year but within five years 65,619,454 59,012,298 46,279,158
More than five years 37,225,611 37,923,978 31,435,292
P
=117,940,701 =110,564,073
P =88,748,685
P
Ground property
PAL has an operating lease agreement with an entity under common control for the lease of a portion
of the PNB Financial Center Building. The lease is for a period of 10 years commencing on
November 1, 2007 and may be renewed upon mutual agreement of the parties. On November 1, 2017,
the lease agreement was renewed for another 10 years.
In 2013, PAL entered into an operating lease agreement with Manila International Airport Authority
(MIAA) for a parcel of land situated at Aviation Support Industrial Area 2 (formerly Nayong Pilipino)
to be utilized as an aircraft parking facility. In 2014, PAL required additional space and entered into a
lease agreement with PAGCOR for another parcel of land which is part of Airport Property for the
same purpose. The leases are for a period of 25 years and 20 years commencing on December 23, 2013
and August 1, 2014, respectively, and may be renewed upon mutual agreement of the parties.
Minimum rental commitments under these lease contracts as of December 31 are as follows:
2017 2016 2015

Due within one year P217,545
= =
P117,704 =
P122,413
Due after one year but within five years 1,124,923 463,797 393,859
More than five years 1,930,543 1,436,433 1,624,110
= 3,273,011
P =
P2,017,934 =
P2,140,382
Operating Leases - Group as Lessor

The Group has existing aircraft operating lease and sublease agreements as of December 31, 2016 and
2015 (see Note 18). The future minimum lease receivables from these agreements as of December 31
are as follows:
2016 2015
Due within one year =
P154,425 =
P498,258
Due after one year but within five years – 154,425
=154,425
P =
P652,683
25. Capital Management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit
rating and healthy capital ratios in order to support its business and maximize shareholder value.
The Group considers its equity of =P13.98 billion and P

=21.66 billion as of December 31, 2017 and 2016,
respectively, presented in the consolidated statements of financial position, as its capital. The Group
manages its capital structure and makes adjustment to it, in light of changes in economic conditions.
To maintain or adjust capital structure, the Group may issue new shares or return capital to shareholders.
The Group manages its capital by monitoring its cash flows and debt levels. No changes were made in
the objectives, policies or processes in 2017 and 2016.
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26. Financial Risk Management Objectives and Policies
Risk Management Structure

BOD
The BOD is mainly responsible for the overall risk management approach and for the approval of risk
strategies and policies of the Group.
Treasury Risk Committee

The Treasury Risk Committee has the overall responsibility for the development of financial risk
strategies, principles, frameworks, policies and limits. It establishes a forum of discussion of the
Group’s approach to financial risk issues (fuel price and foreign exchange risk, in particular) in order
to make relevant decisions.
Treasury Risk Office

The Treasury Risk Office is responsible for the comprehensive monitoring, evaluation and analysis of
the Group’s financial risks in line with the policies and limits set by the Treasury Risk Committee. The
Treasury Risk Office conducts mark-to-market of derivative positions and daily calculation and
reporting of Value-at-Risk (VaR) amounts.
Financial Risk Management

The Group’s principal financial instruments, other than derivatives, consist of loans and borrowings
and cash and cash equivalent. The main purpose of these financial instruments is to raise financing for
the Group’s operations. The Group has various other financial assets and financial liabilities such as
receivables, short-term investments, accounts payable, accrued expenses and deposits which arise
directly from its operations. The main risks arising from the use of financial instruments are market
risks (consisting of foreign exchange risk, cash flow interest rate risk and fuel price risk), liquidity risk,
counterparty risk and credit risk.
The Group uses derivative instruments to manage its exposures to foreign exchange and fuel price risks
arising from the Group’s operations and its sources of financing. The details of PAL’s derivative
transactions, including the risk management objectives and the accounting results, are discussed in this
note.
Market risks
The Group’s operating, investing and financing activities are directly affected by changes in foreign
exchange rates, interest rates and fuel prices. Increasing market fluctuations in these variables may
result in significant equity, cash flow and profit volatility risks for the Group. For this reason, the
Group seeks to manage and control these risks primarily through its regular operating and financing
activities, and through the execution of a documented hedging strategy. Management of financial
market risk is a key priority for the Group. The Group generally applies sensitivity analysis in assessing
and monitoring its market risks. Sensitivity analysis enables management to identify the risk position
of the Group as well as provide an approximate quantification of the risk exposures. Estimates provided
for foreign exchange risk, cash flow interest rate risk and fuel price risk are based on the historical
volatility for each market factor, with adjustments being made to arrive at what the Group considers to
be reasonably possible.
Foreign exchange risk

The Group is exposed to foreign exchange rate fluctuations arising from its revenue, expenses and
borrowings in currencies other than its functional currency. The Group manages this exposure by
matching its receipts and payments for each individual currency. Any surplus is sold as soon as
practicable. PAL also uses foreign currency forward contracts and options to economically hedge a
portion of its exposure.
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The Group’s significant foreign currency-denominated monetary assets and liabilities (in Philippine
Peso equivalent) as of December 31 are as follows:
2017 2016
Financial Assets and Financial Liabilities
Financial assets:
Cash P3,663,836
= P4,107,118
=
Receivables 15,339,295 11,462,786
Others* 3,513,500 2,825,937
22,516,631 18,395,841
Financial liabilities:
Accounts payable and accrued expenses (7,264,496) (13,355,368)
Others** (1,454,461) (841,693)
(8,718,957) (14,197,061)
Net foreign currency-denominated financial assets 13,797,674 4,198,780
Nonfinancial Liabilities
Accrued employee benefits (9,160,657) (8,723,610)
Provisions (2,255,238) (2,382,542)
(11,415,895) (11,106,152)
Net Foreign Currency-denominated Monetary Assets
(Liabilities) P
=2,381,779 (P
=6,907,372)
* Includes miscellaneous deposits and security deposits.
** Substantially pertaining to passenger taxes.
The Group recognized net foreign exchange gain amounting to = P896.77 million in 2017 and net foreign
exchange loss amounting to P =30.61 million and P =214.42 million in 2016 and 2015 respectively,
included under “Other charges (income) - net” in the consolidated statements of comprehensive income
arising from the translation and settlement of these foreign currency-denominated financial and
nonfinancial instruments. The Group’s foreign currency-denominated exposures comprise primarily of
Philippine peso (PHP) and Japanese Yen (JPY). Other foreign currency exposures include Canadian
dollar (CAD), Euro (EUR), Australian dollar (AUD), Singaporean dollar (SGD), Chinese Yuan (CNY),
Thai Baht (THB) and Hong Kong dollar (HKD), Saudi riyal (SAR) and Emirati dirham (AED).
Shown below is the impact on the Group’s income before income tax of reasonably possible changes
in the exchange rates of foreign currencies (CCY) against the USD, with all other variables held
constant.
December 31, 2017

Net Gain (Loss) Effect on
Income before Income Tax
Movement in Foreign Increase in Foreign Decrease in Foreign
Currency Exchange Rates Exchange Rates Exchange Rates
PHP 3.43% to 6.30% =351,873
P (P
=351,873)
JPY 9.11% (33,553) 33,553
Others* 0.93% to 22.00% (207,110) 207,110
Net =111,210
P (P
=111,210)
* Includes various currencies (i.e., CAD, EUR, AUD, SGD, CNY, THB, HKD, SAR, AED and others ).
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December 31, 2016

