PAL 17A Mar2011

COVER SHEET
P W - 9 4
SEC Registration Number
P A L H O L D I N G S , I N C . A N D
S U B S I D I A R I E S
(Company’s Full Name)
7 t h F l o o r , A l l i e d B a n k C e n t e r
6 7 5 4 A y a l a A v e n u e , M a k a t i C i t y
(Business Address: No. Street City/Town/Province)
Susan T. Lee 817-8710

(Contact Person) (Company Telephone Number)
0 3 3 1 1 7 - A
Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)
Not Applicable
(Secondary License Type, If Applicable)
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
6,684
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
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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 fiscal year ended March 31, 2011
2. SEC Identification Number PW- 94 3. BIR Tax Identification No. 430-000-707-922
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. 7/F Allied Bank Center, 6754 Ayala Avenue, Makati City 1200
Address of principal office Postal Code
8. (632) 816-3311 local 3687 / 817-8710

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 Outstanding

Title of Each Class and Amount of Debt Outstanding
Common Stock 5,421,512,096 shares
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11. Are any or all of these securities listed on the Philippine Stock Exchange?
Yes [ X ] No [ ]
12. Check whether the registrant:
(a) has filed all reports to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or
Section 11 of the Revised Securities Act (RSA) and RSA Rule 11 (a)-1 thereunder and
Section 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 [ X ] No [ ]
(b) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
13. Aggregate market value of the voting stock held by non-affiliates of the registrant is
= 560,245,126 as of March 31, 2011.
P
14. Not applicable
DOCUMENTS INCORPORATED BY REFERENCE
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PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
a) Corporate History
PAL Holdings, Inc., (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 million common shares to 4 billion common shares both at P1 par value per share.
On April 13, 1998, the stockholders amended the increase in the Company’s authorized capital
stock from 4 billion common shares to 2.8 billion common shares and 1.2 billion preferred shares
both at P1 par value per share. On August 30, 1999, the stockholders further amended the
authorized capital stock from 2.8 billion common shares and 1.2 billion preferred shares to 400
million common shares at P1 par value per share this was approved by the SEC on October 2,
2000.
On July 26 and September 19, 2006, the Board of Directors (BOD) approved the increase in
authorized capital stock of the Company from P400 million divided into 400 million common
shares with a par value of P1 per share to P 20 billion divided into 20 billion common shares.
On August 17, 2006, the BOD approved the acquisition of the following holding companies which
collectively control 84.67% of Philippine Airlines (PAL); Pol Holdings, Inc., Cube Factor
Holdings, Inc., Ascot Holdings, Incorporated, Sierra Holdings & Equities, Inc., Network Holdings
& Equities, Inc., and Maxell Holdings Corporation.
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 Five Holding Companies
50,591,155 shares in PR Holdings, Inc., equivalent to 82.33% of the outstanding shares in PR
Holdings, Inc. Both acquisitions were made by way of a dacion en pago, whereby the total
acquisition price of PHP 12,550 million for the shares in PAL and PR Holdings, Inc. was satisfied
by an equivalent reduction of the liability owning to the Company from the Six Companies.
On August 14, 2007, the Company assigned its shares in each of the Six Holding Companies to
Trustmark Holdings Corporation.
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 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 P253.73 million
using the Additional Paid-In Capital amounting to P4,029.3 billion subject to the condition that the
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 SEC.
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b. Description of Subsidiaries
Philippine Airlines, Inc.
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 31
March 2011, PAL’s route network covered 20 points in the Philippines and 30 international
destinations.
PR Holdings, Inc.
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.
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's operations for FY2010-11 are described as follows:
During the year, PAL carried an average of 24,627 passengers (13,926 domestic and 10,701
international) and 398 tons of cargo (187 tons domestic and 211 tons international) per day.
Systemwide Operations: FY2010-11
Net Passenger Revenues Php millions 62,667.0
Net Cargo Revenues Php millions 5,941.3
Revenue Passenger Kms (‘000) 19,956,951

Available Seat Kms (‘000) 26,162,798
Passenger Load Factor 76.28%
No. of Passengers 8,989,068