Net Gain (Loss) Effect on
Income before Income Tax
Movement in Foreign Increase in Foreign Decrease in Foreign
Currency Exchange Rates Exchange Rates Exchange Rates
PHP 4.38% to 6.83% =710,860
P (P
=710,860)
JPY 12.04% (56,012) 56,012
Others* 1.07% to 12.75% (239,440) 239,440
Net =415,408
P (P
=415,408)
* Includes various currencies (i.e., CAD, EUR, AUD, SGD, CNY, THB, HKD, SAR, AED and others).
The Group’s currency derivative consists of options to buy USD and sell JPY. Before taking into
account the effect of income taxes, income in 2017 and 2016 would have either increased by
P
=40.82 million and =P39.81 million or decreased by =
P27.37 million and =
P3.61 million had the percentage
change in JPY been at 8.43% and 11.89%, respectively. There is no other impact on the Group’s equity
other than those affecting profit and loss.
Cash flow interest rate risk

The Group’s exposure to cash flow interest rate risk arises from the regular repricing of interest on its
floating-rate loans. The Group’s policy on interest rate risk is designed to limit the Group’s exposure
to fluctuating interest rates. The ratio of floating-rate long-term loans to the total borrowings is 0.77:1
and 0.69:1 as of December 31, 2017 and 2016, respectively.
Income before income tax in 2017 and 2016 would either decrease by = P245.76 million and
P
=82.42 million or increase by P =245.76 million and P =82.42 million, respectively, if the USD interest
rate for both years had been higher or lower by 30 basis points. There is no other impact on the Group’s
equity other than those already affecting profit or loss. The Group assumes concurrent movements in
interest rates and parallel shifts in the yield curves.
Fuel price risk

The Group is exposed to price risk on jet fuel purchases. This risk is managed by a combination of
strategies with the objective of managing price levels within an acceptable band through various types
of derivatives and hedging instruments. The Group implements such strategies to manage and minimize
the risks within acceptable risk parameters.
The Group’s fuel derivatives are viewed as economic hedges and are not held for speculative purposes.
In 2017 and 2016, The Group hedged its short-term and long-term exposures primarily with fuel
derivatives indexed to jet fuel. The Group uses a VaR computation to estimate the potential three-day
loss in the fair value of its fuel derivatives. The VaR computation is a risk analysis tool designed to
statistically estimate the maximum potential loss at a given confidence interval from adverse movement
in fuel prices.
Assumptions and limitations of VaR

The VaR methodology employed by the Group uses a three-day period due to the assumption that not
all positions could be undone in a single day given the size of the positions. The VaR computation
makes use of Monte Carlo simulation with multi-factor models. Multi-factor models ensure that the
simulation process takes into account mean reversion tendency and seasonality of fuel prices. It
captures the complex dynamics of the term structure of commodity markets, such as contango and
backwardation. The VaR estimates are made assuming normal market conditions using a 95%
confidence interval and are determined by observing market data movements over a 90-day period.
137 *SGVFS026729*
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The estimated potential three-day losses on its fuel derivative transactions, as calculated in the VaR
model, amounted to =P7.21 million, P=114.77 million and P =193.97 million as of December 31, 2017,
2016 and 2015 respectively.
The high, average and low VaR amounts for the period January 1 to December 31 are as follows:
High Average Low

2017 P
=157,753 P
=69,200 P
=7,207
2016 343,592 192,294 78,808
2015 490,593 264,002 167,175
Liquidity risk
Liquidity risk arises from the possibility that the Group may encounter difficulties in raising funds to
meet commitments from financial instruments (e.g., long-term obligations) or that a market for
derivatives may not exist in some circumstances.
The Group’s objectives to manage its liquidity profile are: (a) to ensure that adequate funding is
available at all times; (b) to meet commitments as they arise without incurring unnecessary costs;
(c) to be able to access funding when needed at the least possible cost; and (d) to maintain an adequate
time spread of refinancing maturities.
The tables below summarize the maturity analysis of the Group’s financial liabilities as of
December 31 based on contractual undiscounted payments (principal and interest):
2017
<1 Year >1-<2 Years >2-<3 Years >3-<4 Years >4-<5 Years >5 Years Total
Notes payable* P
= 17,949,835 P–
= P–
= P–
= P–
= P– P
= = 17,949,835
Accounts payable and accrued
expenses** 30,551,122 – – – – – 30,551,122
48,500,957 – – – – – 48,500,957
Obligation under finance
lease*** 10,121,111 10,651,767 9,065,241 8,324,330 7,951,353 14,523,488 60,637,290
Long-term debt**** 16,605,170 6,026,351 4,830,078 3,695,219 3,564,203 5,618,024 40,339,045
Derivative instruments:
Contractual receivable (705,960) – – – – – (705,960)
Contractual payable 654,732 – – – – – 654,732
Fuel derivatives 100,409 (54,124) – – – – 46,285
26,775,462 16,623,994 13,895,319 12,019,549 11,515,556 20,141,512 100,971,392
=
P75,276,419 P= 16,623,994 P= 13,895,319 = P12,019,549 = P11,515,556 =P20,141,512 =P149,472,349
*Includes interest amounting to =P 112,343.
**Excludes nonfinancial liabilities, advances from charterer and statutory liabilities amounting to P
=4,258,829, =
P22,445 and =
P320,480,
respectively.
***Includes interest amounting to = P 6,762,127.
****Includes interest amounting to = P 3,948,564.
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2016
Notes payable* =
P7,754,458 P–
= P–
= P–
= P–
= P–
= P
=7,754,458
expenses** 31,160,235 – – – – – 31,160,235
38,914,693 – – – – – 38,914,693
Obligation under finance lease*** 9,564,955 9,333,181 9,802,005 8,228,757 7,503,423 18,865,089 63,297,410
Long-term debt**** 6,042,106 7,381,290 7,040,870 3,198,952 – – 23,663,218
Fuel derivatives 525,063 – – – – – 525,063
Premium liability 98,543 – – – – – 98,543
16,138,147 16,714,471 16,842,875 11,427,709 7,503,423 18,865,089 87,491,714
=
P55,052,840 = P 16,714,471 =
P 16,842,875 = P 11,427,709 = P 7,503,423 =
P 18,865,089 =P126,406,407
**Excludes nonfinancial liabilities, advances from charterer and statutory liabilities amounting to P
=3,842,515, =
P22,542 and =
P252,671
respectively.
2015
Notes payable* P
=3,077,229 =
P– =
P– =
P– =
P– =
P– P
=3,077,229
expenses** 27,120,169 – – – – – 27,120,169
30,197,398 – – – – – 30,197,398
Obligation under finance lease*** 9,010,187 8,853,048 8,636,541 9,084,350 7,598,861 23,642,352 66,825,339
Long-term debt**** 5,664,055 5,486,844 5,312,460 5,140,809 3,019,934 – 24,624,102
Fuel derivatives 2,807,290 – – – – – 2,807,290
Premium liability 995,179 – – – – – 995,179
18,448,393 14,339,892 13,949,001 14,225,159 10,618,795 23,642,352 95,223,592
=
P48,645,791 P =14,339,892 = P13,949,001 = P14,225,159 =P10,618,795 = P23,642,352 =
P125,420,990
**Excludes nonfinancial liabilities and statutory liabilities amounting to P
=2,906,992 and =
P311,764, respectively.
The Group’s total financial liabilities to be settled currently amounting to = P75.28 billion and
P
=55.05 billion as of December 31, 2017 and 2016, include liabilities aggregating to P =48.50 billion and
=
P38.91 billion, respectively that management considers as working capital. Accounts payable and
accrued expenses of = P30.55 billion and =
P31.16 billion as of December 31, 2017 and 2016, respectively,
include liabilities that are payable on demand but are expected to be renegotiated in the future. For the
other liabilities amounting to = P26.78 billion and =P16.14 billion as of December 31, 2017 and 2016,
respectively, management expects to settle these from the Group’s cash to be generated from
operations.
The following are the Group’s financial assets as of December 31, 2017 and 2016 used to manage
liquidity risk, particularly those financial liabilities that will mature in less than a year:
2017
Cash P
= 6,789,139 P
=– P
=– P
=– P
=– P
=– P = 6,789,139
Loans and receivables:
Cash equivalents 3,283,730 – – – – – 3,283,730
Short-term equivalents 236,677 236,677
Receivables - net* 24,075,352 – – – – – 24,075,352
P
= 34,384,898 P
=– P
=– P
=– P
=– P
=– P
= 34,384,898
*Excludes receivables arising from statutory requirements, net of allowance, amounting to P
=2,102,403.
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2016
Cash P
=8,708,160 =
P– =
P– =
P– =
P– P
=– = P8,708,160
Loans and receivables:
Short-term investments 76,774 – – – – – 76,774
Receivables - net* 22,401,771 – – – – – 22,401,771
P
=32,444,428 =
P– =
P– =
P– =
P– P
=– =P32,444,428
=1,669,060.
2015
Cash P
=499,137,049 =
P– =
P– =
P– =
P– P
=– = P499,137,049
Loans and receivables: – –
Short-term investments 97,421 – – – – – 97,421
Receivables - net* 21,307,496 – – – – – 21,307,496
P
=523,662,331 =
P– =
P– =
P– =
P– P
=– = P523,662,331
=1,297,431.
Counterparty risk
The Group’s counterparty risk encompasses issuer risk on investment securities, credit risk on cash in
banks, time deposits and security deposits and settlement risk on derivatives. The Group manages its
counterparty risk by transacting with counterparties of good financial condition and selecting
investment grade securities. Settlement risk on derivatives is managed by limiting aggregate exposure
on all outstanding derivatives to any individual counterparty, taking into account its credit rating. The
Group also enters into master netting arrangements and implements counterparty and transaction limits
to avoid concentration of counterparty risk.
The tables below show the maximum counterparty exposure as of December 31 after taking into
account information about rights of offset and related arrangements for financial instruments subject to
master netting agreements:
2017
Gross
amounts
offset in Net amount
accordance presented in
Gross with the statements of Master Fair value of
Maximum offsetting financial netting financial
Exposure criteria position agreement collateral Net exposure
Financial Assets
Cash in banks and cash equivalents =
P9,633,728 P
=– =
P9,633,728 P
=– P
=– P
= 9,633,728
Receivables – net 24,068,624 – 24,068,624 – 2,022,315 22,046,309
Derivative assets 277,261 – 277,261 274,665 – 2,596
Margin deposits, lease deposits and others 12,853,106 – 12,853,106 – – 12,853,106
P
= 46,832,719 P
=– P
= 46,832,719 =
P274,665 =
P2,022,315 P
= 44,535,739
Financial Liabilities
Derivative liabilities =
P320,950 P
=– =
P320,950 =
P274,665 P
=– P
= 46,285
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2016
Gross amounts
Gross with the statements of Fair value of
Maximum offsetting financial Master netting financial
Financial Assets
P9,679,095 =
P– =
P9,679,095 =
P– =
P– P
=9,679,095
Receivables - net 22,395,563 – 22,395,563 – 1,824,133 20,571,430
Derivative assets 150,253 – 150,253 76,694 – 73,559
P
=44,414,584 P
=– P
=44,414,584 =
P76,694 =
P1,824,133 P
=42,513,757
Derivative liabilities =
P645,106 =
P– =
P645,106 =
P76,694 =
P– P
=568,412
2015
Gross amounts
Gross with the statements of Fair value of
Maximum offsetting financial Master netting financial
Financial Assets
P7,691,753 =
P– =
P7,691,753 =
P– =
P– P
=7,691,753
Receivables – net 21,297,901 – 21,297,901 – 1,582,081 19,715,820
Derivative assets 1,980,841 – 1,980,841 1,970,852 – 9,989
P
=44,256,253 P
=– P
=44,256,253 P
=1,970,852 P
=1,582,081 P
=40,703,320
Derivative liabilities P
=4,791,052 =
P– P
=4,791,052 P
=1,970,852 =
P– P
=2,820,200
In an event of default or pre-termination of derivative contracts, the parties can apply master netting
agreements. In 2017 and 2016, there was no default or pre-termination event which require the
application of the master netting agreements.
Credit risk
The Group’s exposure to credit risk arises from the possibility that agents, financial institutions and
other counterparties may fail to fulfill their agreed obligations and that the collaterals held may not be
sufficient to cover the Group’s claims. To manage such risk, the Group, through its Credit and
Collection Department, employs a credit evaluation process prior to the accreditation or
re-accreditation of its travel and cargo agents. The Group considers, among other factors, the size,
paying habits and the financial condition of the agents. To further mitigate the risk, the Group requires
from its agents financial guarantees in the form of cash bonds, letters of credit and assignment of time
deposits. The carrying value of these collaterals held as of December 31, 2017 and 2016 amounted to
P
=2.02 billion and =P1.82 billion, respectively.
The Group, to the best of its knowledge, has no significant concentration of credit risk with any
counterparty.
Credit quality per class of financial assets

The credit quality of receivables is managed by the Group using internal credit quality ratings. High
grade accounts consist of passenger and cargo receivables from agents with good financial condition
and which management believes to be reasonably assured to be recoverable. Standard grade accounts
consist of passenger and cargo receivables from agents with relatively low defaults. Substandard grade
accounts, on the other hand, are receivables from agents with history of defaulted payments. Accounts
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from these agents are consistently monitored in order to identify any potential adverse changes in the
credit quality. Receivables from IATA which consist of receivables from other airlines through the
IATA clearing house are deemed high grade accounts as the expectation of default is minimal.
The Group considers its other financial assets as high grade as they consist of accounts with good
financial standing and with relatively low defaults.
Past due accounts include those accounts that are past due by a few days. An analysis of past due
accounts, by age, is discussed in the succeeding section.
The tables below show the credit quality of receivables and an aging analysis of past due accounts as
of December 31:
2017
Past Due but not Impaired Impaired
Standard Substandard Over 30 Over 60 Over 90 Financial
High Grade Grade Grade Days Days Days Assets Others Total
General traffic P
= 5,428,336 P
= 243,057 P
= 39,445 P
= 343,419 P
= 81,885 P
= 126,822 P
= 1,543,741 P− P
= = 7,806,705
Related parties 12,320 − 543,879 1,152,984 2,459,502 3,288,889 194,827 − 7,652,401
Non-trade* 20,521 61,701 179,398 165,729 72,998 439,534 1,319,350 851,842 3,111,073
Total P
= 5,461,177 P
= 304,758 P
= 762,722 P
= 1,662,132 P
= 2,614,385 P= 3,855,245 P
= 3,057,918 P
= 851,842 P= 18,570,179
*Excludes receivables arising from statutory requirements amounting to =
P 4,985,860.
2016
General traffic P
=4,083,509 =
P795,539 =
P29,563 =
P291,298 =
P77,341 =
P68,980 =
P1,622,886 P− =
= P6,969,116
Related parties 7,040 − 2,219,001 1,028,725 2,201,581 2,985,145 52,457 − 8,493,949
Non-trade* − 62,331 225,254 72,210 76,009 79,139 1,476,995 812,356 2,804,294
Total =
P4,090,549 =
P857,870 =
P2,473,818 =
P1,392,233 = P2,354,931 = P3,133,264 =
P3,152,338 =
P812,356 =P18,267,359
P 4,545,801.
2015
General traffic P
=4,600,086 =
P1,103,903 =
P32,935 =
P227,533 =
P115,156 =
P160,814 =
P1,560,966 P
=6,302 P=7,807,695
Related parties 6,600 − 1,383,856 999,373 1,998,039 2,844,749 96,828 − 7,329,445
Non-trade* − 35,672 244,118 45,421 7,313 565,404 967,568 455,370 2,320,866
Total P
=4,606,686 =
P1,139,575 =
P1,660,909 =
P1,272,327 = P2,120,508 = P3,570,967 =
P2,625,362 =
P461,672 =P17,458,006
P 4,094,177.
27. Fair Value Measurement
Fair Values
The table below presents the Group’s financial instruments as of December 31 measured at fair value
and financial instruments for which fair values are disclosed:
2017 2016 2015