Freight Kilograms 145,289,527
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Net Revenues by Route
Based on the FY2010-11 results, the revenue contribution by route is shown below:
Transpacific 32.4%
Asia & Australia 47.3%
Total International 79.7%
Total Domestic 20.3%
Total System 100.0%
International Passenger Services
As of March 31, 2011, PAL's international route network covered 30 cities (including 5 under joint
service/code share arrangements with other international carriers) in 16 countries.
25 on-line points: Guam, Honolulu, Las Vegas, Los Angeles, San Francisco,
Vancouver, Melbourne, Sydney, Delhi, Fukuoka, Nagoya, Osaka,
Tokyo, Pusan, Seoul, Hongkong, Macau, Beijing, Shanghai, Xiamen,
Taipei, Bangkok, Saigon, Singapore, Jakarta
5 points under joint Abu Dhabi, Bahrain, Doha, Dubai, Kuala Lumpur
service/codeshare
arrangements:
Transpacific
During the year, PAL flew an average of 22 flights a week to North America utilizing B747-400s and
A340-300s: 8 times weekly non-stop flights to Los Angeles; 7 times weekly non-stop services to San
Francisco; and 7 times a week to Vancouver, four of which fly onward to Las Vegas and back.
Technical stops either in Guam or Honolulu are required on the return flights of Transpacific services
at certain times of the year to compensate for adverse wind conditions.
In addition, PAL also operates a regular thrice weekly direct service to Honolulu while Guam is
served five times a week.
The Airline is entitled to fly to 33 other US cities for unlimited frequencies under certain terms and
conditions of the Philippines-US bilateral air transport agreement. However, the Category II rating
imposed on the Philippines by the U.S. Federal Aviation Administration prevents PAL from
increasing the number of flights it operates into the U.S. at this time.
Middle East
Riyadh was served 4 times weekly using the B747-400s. The service was terminated effective April 1,
2011.
India
PAL started to offer services to Delhi, India on March 27, 2011 using the A330-300s. Delhi is served
three times a week via Bangkok and another three times a week direct service.
Asia and Australia
PAL operated 181 departures per week out of Manila and Cebu to 9 countries in Asia and Australia.
The Airline flew 35 times a week to Hongkong; 24 times a week to Singapore; 21 times a week to
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Seoul; 14 times a week to Bangkok; 12 times a week to Tokyo; 7 times a week each to Nagoya,
Osaka, Saigon, Shanghai, Taipei, and Xiamen; 5 times a week each to Beijing and Fukuoka; and 4
times a week each to Macau and Pusan. Jakarta is served 4 times a week via Singapore and also 4
times a week direct service.
PAL used to operate 3 times weekly on the Manila-Melbourne-Sydney-Manila route, 2 times weekly
on the Manila-Melbourne-Brisbane-Manila route, and 2 times weekly on the Manila-Sydney v.v.
route. With the cancellation of the Brisbane service, the Australia operations are now composed of 4
times weekly service on the Manila-Melbourne-Sydney-Manila route and 3 times weekly on the
Manila-Sydney-Melbourne-Manila route.
Domestic Passenger Services
PAL's domestic network covered 20 cities and towns in the Philippines. In FY2010-2011, it flew
about 4.2 billion ASKs on its domestic routes which represented 16% of the Airline's total capacity.
PAL operated its jet aircraft (B747-400, B777-300ER, A340-300, A330-300, A320-200, and A319-
100) on its domestic routes. It serves the following domestic destinations: Bacolod, Butuan, Cagayan
de Oro, Cebu, Cotabato, Davao, Dipolog, Dumaguete, General Santos, Iloilo, Kalibo, Laoag, Legazpi,
Manila, Ozamiz, Puerto Princesa, Roxas, Tacloban, Tagbilaran, and Zamboanga.
Joint Services and Code Share Agreements
PAL continues to employ codesharing and tactical 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 14 weekly flights between Kuala Lumpur and Manila; with Emirates Airlines (in place since
September 1999) on 14 times weekly non-stop flights between Dubai and Manila; with Cathay Pacific
(in place since November 2001) on daily services between Hongkong and Cebu; with Qatar Airways
(in place since August 2002) on 14 times weekly service between Doha and Manila; with Gulf Air (in
place since March 2006) on 12 times weekly service between Bahrain and Manila; and with Etihad
Airways (in place since October 2007) on 12 times weekly services between Abu Dhabi and Manila.
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, and with Air Macau (since October 2009) on PAL operated flights between Manila and
Macau.
PAL also codeshares with Air Philippines (in place since May 2002) on regular domestic services
which the latter operates.
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.
Mabuhay Miles Elite or Premier Elite members enjoy exclusive travel privileges including priority
reservation waitlist, dedicated reservation telephone lines, priority check-in, additional free luggage
allowance, priority luggage handling, access to Mabuhay Lounges and participating VIP lounges, and
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additional discounts and amenities from program partners.
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 thirteen (13) sales and ticket offices in Manila, twenty four (24) in other
cities in the Philippines, and thirty (30) located in foreign stations. There are twenty nine (29) general
sales agents in selected international points, Bank Settlement Plan member agents in twenty three (23)
countries, Airline Reporting Corporation member agents in the United States, thirteen (13) domestic
sales agents and 357 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 site, www.philippineairlines.mobi , allows web-enabled mobile phones to access
flight schedules, track Mabuhay Miles mileage, and know more about the latest PAL news, advisories,
travel information, and promos.
(iii) Status of any publicly-announced new product or service
All PAL aircraft are equipped with new interiors, state-of-the-art seats, and the latest in inflight
entertainment.
Together with the Company’s in-house catering staff, top Filipino chefs were commissioned to
recreate and improve PAL’s inflight menus.
On long haul flights, passengers are provided with overnight kits containing grooming items and travel
essentials. Children also receive the Junior Jetsetter activity kits.
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.
The PAL Swingaround and PALakbayan are the PAL's tour programs which continue to offer holiday
packages in PAL's international and domestic destinations.
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 time.
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.
(iv) Competitive business conditions and the registrant’s competitive positions in the industry
and methods of competition
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PAL continues to maintain a strong market share in its international routes despite competition with
flag carriers of the host countries where PAL flies and with the 'sixth freedom' carriers which fly to the
Philippines en route to their final destinations.
The following table shows the PAL’s main competitors and PAL's total market and capacity share per
route.
PAL's Market and Capacity Share:
Route Market Capacity Airline Competitors

Share Share
Transpacific 37.7% 35.9% Delta Airlines, Hawaiian Airlines, Air

Canada, Korean Airlines, Asiana Airlines,
Japan Airlines, Cathay Pacific, Eva
Airways, China Airlines, Continental
Airlines
Asia and 31.1% 32.4% Japan Airlines, Cathay Pacific, Singapore

Australia Airlines, Thai Airways, Korean Airlines,
Asiana Airlines, China Airlines, Eva
Airways, Qantas Airlines, China Southern
Airlines, Dragon Air, Delta Airlines,
Royal Brunei, Kuwait Airways, Spirit of
Manila Airlines, Jeju Airlines, Zest Air,
Jin Air, Air China, Tiger Airways, Silk
Air, Southeast Asian Airlines, Cebu
Pacific, Jetstar Asia, Hong Kong Express,
Jet Airways, Air Philippines Express
PAL competes with the biggest carriers in the airline industry. Delta Airlines, Continental Airlines,
and China Southern Airlines are among the world's biggest in terms of passengers carried. Japan
Airlines, Qantas Airways, Cathay Pacific, Singapore Airlines, Korean Airlines, China Southern
Airlines, 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 (including the Star Alliance, Sky
Team and One World).
PAL held a 37% share in the domestic market in the fiscal year ending March 2011. Competitors
include Cebu Pacific, Air Philippines Express, Zest Air, and Southeast Asian Airlines.
The continuous enhancement of products and services, competitive fares, and an excellent safety
record enables PAL to hold its market leadership. Over the TransPacific, PAL has the advantage of
providing the only nonstop service to mainland USA and Canada. The distinct Filipino flavor of the
PAL inflight service, which appeals strongly to Filipino ethnic passengers, is another advantage over
the non-Filipino carriers.
(v.) Sources and availability of raw materials and the names of principal suppliers
PAL’s jet fuel suppliers are: Air BP Limited, 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.,
Saudi Arabian Oil Co. (SAUDI ARAMCO), JX Nippon Oil and Energy Corporation (Formerly Japan
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Energy Corporation), Vitol Aviation Co. (Formerly Pacific Fuel Trading Corporation), Indian Oil
Corporation Ltd., Vitol Asia Pte. Ltd., SK Network Co. Ltd., and Daewoo International Corporation.
PAL’s inflight catering requirements are provided by its own inflight kitchen in Manila for all
outgoing flights. For incoming flights, the major suppliers include Flying Food Group (SFO),
HACOR Inc. (LAX), International In-Flight Catering Co. Ltd. (HNL), Q Catering (SYD and MEL),
CLS Catering Services Ltd. (YVR), TAJ SATS Air Catering Ltd. (DEL), Cebu Pacific Catering
Services Inc. (CEB), Fukuoka Inflight Catering (FUK), AAS Catering Services (KIX), Nagoya Air
Catering Co. Ltd. (NGO), TFK Corporation (NRT), 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 International Airport
Catering Co. Ltd. (XMN), LSG Sky Chefs (Thailand) Ltd. (BKK), Aerofoods ACS Catering Service
(CGK), LSG Sky Chefs Guam (GUM) and SATS Catering Pte. Ltd. (SIN).
(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 has a General Terms Agreement for Maintenance, Repair and Overhaul Services (GTA) with
Lufthansa Technik Philippines (LTP) covering its fleet of commercial aircraft. PAL's Aircraft
Engineering Department (AED) undertakes planning, monitoring and control of all maintenance
activities and technical compliance of aircraft, engines and accessories with airworthiness standards
and industry accepted standards for safety, reliability, and customer acceptability.
Man-hour rates for maintenance requirements are negotiated with LTP in accordance with the terms of
the GTA. Maintenance materials and parts are sourced from the original equipment manufacturers
which include Airbus Industrie, Boeing, General Electric, CFM International, Honeywell, Goodrich,
Nordam Singapore, Panasonic Aviation, Recaro Aircraft Seating, and Thales Avionics , among others.
The PAL Fleet is maintained in accordance with a Continuous Airworthiness Maintenance Program
(CAMP) that is approved by the Airworthiness Authorities and is based on Maintenance Planning
Documents provided by the Airframe Manufacturers. This ensures that PAL aircraft and equipment
are always in airworthy condition, making them safe and reliable. AED established the General
Maintenance Manual (GMM) which describes the processes required to achieve the intent of the
CAMP as required by the Airworthiness Authorities.
PAL subcontracts the maintenance of its aircraft to competent Maintenance Repair Organizations
(MRO), mostly to Lufthansa Technik Philippines (LTP) for line, base, engine and component
maintenance in the Philippines. Line maintenance in overseas destination stations is subcontracted to
other service providers. Nonetheless, LTP and other service providers have to follow the requirements
of PAL’s Maintenance Schedule and GMM and AED exercises oversight responsibilities to ensure
that this is done.
LTP’s responsibilities as PAL’s MRO include the management and procurement of materials and
spare parts, subcontracting service for maintenance of certain types of PAL aircraft engines and most
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components. Heavy airframe maintenance work is tendered to certified local or overseas vendors.
These are done in accordance with the PAL GMM and under AED oversight.
Engineering functions are mostly performed by AED with MRO related functions being handled by
LTP.
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, Asian Aeronautics Services, Inc. (AASI).
PAL has a similar TSA with AASI was signed in November 2010. AED assists the Aviation School
in its oversight of the maintenance activities of the trainer fleet.
Development Plans
Despite the high fuel prices, and fierce competition from aggressive domestic carriers, PAL will
continue to focus its business activities on its key results areas, namely: product improvement, asset
and cost efficiency, business efficiency, and financial performance.
PAL will continue to look for other profitable markets and destinations, strengthen corporate accounts,
improve product and service offerings, and freshen up its communications campaigns. PAL will also
intensify its focus on the more stable higher yield traffic both on its international and domestic
networks.
To improve its financial position, the Airline will restructure operations and control cost without
compromising safety and customer satisfaction.
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:
1. corporate income tax based on net taxable income, or
2. franchise tax of two percent (2%) of the gross revenue derived from non transport , domestic
transport and outgoing international transport operations, whichever is lower, in lieu of all
other taxes, duties, fees and licenses of any kind, nature, or description, imposed by any
municipal, city, provincial or national authority or government agency, except real property
tax.
whichever will result in a lower tax, in lieu of all other taxes, duties, royalties, registration, license 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, now or in the
future, except real property tax.
In addition, the payment of principal, interest, fees, and other charges on foreign loans obtained by the
Company, and all rentals, interests, fees and other charges paid by the Company to foreign or domestic
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 Company.
As further provided for under its franchise, PAL 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 23 of the Notes
to the Consolidated Financial Statements). In addition, the payment of principal, interest, fees, and
other charges on foreign loans obtained by PAL, and all rentals, interests, fees and other charges paid
by PAL to 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
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the payment of said taxes is assumed by PAL.
On May 24, 2005, the Expanded-Value Added Tax (E-VAT) law was signed as Republic Act (RA)
No. 9337 or the E-VAT Act of 2005. The E-VAT law took effect on November 1, 2005 following the
approval on October 19, 2005 of Revenue Regulation (RR) No. 16-2005 which provides for the
implementation of the rules of the E-VAT law. Among the relevant provisions of RA No. 9337 are
the following:
a. The franchise tax of PAL is abolished;
b. PAL shall be subject to the corporate income tax;
c. PAL shall remain exempt from any taxes, duties, royalties, registration license, and other fees and
charges, as may be provided by PAL’s franchise;
d. Change in corporate income tax rate from 32% to 35% for the next three years effective on
November 1, 2005, and 30% starting on January 1, 2009 and thereafter;
e. Change in unallowable deduction for interest expense from 38% to 42% of interest income subject
to final tax for three years effective on November 1, 2005, and 33% starting on January 1, 2009; and
f. Increase in the VAT rate imposed on goods and services from 10% to 12% effective on
February 1, 2006.
On November 21, 2006, the President signed into law RA No. 9361 which amends
Section 110(B) of the Tax Code. This law, which became effective on December 13, 2006, provides
that if the input tax, inclusive of the input tax carried over from the previous quarter exceeds the
output tax, the excess input tax shall be carried over to the succeeding quarter or quarters. The
Department of Finance through the Bureau of Internal Revenue issued RR No. 2-2007 to implement
the provisions of the said law. Based on the regulation, the amendment shall apply to the quarterly
VAT returns to be filed after the effectivity of RA No. 9361, except VAT returns covering taxable
quarters ending earlier than December 2006.
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, and schedules; through the Civil Aviation Authority of the
Philippines (CAAP), formerly the Philippine Air Transport Office (RP-ATO), for aircraft and
operating standards; and through airport authorities 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 and Communications (DOTC) - 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.
x) Effects of existing or probable government regulations on the business
The US Department of Transportation’s Federal Aviation Administration (FAA) had previously