Carrying Carrying Carrying
Value Fair Value Value Fair Value Value Fair Value
Financial Assets
Loans and receivables - margin
deposits, lease deposits and others P =15,450,776 P
=15,758,843 P =11,634,292 P
=11,602,727 P
=13,201,591 P
=13,182,916
AFS investments:
Quoted equity investments 2,014,794 2,014,794 214,803 214,803 209,156 209,156
Derivative asset - fair value
through profit or loss 277,261 277,261 144,215 144,215 1,980,841 1,980,841
(Forward)
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2017 2016 2015

Carrying Carrying Carrying
Value Fair Value Value Fair Value Value Fair Value
Derivative liabilities - fair value
through
profit or loss P
=320,950 P
=320,950 P
=619,182 P
=619,182 P
=4,791,052 P
=4,791,052
Financial liabilities carried at
amortized cost:
Obligations under finance leases 53,875,169 54,624,319 53,469,466 54,917,058 58,595,521 60,210,019
Long-term debt 36,390,482 36,226,462 20,937,153 20,965,814 22,577,202 23,579,449
The carrying amounts of cash and cash equivalents, receivables, notes payable, accounts payable and
accrued expenses approximate their fair value due to the short-term nature of these accounts.
The following methods and assumptions are used to estimate the fair value of each class of financial
instruments that is different from their carrying amount:
Available-for-sale investments
The fair values of quoted equity investments are based on market prices in active markets.
As of December 31, 2017 and 2016, AFS investments amounting to P =50.43 million and
P
=53.20 million, respectively, were carried at cost since these are investments in unquoted equity shares
and the fair values cannot be measured reliably.
Margin deposits, lease deposits and others

The fair value of margin deposits, lease deposits and others is determined using discounted cash flow
techniques based on prevailing market rates. Discount rates used are 2.17% and 1.87% as of
Long-term obligations
The fair value of long-term obligations (whether fixed or floating) is generally based on the present
value of expected cash flows with discount rates that are based on risk-adjusted benchmark rates
(in the case of floating rate liabilities with quarterly repricing, the carrying value approximates the fair
value in view of the recent and regular repricing based on current market rates). The discount rates
used for USD-denominated loans ranged from 2.64% to 3.44% and 1.96% to 4.00% as of
Derivatives
The fair values of derivatives is determined by the use of either present value methods or standard
option valuation models. The valuation inputs on these fuel derivatives are based on assumptions
developed from observable information, including, but not limited to, the forward curve derived from
published or futures prices adjusted for factors such as seasonality considerations and the volatilities
that take into account the impact of spot prices and the long-term price outlook of the underlying
commodity and currency.
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Fair Value Hierarchy
As of December 31, 2017
Fair value measurement using

Significant Significant
Quoted prices in observable unobservable
active markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
Assets and liabilities measured at fair value:
AFS investments (Note 12):
Quoted equity shares P
= 2,014,794 P
=2,014,794 P
=– P
=–
Derivative financial assets (Notes 8 and 12):
Fuel derivatives 271,869 – 271,869 –
Structured currency derivatives 5,392 – 5,392 –
Derivative financial liabilities
(Notes 14 and 16):
Property and equipment (Note 10) 1,208,905 – − 1,208,905
Assets and liabilities for which fair values
are disclosed:
Margin deposits, lease deposits
and others (Note 12) 15,438,456 – 15,438,456 –
Obligations under finance
leases (Note 15) 54,624,319 – 54,624,319 –
Long-term debt (Note 15) 37,574,572 – 37,574,572 –
Investment properties (Note 11) 4,212,045 – − 4,212,045
Assets held for sale 785,049 – – 785,049

=214,803 P
=214,803 =
P– =
P–
(Notes 14 and 16):
Structured currency derivatives 299 – 299 –
Property and equipment (Note 10) 683,179 – – 683,179
are disclosed:
and others (Note 12) 12,069,241 – 12,069,241 –
leases (Note 15) 56,205,824 – 56,205,824 –
Investment properties (Note 11) 2,837 – – 2,837
144 *SGVFS026729*
- 76 -

=209,156 P
=209,156 =
P– =
P–
Fuel derivatives 1,977,731 – 1,977,731 –
(Notes 14 and 16):
Fuel derivatives 4,785,068 – 4,785,068 –
Property and equipment (Note 10) 911,828 – – 911,828
Assets held for sale 141,354 – – 141,354
are disclosed:
and others (Note 12) 13,176,315 – 13,176,315 –
leases (Note 15) 60,210,019 – 60,210,019 –
Investment properties (Note 11) 1,903,049 – – 1,903,049
There were no transfers between hierarchy levels during the years ended December 31, 2017 and 2016.
Derivative Financial Instruments

The derivative financial instruments set out in this section have been entered into to achieve PAL’s risk
management objectives. PAL’s derivative financial instruments are accounted for as fair value through
profit or loss.
The following table provides information about PAL’s outstanding derivative financial instruments and
their related fair values as of December 31:
2017 2016 2015
Asset Liability Asset Liability Asset Liability
Fuel derivatives P
=271,869 P
=318,154 P
=119,744 P
=644,807 P
=1,977,731 P =4,785,068
Structured currency derivatives 5,392 2,796 30,509 299 3,110 5,984
P
=277,261 P
=320,950 P
=150,253 P
=645,106 P
=1,980,841 P =4,791,052
As of December 31, 2017 and 2016, the positive and negative fair values of derivative positions that
will be settled in 12 months or less are classified under “Other current assets” (P
December 31, 2017 and = P150.25 million as of December 31, 2016) and “Accrued expenses”
(P
=320.95 million as of December 31, 2017 and P =645.11 million as of December 31, 2016).
Fuel derivatives
PAL is dependent on jet fuel to run its operations, and jet fuel costs have become a larger portion of the
Group’s expenses due to the increase in all energy prices over the years. Jet fuel consumption is 27.91%,
24.21% and 30.58% of its operating expenses for the years ended December 31, 2017, 2016 and 2015,
respectively. In order to hedge against adverse market condition and to be able to acquire jet fuel at the
lowest possible cost, PAL enters into fuel derivatives. PAL does not purchase or hold any derivative
financial instruments for trading purposes.
145 *SGVFS026729*
- 77 -
There are no outstanding fuel derivatives accounted for as cash flow hedges as of December 31, 2017
and 2016.
PAL’s fuel derivatives not accounted for as cash flow hedges still provide economic hedges against jet
fuel price risk. These fuel derivatives are carried at fair values in the consolidated statements of financial
position, with fair value changes reported immediately in the consolidated statements of comprehensive
income. The outstanding notional amounts of long fuel derivative assets and liabilities not accounted
for as cash flow hedges totaled 510,000 and 840,000 barrels as of December 31, 2017 and 510,000 and
840,000 barrels as of December 31, 2016, respectively. The outstanding notional amounts of short fuel
derivative liabilities not accounted for as cash flow hedges totaled 16,800,000 and 120,000 barrels as
of December 31, 2017 and 2016, respectively.
Structured currency derivatives