assessed the Philippines’s Civil Aviation Authority in September 2002 and found it in compliance
with the international safety standards set by the International Civil Aviation Organization (ICAO).
However, after consultation in November 2007, the agency determined that the Philippines was no
longer overseeing the safety of its airlines in accordance with international standards. The Philippines
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safety rating has been lowered from Category 1 to Category 2 under the agency’s International
Aviation Safety Assessment program. A Category 2 rating means a country either lacks laws or
regulations necessary to oversee air carriers in accordance with minimum international standards, or
that civil aviation authority – equivalent to the FAA – is deficient in one or more areas, such as
technical expertise, trained personnel, record-keeping or inspection procedures. This subpar ratings
negatively affected PAL particularly on its planned flight expansions. Because the country is in
Category 2 status, PAL is prohibited from increasing its flights to the US and from changing the type
or number of aircraft used in these services.
The Company strictly complies with and adheres to existing and probable government regulations.
xi) Estimate of the amount spent during each of the last three fiscal 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, the “Clean Air Act”.
Php 35,840 for the annual Stationary Source Emission Test for two (2) boilers located at the
Inflight Center (IFC).
2. DENR Administrative Order (AO) No. 34, the “Revised Water Usage and Classification”.
No cost to PAL for period covering FY2010-2011.
3. DENR Administrative Order No. 35, the “Revised Effluent Regulations of 1990”.
Cost: Php 60,843.16 annually for water quality analysis; approximately Php
1,200,000/annum for electricity consumption for operation of the sewage treatment plant;
Php 720,000/annum for enzyme used to dissolve grease in the catering/kitchen area, control
odor, and enhance STP biological reaction.
4. Presidential Decree No. 1152, the “Philippine Environmental Code”.
No cost to PAL for period covering FY2010-2011.
5. Presidential Decree No. 1586, “Establishing an Environmental Impact Assessment System” and
DENR Administrative Order No. 96-37.
No cost to PAL. Certificate of Non-Coverage issued to IFC, Maintenance Base Complex

(MBC) and Data Center Building (DCB).
6. Republic Act No. 6969, “Toxic and Hazardous Waste Management” and DENR Administrative
Order No. 90-29.
Cost: approximately Php 60,000 for disposal of busted fluorescent lamps.
7. Presidential Decree No. 1067, the “Water Code of the Philippines”.
13
Cost: Php 5,005.50 for renewal of annual Water Permit.
8. Republic Act 9003, the “Ecological Waste Management Act of 2000”.
No cost to PAL due to solid wastes with recyclable materials are segregated and recycled by a
service provider.
9. Department of Health (DOH) Administrative Order 29, s. 2000, “License to Operate an Industrial X-
ray Facility”.
Cost: Php 6,400.00 permit application for eight (8) X-ray facilities nationwide (PAL Cargo
Terminal, Mactan-Cebu, Davao and General Santos Cargo Services).
10. DENR Administrative Order (AO) No. 26, “Appointment/Designation of Pollution Control
Officers”
Cost: Php 2,500.00 recurrent training cost for continuous PCO accreditation.
The effects of PAL’s compliance with environmental laws are as follows:
1. Regulatory compliance;
2. Resource utilization;
3. Waste generation reduction;
4. Environmental cost reduction;
5. Improved public image and community relations;
6. Improved positive perception of regulators and NGOs;
7. Enhancing the Airline’s commitment to continually improve its environmental performance in all
aspects of its operations;
8. Appreciation and recognition from the DENR for the company’s participation in Earth Day,
Environment Month and International Coastal Cleanup celebrations; and
9. Cost cutting through energy and resource conservation.
(xiii) Total number of employees and number of full time employees
The Company’s employees are only the 4 directors who are employed by the company. The
Company does not have any plan of hiring employees within the ensuing twelve months.
PAL Employees :
As of March 31, 2011, PAL has a total workforce of 7,161 as follows:
Classification Number of Employees

Ground Employees
Philippine 4,922
Foreign 216
Flight Crew
Pilots 454
Cabin Crew 1,569
The Company recognizes two local labor unions, one for the rank and file ground employees and
another for the cabin crew. In addition, it also recognizes foreign labor unions in the United States,
Singapore, and Japan.
The Company has 3,582 rank and file ground employees in the Philippines, United States, Singapore
and Japan; and 1,538 cabin crew who are covered by a collective bargaining agreement (CBA).
14
The 10 year moratorium on the PAL-PALEA CBA ended in September 2008, after which, PAL
reached an agreement with PALEA that any improvement on concerns/proposals on the CBA will be
discussed/implemented after October 2009. A new CBA is due for negotiation but this has not been
finalized due to intervening events (such as PAL’s losses due to the financial crisis and the spin-off
issue involving the outsourcing of non-core airline functions for airport services, catering and
reservations), which PALEA elevated to the Office of the President after receiving an unfavorable
ruling from the Department of Labor and Employment (DOLE). PAL maintains that DOLE was
correct in its earlier rulings recognizing the planned spin-off as a valid exercise of management
prerogative and that any CBA negotiation will eventually cover only those to be left behind. PALEA
reacted by filing a Notice of Strike on the ground of unfair labor practice (refusal to bargain) which
was eventually certified by the Labor Secretary to the NLRC for compulsory arbitration.
The last PAL-FASAP CBA expired on July 13, 2005. Pending the final conclusion of the 2005-2010
PAL- FASAP CBA negotiations, the airline and FASAP had already agreed to resolve the first two (2)
years of the 2005-2010 PAL-FASAP CBA (July 14, 2005 – July15, 2007) by implementing economic
packages for the association’s members. When a deadlock in negotiations between PAL and FASAP
for the remaining three years of their CBA ensued, DOLE assumed jurisdiction and ruled in favor of
FASAP by granting economic benefits amounting to approximately Php222 million and a higher
compulsory retirement age for female cabin attendants at 60 years old. PAL filed a motion for
reconsideration arguing that the economic package to be given FASAP be pegged at Php80 million
and to fix the mandatory retirement age for female cabin crew at 45 years old. DOLE subsequently
affirmed its earlier ruling with minor modifications. PAL elevated the matter to the Court of Appeals.
Meanwhile, the CBA for PAL – International Association of Machinists (IAM-US) is currently in
place and is effective from July 1, 2008 until June 30, 2011. The current PAL – Singapore Air
Transport Workers’ Union (SATU) CBA is effective from January 1, 2009 until December 31, 2011.
The Airline is in the process of negotiating for a new CBA with the PAL Labor Union (Japan).
In FY 2010-2011, PAL gave its employees all benefit entitlements in accordance with stipulations in
the respective collective bargaining agreements.
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
15
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.
- 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 property. It has an annual lease contract for its office space with a
monthly rental of P23,100. The lease contract was renewed for another two years, which expires in
May 2013. The Company has no plans of acquiring any property in the next twelve months.
PAL’s properties and equipment include its aircraft fleet, various parcels of land, and buildings.
PAL’s fleet as of March 31, 2011 consists of:
Owned:
Boeing 737-300 1
Bombardier DHC 8-400 5
Bombardier DHC 8-300 3
Under Finance Lease:

Boeing 747-400 4
Airbus 340-300 4
Airbus 330-300 8
Airbus 320-200 10
Under Operating Lease:

Boeing 747-400 1
Boeing 777-300-ER 2
Airbus 320-200 9
Airbus 319-100 4
Total 51
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
16
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 over 6 to 16
years including balloon payments for certain capital leases at the end of the lease term, at fixed rates
and/or floating interest rates based on certain margins over three-month or six-month London
Interbank Offered Rate (LIBOR), as applicable.
Aircraft covered by operating lease agreements contain terms ranging from 6 to 12.3 years. Total
operating lease payments amounted to PHP 3,570.4 million for 2011 and PHP 2,531.8 million for
2010.
PAL owns three (3) Bombardier DHC 8-300 aircraft and five (5) Bombardier DHC 8-400 aircraft
which were dry leased to Air Philippines Corporation (APC) commencing on October 2009 for a term
of sixty (60) months. PAL further leased to APC its owned B737-300 aircraft from January 2008 for a
period of thirty-six (36) months. In January 2011, PAL and APC agreed to extend the term of the
lease agreement until the aircraft is disposed. Also, six A320-200s were subleased to Air Philippines:
two A320-200s in March 2010 for a term of 74 and 75 months respectively and additional four A320-
200s in 2011 for a term of 72 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) & 212 sq.m. (parcel of land)
2. Maasin, Iloilo City 3,310 sq.m & 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 sq.m. (parcel of land)
7. Bacolod City 200,042 sq.m. (parcel of land)
8. Mandurriao, Iloilo City 1,300 sq.m. & 1,700 sq.m. (parcels of land)
9. Paranaque City 375 sq.m. (parcel of land)
B. Foreign Properties
1. Glenn County, San Francisco, California 83 acres (walnut farm)

2. Hongkong 977 sq.ft & 3,701 sq.ft. (condominium units)
3. San Mateo, Daly City, California 1,760 sq.ft. & 1,193 sq.ft. (condominium units)
4. Singapore 85 sq.m.; 126 sq.m., and 68 sq.m. (office units)
5, Singapore 65 sq.m. (shop unit)
6. Sydney, Australia 177 sq.m. and 229 sq.m. (office units)
In addition, the Company 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. Legaspi 192 sq.m.
The land where these buildings are situated are leased from the Civil Aviation Authority of the
Philippines (CAAP).
PAL’s existing ground facilities service PAL’s own requirements and some of the requirements of
17
foreign airlines that fly to the Philippines. These major ground facilities as of March 31, 2011 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 Resource Training & Development Sub-
Department, with PAL’s eight training units, namely: Commercial Training & Development Division,
Ground Technical Training, Inflight Services Training Division, Management & People Development
Division, Aviation School, External Training Administration & Logistics Division.
Likewise, the PLC is the headquarters of PAL’s sales offices under the Office of the Country
Manager-Philippines, i.e., Passenger Sales Philippines, Agency Sales, Metro Manila and Luzon Sales
& Services, Corporate Sales Office, and the Ticket Office.
The PLC boasts of new and modern training equipment and facilities, such as 13 classrooms, two (2)
computer-based training (CBT) rooms; one (1) cockpit mock-up trainer (CMT) room as follows: one
(1) flight management system (FMS-747) and three (3) flight management guidance system trainer
(FMGS-Airbus); Frasca 172R simulator room; inflight service simulators for B747, A340, B737 and
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. An adjacent 4,328.80 sq.m. lot is used for parking and driveway.
The PAL Inflight Center (IFC) along MIAA Road corner Baltao St., Pasay houses PAL’s inflight
kitchen which is capable of producing more than 3.7 million meals annually to service PAL’s catering
requirements. PAL held a 48% market share in terms of meal tray production while 52% was the
combined share of MacroAsia and Miascor.
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 PAL’s entire flight operation is housed
in one terminal for the first time since it was founded 70 years ago. This gives PAL a genuine hub for
its operations where passengers from domestic flights can connect seamlessly onto international flights
and vice versa.
The terminal boasts of complete facilities for PAL’s passengers’ 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.
It is also the home of the Airport Services Group and other support offices, i.e., Operations Control
Center, Line Maintenance International Division, Aircraft Interior Maintenance Division, Flight
Dispatch, Ticket Office, Treasury, Safety, and Medical office.
Various airport support offices servicing PAL’s foreign airline customers were retained at the NAIA 1,
together with the Sampaguita Lounge.
The area is leased from MIAA.
The PAL Cargo Terminal (PCT) near NAIA 1 in Pasay which houses PAL’s domestic and
18
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 core of one of the most
extensive computer systems in the Philippines. It houses two (2) Mainframe Computers, one hundred
twenty (120) Unix systems, and PC servers. These equipment run sophisticated systems like the
Airline’s Reservations and Departure Control used in the daily operation of the Airline. The DCB is
also the center of applications development and maintenance, housing close to one hundred three (103)
analysts and programmers. It is the hub of PAL’s domestic network, connecting the various PAL
ticket offices and airports.
The DCB, comprising 3,588.35 sq.m., is likewise leased from 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. Other facilities located in the MBC include Flight Operations and
the Flight Simulator Building, Aircraft Engineering, Airworthiness Management, Communications
Operations, Fuel Management, Employee Benefits, Medical, Sports Complex, Corporate Logistics &
Services, Operations Accounting, Ground Property, Material Sales Management, Comat Handling,
Safety, Security, Ground Equipment Management, Communications Maintenance, Network
Management & Telecom System, Construction and Facilities Management, Reservations Control
Center/Telesales, General Materials Warehouse, Central Finance Records Warehouse, Aircraft
Records Warehouse and other support offices. MBC also houses the K-9 Kennel Facility.
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 Resources, Corporate Audit, Corporate Communications, Consular Affairs,
Government Relations, Domestic and International Ticket Offices, Facilities Management Division,
Satellite Office and Security Office of PAL. The total area being leased from PNB is 15,080.08 sq.m.
Item 3. Legal Proceedings
PAL is currently being investigated by the U.S. Department of Justice based in Washington D.C. for
possible violation of U.S. Anti-trust laws for both passenger and cargo services covering the period
January 1, 1999 to July 11, 2007. PAL is also 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 Northern District of California against air carriers operating passenger air
services to and from the U.S. Possible violations of U.S. Anti-trust laws may carry fines over PHP
4,340.8 million or imprisonment not exceeding 10 years or both.
Similarly, PAL is also currently being investigated by the Competition Bureau of Canada for possible
violation of Canadian Anti-trust laws for passenger services which may carry fines not more than
PHP440.8 million or imprisonment or both.
PAL is likewise a plaintiff in various cases pending before the Court of Tax Appeals for the refund of
excise taxes paid by PAL under protest in connection with its importation of aviation fuel and of
commissary items used for operations. The total amount involved in the subject refund cases is PHP
3,091.9 million and PHP 93.4 million respectively.
19
There were deficiency Minimum Corporate Income Tax (MCIT) and Expanded Withholding Tax
assessments amounting to PHP1,419.5 million that were already decided by the Court of Tax Appeals
in favor of the Company , currently on appeal by the Bureau of Internal Revenue in the higher courts.
Taking as precedence the favorable Supreme Court decision on similar MCIT assessments ,
management believes that these cases will be finally decided in favor of the Company.
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 PHP13,389.9 million (10% of its total
current assets) for fiscal year ended March 31, 2011.
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 fiscal
year ended March 31, 2011.
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:
2011 HIGH LOW