PAL enters into structured currency derivatives consisting of option structures with combination of
calls and puts. These contracts are carried at fair value in the consolidated statements of financial
position and the fair value changes from these derivatives are recognized directly in profit or loss.
Outstanding structured currency derivatives as of December 31, 2017 and 2016 are composed of
options to buy USD and sell various currencies (i.e., AUD, JPY). The contracts have bought and sold
options with translated notional amounts of P=653.73 million and P
=705.96 million as of December 31,
2017 and P=452.55 and = P545.07 million, respectively, as of December 31, 2016. The net fair value of
these option structures as of December 31, 2017 and 2016 amounts to P
=2.59 million and =
P30.21 million,
respectively.
Fair value changes on derivatives

The net changes in the fair values of all derivative instruments are as follows:
2017 2016 2015

Beginning of year (P
=494,903) (P
=2,810,211) (P
=1,810,583)
Net changes in fair values of derivatives (457,212) (375,403) (3,241,031)
Fair value of settled instruments 908,426 2,690,711 2,241,403
End of year (P
=43,689) (P
=494,903) (P
=2,810,211)
28. Segment Information
The Group has one reportable operating segment, which is the airline business (system-wide). This is
consistent with how the Group’s management internally monitors and analyzes the financial
information for reporting to the chief operating decision-maker, who is responsible for allocating
resources, assessing performance and making operating decisions.
The revenue of the operating segment are mainly derived from rendering transportation services and
all sales are made to external customers.
Segment information for the reportable segment is shown in the following table:
2017 2016 2015
Revenue P
=129,509,253 =114,457,062
P =107,226,456
P
Interest income 443,673 256,243 457,630
Financing charges 3,484,374 2,990,424 3,487,362
Depreciation, amortization and
obsolescence 8,214,072 7,132,584 7,018,871
Net income (loss) (6,467,121) 4,928,396 6,667,853
Reportable segment assets 179,955,554 164,588,161 154,147,933
Reportable segment liabilities 165,978,321 142,927,730 138,357,979
146 *SGVFS026729*
- 78 -
The reconciliation of total revenue reported by reportable operating segment to revenue in the
consolidated statements of comprehensive income is presented in the following table:
2017 2016 2015

Total segment revenue of
reportable operating segments P
=125,454,444 P
=109,435,207 P
=101,531,070
Nontransport revenue 4,054,809 5,021,855 5,695,386
Total revenue =129,509,253
P =114,457,062
P =107,226,456
P
The reconciliation of total income (loss) reported by the reportable operating segment to total
comprehensive income (loss) in the consolidated statements of comprehensive income is presented in
the following table:
2017 2016 2015

Total segment income (loss) of
reportable segments (P
=6,827,045) P
=4,547,518 P
=5,368,613
Add (deduct) unallocated items:
Nontransport revenue and 4,054,809 5,021,855 4,968,020
other income
Nontransport expenses and (3,697,778) (6,838,990) (3,749,757)
other charges
Income tax expense 2,893 2,198,013 80,978
Net income (6,467,121) 4,928,396 6,667,854
Other comprehensive income 1,856,006 936,106 1,175,086
Total comprehensive income (P
=4,611,115) =5,864,502
P =7,842,940
P
The Group’s major revenue-producing asset is the fleet owned by the Group, which is employed across
its route network (see Note 10).
29. Business Combination under Common Control
In 2017, the Parent Company acquired 51% ownership interest in ZUMA, the holding company of
APC, while PAL increased its ownership interest in FSL to 65%. The Parent Company and PAL (the
acquirers) and ZUMA, APC and FSL (the acquired subsidiaries) are indirectly owned by the same
controlling shareholder before and after the acquisition. Accordingly, the Group accounts for the
business combination under common control using the pooling of interest method.
In accounting for the business combination under common control, the Group used the carrying values
in the financial statements of ZUMA, APC and FSL and restated the prior year comparative information
in the Group’s consolidated financial statements. This will be consistently applied for future business
combination under common control
The restatements on the Group’s consolidated statements of financial position as of December 31, 2016
and January 1, 2016, and consolidated statements of comprehensive income and consolidated
statements of cash flows for the years ended December 31, 2016 and 2015 are shown in the succeeding
pages.
147 *SGVFS026729*
Consolidated Statements of Financial Position
December 31, 2016 January 1, 2016
As Effect of business As Effect of business
previously combination under As previously combination under As
reported common control restated reported common control restated
ASSETS
Current Assets
Cash and cash equivalents P9,354,100
= =612,557
P P9,966,657
= P7,114,647
= P1,002,241
= P8,116,888
=
Receivables 14,021,108 2,982,264 17,003,372 13,510,980 2,324,935 15,835,915
Expendable parts, fuel, materials and supplies 2,188,841 761,831 2,950,672 2,039,785 577,981 2,617,766
Other current assets 3,980,860 107,934 4,088,794 8,457,358 208,311 8,665,669
29,544,909 4,464,586 34,009,495 31,122,770 4,113,468 35,236,238
Assets held for sale – – – 141,354 – 141,354
Total Current Assets 29,544,909 4,464,586 34,009,495 31,264,124 4,113,468 35,377,592
Noncurrent Assets
Property and equipment
At cost 66,240,847 45,712,341 111,953,188 57,373,656 45,335,468 102,709,124
At appraised values 683,179 24,768 707,947 911,828 10,718 922,546
Investment properties 3,150,029 – 3,150,029 1,366,092 – 1,366,092
Investment in associate 7,491,678 (7,491,678) – 6,544,690 (6,544,690) –
Deferred income tax assets - net 819,894 74 819,968 2,603,317 22 2,603,339
Other noncurrent assets 17,319,577 (3,372,043) 13,947,534 14,342,483 (3,173,243) 11,169,240
Total Noncurrent Assets 95,705,204 34,873,462 130,578,666 83,142,066 35,628,275 118,770,341
TOTAL ASSETS =125,250,113
P =39,338,048
P =164,588,161
P =114,406,190
P =39,741,743
P =154,147,933
P
LIABILITIES AND EQUITY

Current Liabilities
Notes payable P7,714,195
= =–
P P7,714,195
= P3,062,670
= =–
P P3,062,670
=
Accounts payable 8,540,627 82,964 8,623,591 7,851,338 127,698 7,979,036
Accrued expenses and other current liabilities 19,510,846 651,134 20,161,980 19,895,216 501,976 20,397,192
Unearned transportation revenue 14,826,181 – 14,826,181 13,551,938 60,278 13,612,216
Current portion of long-term obligations 8,652,390 4,361,762 13,014,152 7,968,973 4,118,002 12,086,975
Total Current Liabilities 59,244,239 5,095,860 64,340,099 52,330,135 4,807,954 57,138,089
(Forward)
148 *SGVFS026729*
- 80 -
December 31, 2016 January 1, 2016

As Effect of business As Effect of business
previously combination under As previously combination under As
reported common control restated reported common control restated
Noncurrent Liabilities
Long-term obligations - net of current portion =38,203,879
P =26,801,526
P =65,005,405
P =39,585,245
P =29,500,511
P =69,085,756
P
Accrued employee benefits 8,723,609 202,086 8,925,695 7,507,641 175,648 7,683,289
Reserves and other noncurrent liabilities 4,987,551 (331,020) 4,656,531 4,843,401 (392,556) 4,450,845
Total Noncurrent Liabilities 51,915,039 26,672,592 78,587,631 51,936,287 29,283,603 81,219,890
Total Liabilities 111,159,278 31,768,452 142,927,730 104,266,422 34,091,557 138,357,979
Equity
Capital stock 23,025,318 – 23,025,318 23,025,318 – 23,025,318
Capital in excess of par 7,308,860 – 7,308,860 7,308,860 – 7,308,860
Other equity reserves – 4,427,932 4,427,932 − 4,427,932 4,427,932
Other comprehensive income (loss) 1,257,815 348,667 1,606,482 1,069,716 119,813 1,189,529
Deficit (17,756,754) (5,056,104) (22,812,858) (21,451,272) (5,658,735) (27,110,007)
Treasury stock - at cost (56) – (56) (56) – (56)
Equity Attributable to Equity Holders of the
Parent Company 13,835,183 (279,505) 13,555,678 9,952,566 (1,110,990) 8,841,576
Non-controlling interests 255,652 7,849,101 8,104,753 187,202 6,761,176 6,948,378
Total Equity 14,090,835 7,569,596 21,660,431 10,139,768 5,650,186 15,789,954
TOTAL LIABILITIES AND EQUITY =125,250,113
P =39,338,048
P =164,588,161
P =114,406,190
P =39,741,743
P =154,147,933
P
149 *SGVFS026729*
- 81 -
Consolidated Statements of Comprehensive Income

December 31, 2016 December 31, 2015
Effect of business Effect of business
As previously combination under As previously combination under
reported common control As restated reported common control As restated
REVENUE
Passenger =96,292,075
P =554,231
P =96,846,306
P =89,889,326
P =1,086,665
P =90,975,991
P
Cargo 6,930,594 – 6,930,594 7,197,526 21,113 7,218,639
Ancillary 9,763,851 113,972 9,877,823 7,873,435 152,071 8,025,506
Others 3,639,290 (2,836,951) 802,339 3,838,430 (2,832,110) 1,006,320
116,625,810 (2,168,748) 114,457,062 108,798,717 (1,572,261) 107,226,456
EXPENSES
Flying operations 59,243,158 (8,135,685) 51,107,473 60,874,467 (7,219,781) 53,654,686
Maintenance 15,041,362 699,295 15,740,657 10,996,913 827,446 11,824,359
Aircraft and traffic servicing 14,470,775 658,764 15,129,539 11,778,072 658,677 12,436,749
Passenger service 10,203,606 145,260 10,348,866 8,638,301 102,898 8,741,199
Reservation and sales 8,059,147 24,959 8,084,106 6,623,600 201,037 6,824,637
General and administrative 3,280,840 1,123,629 4,404,469 3,615,572 1,261,228 4,876,800
110,298,888 (5,483,778) 104,815,110 102,526,925 (4,168,495) 98,358,430
OTHER CHARGES (INCOME)
Financing charges 1,713,162 1,277,262 2,990,424 1,971,718 1,515,644 3,487,362
Share in net income of an associate (552,560) 552,560 – (515,064) 515,064 –
Other income - net (583,001) 108,120 (474,881) (1,102,554) (265,613) (1,368,167)
577,601 1,937,942 2,515,543 354,100 1,765,095 2,119,195
INCOME BEFORE INCOME TAX 5,749,321 1,377,088 7,126,409 5,917,692 831,139 6,748,831
INCOME TAX EXPENSE 2,156,948 41,065 2,198,013 47,354 33,624 80,978
NET INCOME 3,592,373 1,336,023 4,928,396 5,870,338 797,515 6,667,853
OTHER COMPREHENSIVE INCOME 352,719 583,387 936,106 589,954 585,132 1,175,086
TOTAL COMPREHENSIVE INCOME =3,945,092
P =1,919,410
P =5,864,502
P =6,460,292
P =1,382,647
P =7,842,939
P
150 *SGVFS026729*
- 82 -
Consolidated Statements of Cash Flows
December 31, 2016 December 31, 2015

Effect of business Effect of business
As combination As combination
previously under common As previously under common As
reported control restated reported control restated
Net cash flows from operating activities =11,818,864
P =3,945,161
P =15,764,025
P =8,056,660
P =6,304,034
P =14,360,694
P
Net cash used in investing activities (8,735,545) (177,176) (8,912,721) 129,647 (1,349,113) (1,219,466)
Net cash used in financing activities (682,304) (4,148,816) (4,831,120) (11,498,034) (4,520,954) (16,018,988)
Effect of foreign exchange rate changes on
cash and cash equivalents (161,562) (8,853) (170,415) (367,778) 11,840 (355,938)
Net increase (decrease) in cash and cash equivalents 2,239,453 (389,684) 1,849,769 (3,679,505) 445,807 (3,233,698)
Cash and cash equivalents at beginning of year 7,114,647 1,002,241 8,116,888 10,794,152 556,434 11,350,586
Cash and cash equivalents at end of year =9,354,100
P =612,557
P =9,966,657
P =7,114,647
P =1,002,241
P =8,116,888
P
151 *SGVFS026729*
SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018
INDEPENDENT AUDITOR’S REPORT
The Stockholders and the Board of Directors

PAL Holdings, Inc.
8th Floor, PNB Financial Center
President Diosdado Macapagal Ave.,
We have audited, in accordance with Philippine Standards on Auditing, the consolidated financial
statements of PAL Holdings, Inc. (the Company), a subsidiary of Trustmark Holdings Corporation, and
its subsidiaries as at December 31, 2017 and 2016 and for each of the three years in the period ended
December 31, 2017, included in this Form 17-A and have issued our report thereon dated
February 26, 2018. Our audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the Index to Consolidated Financial Statements and
Supplementary Schedules are the responsibility of the Company’s management. These schedules are
presented for purposes of complying with Securities Regulation Code Rule 68, As Amended (2011), and
are not part of the basic financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, present fairly, in all
material respects, the information required to be set forth therein in relation to the basic financial
statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Josephine H. Estomo
Partner
CPA Certificate No. 46349
SEC Accreditation No. 0078-AR-4 (Group A),
June 9, 2016, valid until June 9, 2019
Tax Identification No. 102-086-208
BIR Accreditation No. 08-001998-18-2015,
February 27, 2015, valid until February 26, 2018
PTR No. 6621259, January 9, 2018, Makati City
February 26, 2018
152 *SGVFS026729*
PAL HOLDINGS, INC. and SUBSIDIARIES
Schedule A. Financial Assets
December 31, 2017
Number of shares Amount shown Income

Name of Issuing entity and or principal amount of in the received
association of each issue bonds and notes balance sheet and accrued
MacroAsia Corporation 88,000 P 2,010,800 P 12,320

Golf La Moraleja 2 4,693 -
Medical Doctors, Inc. 10,164 9,936 462
Societe Internationale de Telecommunications (SITA) 30 29,658 -
Tanah Merah Country Club (L corp) 1 6,091 -
Others 61,852 9,925 -
P 2,071,105 P 12,782
See Note 12 of the Notes to Consolidated Financial Statements
- 153 -
Schedule B. Amounts Receivable from Directors, Officers and Employees, Related Parties and Principal Stockholders
December 31, 2017
Balance at Additions Amounts Amounts Forex Current Non- Balance at

Name and Designation of debtor Beg. of Period Collected Written-off Adjustments current End of Period
Various Pilot Trainees - Employees P 25,332 P 21,156 P (9,542) P - P - P 36,946 P - P 36,946

Receivable from various employees 880 1,306 (1,178) - - 1,008 - 1,008
P 26,212 P 22,462 P (10,720) P - P - P 37,954 P - P 37,954
- 154 -
Schedule C. Amounts Receivable from Related Parties which are Eliminated during the Consolidation of Financial Statements
December 31, 2017
Name and Designation of Balance at beginning Balance at end