Php Php
Second Quarter 5.65 4.49
First Quarter 7.94 4.00
2010
Fourth Quarter 5.65 3.90
Third Quarter 5.60 3.00
2009
Fourth Quarter 2.90 2.04
Third Quarter 3.00 2.70
As of July 12, 2011, the latest practicable trading date, PAL Holdings’ was traded at
P 4.85.
2. Holders
The number of shareholders of record as of June 30, 2011, was 6,806 and
common shares outstanding as of the same date were 5,421,512,096.
The top 20 stockholders as of June 30, 2011 are as follows:
20
Stockholders’ Name No. of Shares Held % to Total
1 Trustmark Holdings Corp. 5,297,280,230 97.7075%
2 Pan Asia Securities Corp. 37,300,250 0.6880%
3 Wonderoad Corporation 10,251,679 0.1891%
4 Citiseconline.com, Inc. 5,860,377 0.1081%
5 RCBC Securities, Inc. 5,208,863 0.0961%
6 Emmanuel P. Te 5,000,000 0.0922%
7 Abacus Securities Corp. 3,246,797 0.0599%
8 Tower Securities, Inc. 2,548,232 0.0470%
9 BPI Securities Corp. 1,783,774 0.0329%
10 Triton Securities Corp. 1,328,561 0.0245%
11 Ansaldo, Godinez & Co., Inc 1,257,991 0.0232%
12 Solar Securities, Inc. 1,120,947 0.0207%
13 Accord Capital Equities Corp. 1,075,950 0.0198%
14 DW Capital, Inc. 993,400 0.0183%
15 R. S. Lim & Company, Inc. 880,000 0.0162%
16 R. Coyiuto Securities, Inc. 878,118 0.0162%
17 Angping & Associates Securities, Inc. 854,322 0.0158%
18 E. Chua Chiaco Securities, Inc. 853,348 0.0157%
19 Luys Securities Company, Inc. 810,276 0.0149%
20 Mandarin Securities Corp. 797,907 0.0147%
* The Company has no preferred shares.
a. Dividends
a.) The Company did not declare any cash dividends during the past three years in the
period ended March 31, 2011. The Board of Directors may declare dividends only from
the surplus profits arising from the business of 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 three years)
On 22 January 2007, the Company issued 5,021,567,685 new shares to Trustmark

Holdings Corporation (Trustmark) as subscription to the increase in capital pursuant to a
debt-to equity transaction.
On 01 March 2007 the Securities and Exchange Commission confirmed that the issuance
of these new shares to Trustmark is exempt from the registration requirements of Section
8 of SRC.
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 Securities
and Exchange Commission 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
21
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 PAS 27, Consolidated and Separate
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 as of March 31 of each
year using consistent accounting policies as those of the Company. Companies included in the
consolidation are PAL and PR Holdings, Inc. As a result of the restructuring in fiscal year 2008 (see
note 2 of the consolidated financial statements), the Company still owns 84.67% of PAL, through a
direct ownership in 81.57% of PAL’s shares and an indirect ownership in 3.10% of PAL’s shares
through an 82.33% direct ownership in PR. 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
a.) FY 2011 vs FY 2010
PAL Holdings’ consolidated financial statements for the fiscal year ended March 31, 2011, showed a
total comprehensive income of PHP 3,098.1 million, a significant turnaround from the previous fiscal
year’s total comprehensive loss of PHP 862.9 million.
Total revenues for the current fiscal year amounted to PHP74,607.3 million, up by 16% over last
year’s same period figure of PHP64,087.8 million. The increase in revenues was attributable mainly
to higher passenger and cargo revenues earned during the period. Passenger and cargo traffic grew by
12% and 42% respectively over the same period the year before. An improvement by 9% in yields
generated from passenger seat offerings complemented the boost in passenger traffic. Revenues also
include lease income arising from aircraft operating lease arrangements with an entity under common
control, excess baggage revenues and ancillary revenues generated mainly from other passenger
transport services and charters.
Total expenses amounted to PHP71,567.8 million or an increase of 12% over last year’s same period
total of PHP 63,689.3 million. This was primarily due to higher expenses related to flying operations,
aircraft & traffic servicing. reservation & sales, and passenger service offset in part by the decrease in
maintenance, and financing charges. Reduction in other income, likewise contributed to the increase in
expenses.
The increase in flying operations expenses by 15% was attributable mainly to higher fuel expenses
and aircraft lease rentals. Fuel costs grew 23% as a result of the significant rise in jet fuel prices per
barrel from an average of US$ 86.94 in 2010 to US$ 102.89 in 2011. The phase in of two (2) Boeing
777-300ER aircraft in November 2009 and January 2010 and of four (4) A320-200 aircraft in
September, October and November 2010 had the effect of increasing aircraft lease charges by
PHP1,038.6 million.
Other direct operating expenses incurred in the transport of passengers and cargo such as landing and
take off fees and ground handling charges included under Aircraft and Traffic Servicing expenses rose
by 4.1% as a result of more international flights operated in 2011.
22
The growth in the volume of passenger traffic as well as in the number of flights operated in the
airline’s international operations, had the effect of increasing expenses related to reservation and
sales by 13%.
Maintenance expenses decreased by 19% as a result of lower aircraft, component and engine repair
costs incurred during the current period.
Debt servicing of various long term obligations resulted in lower financing charges by 35%.
Others-net decreased by 92%. The reduction was brought about mainly by lower unrealized gain
recognized in the current period resulting from changes in the fair valuation of outstanding derivative
instruments which did not qualify for hedge accounting. Further, in 2011, PAL also recognized
impairment losses for certain investment properties in accordance with the results of its recently
concluded property appraisal. These, coupled with the effect of the one time gain on debt buyback of
certain unsecured claims, realized in 2010, contributed to the decrease in Others-net.
As of the fiscal year ended March 2011, the Group recognized “Other Comprehensive Income” of
PHP 105.2 million compared with a PHP1,050.1 million “Other Comprehensive Loss” in 2010. This
improvement in the account was prompted by the reduction in net changes in fair values of
outstanding fuel hedges recognized in equity as well as the increase in carrying values of certain
ground properties, net of the related deferred income tax, following the latest appraisal report as of
March 31, 2011.
b.) FY 2010 vs FY 2009
The Group’s consolidated financial statements for FY 2009-2010 showed a total comprehensive loss
of PHP 862.9 million, a significant reduction of 93% from the last fiscal year's restated total
comprehensive loss of PHP 12,081.4 million.
Total revenues for the current fiscal year totaled PHP 64,087.8 million or 13% lower than last year’s
figure of PHP 73,793.9 million. The decrease was brought about mainly by the decline in passenger
revenues by 15.9% offset in part by the increase of 20% in other income earned during the period.
Lower net yields per Revenue Passenger Kilometer (RPK) affected PAL’s revenue generation.
Revenues also include recoveries arising from surcharges, cargo, interest income and other income
earned during the period. The increase in other income was attributable mainly to higher excess
baggage revenues and charter revenues on account of more flights mounted .
In FY 2009-2010, PAL adopted Philippine Interpretation IFRIC 13, Customer Loyalty Programmes
where a portion of the revenue attributable to the customer loyalty award credits is deferred over the
period that the award credits are redeemed. The prior years’ financial information has been restated to
reflect the adoption.
Total expenses and other charges (income) dropped by 26.0% or PHP 22,354.4 million from the
previous year’s total of PHP 86,043.6 million. This was largely due to lower expenses related to flying
operations, passenger service, reservation & sales , financing charges, general & administrative and
other expenses offset by the increase in maintenance expense.
The reduction in flying operations by 29.4% over last year’s same period total of PHP 49,506.4
million was attributable mainly to the decrease in fuel cost offset by the increase in depreciation and
lease charges . For FY 2009-2010, fuel expenses declined by 42.4% as a result of the significant drop
in average price per barrel of aviation fuel from US$ 123.80 in 2009 to US$ 86.94 in 2010. Fuel cost
in 2009 also includes the recognition of losses as a result of the early termination of several hedging
contracts before maturity date. The cabin reconfiguration of the B747 aircraft and acquisitions of
rotable & reparable parts resulted in a higher depreciation expense by PHP 959.1 million. Likewise,
23
the phase in of the two (2) B777-300 ER aircraft had the effect of increasing aircraft lease charges by
28.1% as compared to the previous year’s total of PHP 1,992.7 million.
Cost cutting measures implemented by PAL in FY 2009-2010 resulted in the reduction of passenger
service, reservation & sales and general & administrative expenses to PHP 4,778.0 million,
PHP 3,868.0 million and PHP 2,610.6 million respectively.
Principal payments made on various loans including the debt buyback of certain unsecured claims
from various debt holders during the current fiscal year had the effect of decreasing financing charges
by 31.4% or PHP 1,176.9 million over last year’s figure of PHP 3,746.4 million.
Higher aircraft, engine and component repair costs increased maintenance expenses by PHP 899.2
million over the previous fiscal year’s figure of PHP 9,957.4 million.
In the current fiscal year, the Group recognized “Other Income” of PHP 4,889.8 million versus “Other
Expenses” of PHP 1,147.6 million incurred during the last fiscal year. The significant improvement of
PHP 6,037.4 million was accounted for mainly by the unrealized gains resulting from changes in the
fair valuation of outstanding derivative instruments which did not qualify for hedge accounting. In FY
2008-2009, PAL incurred unrealized losses due to the aforementioned changes. The increase in other
income by 20% also included, among others, the gain on debt buyback of certain unsecured claims.
These claims were carried in PAL’s books at amortized cost. The difference between the purchase
price and the cost was recognized as part of “Others-net ”.
In fiscal year 2009-2010, the Group recognized a lower provision for income tax by PHP 332.1
million as compared with the previous year’s deferred income tax of PHP 543.3 million on account of
the reassessment done on deferred tax assets and liabilities on all deductible temporary differences in
accordance with PAS 12, Income Taxes.
The reduction in the net changes in the value of derivative assets resulting from the fair valuation of
outstanding fuel hedges recognized in equity had the effect of decreasing the “Other Comprehensive
Income” account in the current fiscal year by 28.7% and the net changes in fair value of available-for-
sale investments by 57.6%. The Group recognized a foreign exchange translation loss amounting to
PHP 105 million as compared to 1,915 in 2009. This is due to the decrease in exchange rates from Php
48.422 as of March 31, 2009 to PHP 45.291 as of March 31, 2010
Financial Condition
FY 2011 vs FY 2010
As of March 31, 2011 the Group’s consolidated total assets amounted to PHP72,565.4 million. A
decrease of 6% from the March 31, 2010 balance of PHP76,755.8 million.
The difference was on account of the downward movement in total noncurrent assets by 8% offset in
part by the increase in “Total Current Assets” by 9%.
The reduction in “Total Noncurrent Assets” was attributable mainly to the decrease in property and
equipment by 11% due to the depreciation expense recognized during the period, which had the effect
of reducing the carrying values of the assets. This was offset partly by the additional revaluation
increase on certain properties as a result of the valuation performed by an independent appraiser as of
March 31, 2011. Investment properties decreased by 40% due to the impairment losses recognized
on certain properties in accordance with the updated appraisal report as of March 31, 2011. “Other
Noncurrent Assets” increased by 65.4% mainly on account of additional collaterals required under
operating lease agreements for certain aircraft as well as for an ongoing case under litigation.
24
Total current assets increased by 9.4% from the March 31, 2010 figure of PHP12,246.6 million due in
part to the increase in cash and cash equivalents by 34% as a result of higher net earnings generated
from operations. Higher fuel inventory had the effect of increasing the expendable parts, fuel,
materials & supplies balance to PHP1,771.9 million, a 43.5% increase over the March 31, 2010 figure
of PHP1,234.5 million.
Total liabilities decreased by 10%. This was attributable mainly to the decrease in the Group’s long
term obligations due to the principal payments made on various loans as well as the effect of payment
on unsecured claims.
As of March 31, 2011, the Group’s stockholders’ equity balance amounted to PHP5,377.0 million, up
by 217% from the March 31, 2010 balance of PHP 1,695.5 million. The increase was brought about
mainly by the net income recognized during the current fiscal year.
FY 2010 vs FY 2009
As of March 31, 2010 the Company’s consolidated total assets amounted to PHP 76,755.8 million or
20% lower than the March 31, 2009 balance of PHP 95,503.7 million. The difference was primarily
brought about by the downward movement in total current assets by 41% as a result of the decrease in
cash and cash equivalents by 42%, short-term investments by 100% and other current assets by 79%.
The decline in cash and cash equivalent balance was mainly due to servicing of various debts, offset in
part by the advances received from affiliates. The decrease in other current assets was due to the
effect of the remeasurement to fair value of certain financial assets and derivative instruments and
reduction in security deposits used as collateral for certain derivative instruments.
Total noncurrent assets declined by 14% as a result of the decrease in property and equipment by 14%
due mainly to the depreciation expense recognized during the period , which had the effect of reducing
the carrying values of the assets. The decline in “Other Non-current Assets” by 33% was principally
brought about by the effect of the remeasurement to fair value of certain financial assets and derivative
instruments as well as reduction in certain deposits.
Total liabilities declined by 19% from the March 31, 2009 balance of PHP 92,945.3 million. This was
attributable mainly to the decrease in the long term liabilities due to principal payments made on
various loans and the effect of the debt buyback of certain unsecured claims from Trustmark. The
remeasurement to fair value of certain derivative instruments also had the effect of decreasing the
accrued liabilities balance grouped under “Current Liabilities” and in the other liabilities balance
grouped under “Reserves and Other Liabilities”.
As of March 31, 2010, the stockholders’ equity balance amounted to PHP 1,695.5 million, down by
PHP 862.9 million or 34% from the March 31, 2009 balance of PHP 2,558.4 million. The decrease
was brought about mainly by the total comprehensive loss recognized during the period as well as by
the movements of all non owner changes in equity.
25
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-effective manner performed
To conduct & maintain safe, Number of aircraft related By occurrence and