Additions Amounts collected Amounts written off Current Not Current
debtor of period of period
Philippine Airlines, Inc. 1,807,165 13,531,953 (12,321,910) (737,238) 2,248,626 31,344 2,279,970
Please refer to Note 18 of the Consolidated Financial Statements
- 155 -
Schedule D. Intangible Assets - Other Assets
December 31, 2017
Other changes
Charged to cost and Charged to other
Description Beginning balance Additions of cost additions Ending Balance
expenses accounts
(deductions)
NOT APPLICABLE
``
- 156 -
Schedule E. Long-term Obligations
December 31, 2017
Amount Amount
Type of Obligation Shown as Shown as
Current Long-term Total Interest Rates Maturity Dates
Obligations under aircraft finance leases P 8,380,377 P 45,494,786 P 53,875,163 1.89% to 6.58% and Various dates through 2029
3-month LIBOR plus margin
Long-term debts 15,172,619 21,217,853 36,390,472 1-month LIBOR plus margin Various dates through 2024
P 23,552,996 P 66,712,639 P 90,265,635
See Note 15 of the Consolidated Financial Statements.
- 157 -
Schedule F. Indebtedness to Related Parties (Long-term Obligations)
December 31, 2017
Balance at Balance at
Name of Related Party Beginning of Period End of Period Remarks
Remarks
NOT APPLICABLE
- 158 -
Schedule G. Guarantees of Securities of Other Issuers
December 31, 2017
Name of issuing entity of

securities guaranteed by the Title of issue of each class of Total amount guaranteed Amount owned by person
Nature of guarantee
company for which this securities guaranteed and outstanding for which statement is filed
statement is filed
NOT APPLICABLE
- 159 -
Schedule H. Capital Stock
December 31, 2017
No. of shares reserved Number of shares held by

No. of shares No. of shares issued for options, warrants,
Title of Issue
authorized and outstanding conversion and other Related Directors, Officers Others
rights Parties and Employees
Common Stock 13,500,000,000 11,610,231,157 - 10,411,982,693 3,600 1,198,244,864
See Note 17 of the Notes to Consolidated Financial Statements
- 160 -
PAL HOLDINGS, INC.
Schedule I. SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
DECEMBER 31, 2017
Deficit, beginning (P
=21,933,980)
Accumulated equity in net losses, beginning 25,550,676
Excess of net assets acquired over cost (3,699,923)
Deficit, adjusted for unrealized gains, beginning (83,227)
Add net income (loss) actually incurred during the year
Net loss before other comprehensive income for the year (7,333,595)
realized through sale and depreciation, net of
deferred income tax and foreign exchange
adjustment 193,952
Add (deduct):
Share in net losses of subsidiaries 7,316,615
realized through sale and depreciation, net of
deferred income tax and foreign exchange
adjustment (193,952)
Net loss actually earned during the year (16,980)
Total deficit, adjusted for unrealized gains, ending (P
=100,207)
- 161 -
PAL HOLDINGS, INC. & SUBSIDIARIES
Schedule J. RELATIONSHIPS BETWEEN & AMONG THE GROUP AND ITS PARENT
December 31, 2017
- 162 -
Schedule K. LIST OF EFFECTIVE STANDARDS AND INTERPRETATIONS
AS OF DECEMBER 31, 2017
PHILIPPINE FINANCIAL REPORTING STANDARDS AND

Not Early Not
INTERPRETATIONS Adopted
Adopted Applicable
Effective as at December 31, 2017
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative characteristics 
PFRS Practice Statement Management Commentary 
Philippine Financial Reporting Standards
PFRS 1 First-time Adoption of Philippine Financial Reporting
(Revised) Standards 
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or
Associate 
Amendments to PFRS 1: Additional Exemptions for First-
time Adopters 
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time Adopters 
Amendments to PFRS 1: Severe Hyperinflation and
Removal of Fixed Date for First-time Adopters 
Amendments to PFRS 1: Government Loans 
PFRS 2 Share-based Payment 
Amendments to PFRS 2: Vesting Conditions and
Cancellations 
Amendments to PFRS 2: Group Cash-settled Share-based
Payment Transactions 
Amendments to PFRS 2: Definition of Vesting Condition 
Amendments to PFRS 2: Classification and Measurement
of Share-based Payment Transactions 
PFRS 3 Business Combinations 
(Revised)
Amendments to PFRS 3 : Accounting for Contingent
Consideration in a Business Combination 
Amendments to PFRS 3 : Scope Exceptions for Joint
Arrangements 
PFRS 4 Insurance Contracts 
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts 
Amendments to PFRS 4: Applying PFRS 9, Financial
Instruments, with PFRS 4 
PFRS 5 Non-current Assets Held for Sale and Discontinued
Operations 
- 163 -
Not Early Not
Adopted Applicable
Changes in Method of Disposal 
PFRS 6 Exploration for and Evaluation of Mineral Resources 
PFRS 7 Financial Instruments Disclosures 
Amendments to PFRS 7: Transition 
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets 
Financial Assets - Effective Date and Transition 
Amendments to PFRS 7: Improving Disclosures about
Financial Instruments 
Amendments to PFRS 7: Disclosures - Transfers of
Amendments to PFRS 7: Disclosures - Offsetting
Financial Assets and Financial Liabilities 
Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures 
Amendments to PFRS 7: Applicability of the
Amendments to PFRS 7 to Condensed Interim Financial
Statements 
Amendments to PFRS 7: Servicing Contracts 
PFRS 8 Operating Segments 
Amendments to PFRS 8 : Aggregation of Operating
Segments and Reconciliation of the Total of the
Reportable Segments’ Assets to the Entity’s Asset 
PFRS 9 Financial Instruments 
PFRS 10 Consolidated Financial Statements 
Amendments to PFRS 10: Transition Guidance 
Amendments to PFRS 10, PFRS 12 and PAS 27:
Investment Entities 
Amendments to PFRS 10, PFRS 12 and PAS 28,
Investment Entities: Applying the Consolidation
Exception 
Amendments to PFRS 10 and PAS 28: Sale or
Contribution of Assets between an Investor and its
Associate or Joint Venture 
- 164 -
Not Early Not
Adopted Applicable
PFRS 11 Joint Arrangements 
Amendments to PFRS 11: Accounting for Acquisitions of
Interests in Joint Operations 
PFRS 12 Disclosure of Interests in Other Entities 
Investment Entities 
Exception 
Clarification of the Scope of the Standard 
PFRS 13 Fair Value Measurement 
Amendments to PFRS 13 : Portfolio Exception 
PFRS 14 Regulatory Deferral Accounts 
PFRS 15 Revenue from Contracts with Customers 
PFRS 16 Leases 
Philippine Accounting Standards
PAS 1 Presentation of Financial Statements 
(Revised)
Amendment to PAS 1: Capital Disclosures 
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation 
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income 
Amendments to PAS 1, Disclosure Initiative 
PAS 2 Inventories 
PAS 7 Statement of Cash Flows 
Amendments to PAS 7: Disclosure Initiative 
PAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors 
PAS 10 Events after the Reporting Period 
PAS 11 Construction Contracts 
- 165 -
Not Early Not
Adopted Applicable
PAS 12 Income Taxes 
Amendment to PAS 12 : Deferred Tax: Recovery of
Underlying Assets 
Amendments to PAS 12: Recognition of Deferred Tax
Assets for Unrealized Losses 
PAS 16 Property, Plant and Equipment 
Amendments to PAS 16 and PAS 38: Clarification of
Acceptable Methods of Depreciation and Amortization 
Amendments to PAS 16 and 38: Proportionate
Restatement of Accumulated Amortization 
Amendments to PAS 16 and PAS 41: Bearer Plants 
PAS 17 Leases 
PAS 18 Revenue 
PAS 19 Employee Benefits 

(Revised)
Amendments to PAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures 
Regional Market Issue Regarding Discount Rate 
Amendments to PAS 19: Defined Benefit Plans:
Employee Contributions 
PAS 20 Accounting for Government Grants and Disclosure of
Government Assistance 
PAS 21 The Effects of Changes in Foreign Exchange Rates 
Amendment: Net Investment in a Foreign Operation 
PAS 23 Borrowing Costs
(Revised) 
PAS 24 Related Party Disclosures 
(Revised)
Key Management Personnel 
PAS 26 Accounting and Reporting by Retirement Benefit Plans 
PAS 27 Separate Financial Statements 
(Amended)
Investment Entities 
Amendment: Equity Method in Separate Financial
Statements 
- 166 -
Not Early Not
Adopted Applicable
PAS 28 Investments in Associates and Joint Ventures 
(Amended)
Exception 
Amendments to PAS 28: Measuring an Associate or Joint
Venture at Fair Value 
PAS 29 Financial Reporting in Hyperinflationary Economies 
PAS 32 Financial Instruments: Disclosure and Presentation 
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation 
Amendment to PAS 32: Classification of Rights Issues 
Amendments to PAS 32: Offsetting Financial Assets and
Financial Liabilities 
PAS 33 Earnings per Share 
PAS 34 Interim Financial Reporting 
Disclosure of Information ‘Elsewhere in the Interim
Financial Report’ 
PAS 36 Impairment of Assets 
Amendment to PAS 36: Impairment of
Assets - Recoverable Amount Disclosures for Non-
PAS 37 Provisions, Contingent Liabilities and Contingent Assets 
PAS 38 Intangible Assets 
Amendments to PAS 16 and PAS 38: Clarification of
Acceptable Methods of Depreciation and Amortization 
PAS 39 Financial Instruments: Recognition and Measurement 
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial Liabilities 
Amendments to PAS 39: Cash Flow Hedge Accounting of
Forecast Intragroup Transactions 
Amendments to PAS 39: The Fair Value Option 
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts 
Amendments to PAS 39 and PFRS 7: Reclassification of 
Financial Assets - Effective Date and Transition
Amendments to Philippine Interpretation 
- 167 -
Not Early Not
Adopted Applicable
IFRIC-9 and PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items 
Amendment to PAS 39: Novation of Derivatives and
Continuation of Hedge Accounting 
PAS 40 Investment Property 
Interrelationship between PFRS 3 and PAS 40 
Amendments to PAS 40: Transfers of Investment Property 
PAS 41 Agriculture 
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and
Similar Liabilities 
IFRIC 2 Members’ Share in Co-operative Entities and Similar
Instruments 
IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights to Interests arising from Decommissioning,
Restoration and
Environmental Rehabilitation Funds 
IFRIC 6 Liabilities arising from Participating in a Specific Market
- Waste Electrical and Electronic Equipment 
IFRIC 7 Applying the Restatement Approach under
PAS 29 Financial Reporting in Hyperinflationary
Economies 
IFRIC 9 Reassessment of Embedded Derivatives 
Amendments to Philippine Interpretation
IFRIC - 9 and PAS 39: Embedded Derivatives 
IFRIC 10 Interim Financial Reporting and Impairment 
IFRIC 12 Service Concession Arrangements 
IFRIC 13 Customer Loyalty Programmes 
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction 
Amendments to Philippine Interpretations
IFRIC - 14, Prepayments of a Minimum Funding
Requirement 
IFRIC 15 Agreements for the Construction of Real Estate 
IFRIC 16 Hedges of a Net Investment in a Foreign Operation 
IFRIC 17 Distributions of Non-cash Assets to Owners 
IFRIC 18 Transfers of Assets from Customers 
- 168 -
Not Early Not
Adopted Applicable
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments 
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 
IFRIC 21 Levies 
IFRIC 22 Foreign Currency Transactions and Advance
Consideration 
SIC-7 Introduction of the Euro 
SIC-10 Government Assistance - No Specific Relation to
Operating Activities 
SIC-15 Operating Leases - Incentives 
SIC-25 Income Taxes - Changes in the Tax Status of an Entity or
its Shareholders 
SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease 
SIC-29 Service Concession Arrangements: Disclosures 
SIC-31 Revenue - Barter Transactions Involving Advertising
Services 
SIC-32 Intangible Assets - Web Site Costs 
- 169 -
Schedule L. Financial Soundness Indicators
2017 2016
Current Ratio 0.43 0.53
Liquidity Ratio 0.33 0.42
Debt-to-Equity Ratio 7.73 3.96
Asset-to-Equity Ratio 12.87 7.60
Receivable Turnover 17.53 15.49
Number of Days Sales in Receivables 20.82 23.56
Interest Rate Coverage Ratio (0.86) 3.38
Solvency Ratio 0.02 0.14
Profitability Ratios:
Profit Margin (0.05) 0.04
Return on Assets (0.04) 0.03
Return on Equity (0.46) 0.23
- 170 -

PHI 17A-Dec 2017

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COVER SHEET

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

CONTACT PERSON INFORMATION

CONTACT PERSON’s ADDRESS

7/F Allied Bank Center, 6754 Ayala Avenue, Makati City

SEC FORM 17-A

1. For the calendar year ended December 31, 2017

2. SEC Identification Number PW- 94

3. BIR Tax Identification No. 000-707-922

4. Exact name of registration as specified in its charter PAL HOLDINGS, INC.

10. Securities registered pursuant to Section 8 and 12 of the SRC

Number of Shares of Common Stock

Common Stock 11,610,231,157 shares

Philippine Stock Exchange Common Stock – 10,089,705,458 shares

12. Check whether the registrant:

14. Not Applicable

DOCUMENTS INCORPORATED BY REFERENCE

Philippine Airlines, Inc.

Zuma Holdings and Management Corporation

Systemwide Operations: FY 2017

Number of Passengers 14,466,729

Net Revenues by Route

2017 2016 2015

International Passenger Services

PAL flies to London daily using the B777-300ERs.

PAL also operates 5 times a week to Dammam; and daily to Riyadh.

Asia and Oceania

Systemwide Operations: FY 2017

Traffic Revenues (in millions) =10,251.6

Domestic Passenger Services

Joint Services and Code Share Agreements

Frequent Flyer Programs

(ii) Distribution Methods of Products or Services

PAL's Market and Capacity Share:

Market Capacity Airline Competitors

(vii) Transactions with and/or dependence on related parties

(viii) Patents, trademarks, licenses, franchises, concessions, royalty, agreements or labor

PAL subcontracts the maintenance of its aircraft to competent Approved Maintenance

a. corporate income tax based on net taxable income; or

a. corporate income tax based on net taxable income; or

(ix) Need of any government approval of principal products or services

(x) Effects of existing or probable government regulations on the business

(xii) Cost and effects of compliance with environmental laws

1. Republic Act (RA) 8749, “Clean Air Act”

In compliance to condition of Permit to Operate –Air Pollution Source Installation of MBC,

Cost: Renewal of Discharge Permit of Jet Fuel Storage Facility MNL- P

4. Presidential Decree No. 1152, “Philippine Environmental Code”

No cost to PAL for period covering 2017

5. Presidential Decree No. 1586, “Establishing an Environmental Impact Assessment System”

Cost for application of CNC for PAL Learning Center is P

No cost to PAL for period covering 2017

8. Republic Act 9003 “The Ecological Waste Management Act of 2000”

Cost for the proper disposal of solid waste: P

9. Department of Health (DOH) Administrative Order 29, s. 2000, “License to Operate an

Cost of Trainings required for PCO Accreditation (Renewal)

The effects of PAL’s compliance with environmental laws are as follows:

1. Compliance to national legislations

(xiii)Total number of employees and number of full time employees

As of December 31, 2017, PAL has a total workforce of 6,588 as follows:

Classification Number of Employees

As of December 31, 2017, APC has a total workforce of 1,699 as follows:

Classification Number of Employees