reliable, cost & 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
26
In addition to the Qualitative Key Performance Indicators of PAL, the following comprise its
Quantitative Financial Ratios:
03/31/11 03/31/10
Profitability Factors:
1. Return on Total Assets
Net Income (loss)/Average Total Assets 4.03% 0.22%
2. Percentage of Operating Income
Operating Income (loss)/Total Revenues 4.88% -4.48%
Asset Management:
3. Receivable Turnover
12.04 10.83
Net Sales/Average Trade Receivables
4. Number of Days Sales in Receivables
( General Traffic)
30.32 33.71
# of Days in a year/Receivable turnover
Financial Leverage:
5. Interest Coverage Ratio

Earnings before interest & taxes/Interest Charges 2.83 1.16
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. On July 22, 2008, the Supreme Court 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 affirming the earlier decision dated
July 22, 2008 with modification in that the award of attorney’s fees and expenses of litigation is
reduced to PHP 2.0 million.. On November 3, 2009, PAL filed a second motion for reconsideration,
which is pending resolution before the Supreme Court.
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 & 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.
On December 23, 2010, the Department Of Labor & Employment (DOLE) issued a ruling 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 in that the award of monthly rice
allowance for the first year of the CBA effective July 16,2007 was reduced from PHP 1,800 to PHP
1,500. PAL was also directed to reinstate nine (9) Flight Pursers who were retired at age 55 during
27
the pendency of the case and to pay them full back wages and benefits. The nine (9) flight pursers who
were retired at age fifty-five (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 Court of Appeals via a Petition for certiorari
with prayer for issuance of a Temporary Restraining Order and Preliminary Mandatory Injunction. To
date, the petition is pending resolution before the said court.
In the interim, mediation conferences were called by the DOLE Secretary on the reinstatement aspect
for decision and other undisputed matters. On June 27 , 2011 PAL agreed to pay the retro and
prospective rice allowance starting July 16, 2011; to issue the guidelines in crediting pregnancy and
maternity leave in the length of service of cabin attendants as well as in the computation of related
company benefits and to commence preliminary talks on the 2010-2015 CBA negotiation on July
2011.
Currently, there are other ongoing legal proceedings involving PAL (refer to Legal Proceedings on
page 19). 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
On October 30, 2006, PAL finalized a Purchase Agreement with Boeing wherein PAL placed a firm
order for two Boeing 777-300ER aircraft for delivery in fiscal year 2010 to fiscal year 2011 and
purchase rights for two additional aircraft.
In May 2007, PAL finalized a supplemental agreement with Boeing relating to its exercise of purchase
rights for two Boeing 777-300ER aircraft for delivery in fiscal year 2012. On June 2, 2009, PAL and
Boeing agreed to reschedule the deliveries of four Boeing 777-300ER aircraft from their original
delivery schedules of fiscal year 2010, 2011 and 2012 to fiscal years 2013 and 2014.
On July 28, 2008 , PAL exercised its right to purchase two (2) of the five (5) option Airbus 320-200
aircraft scheduled for delivery in fiscal year ending March 2011. In March 2010, PAL signed
operating lease agreements for the lease of two brand new Airbus 320-200 aircraft for delivery in
October and November 2010. PAL took delivery of the aircraft and these were subleased to Air
Philippines for a lease period of six (6) years.
To improve its financial condition and results of operations, PAL has lined up various revenue
enhancement programs, cash generation strategies and cost control initiatives. Part of these initiatives
is the spin-off of its Inflight Catering operations, Airport Services operations and Call Center
Reservation operations. In April 2010, PAL released a memorandum informing its employees and the
general public of its plan to spin-off a significant number of employees. Members of the employees’
union lobbied for reconsideration to the Department of Labor and Employment (DOLE). On June 15,
2010, PAL received a favorable decision from the DOLE confirming the legality of the spin-
off/outsourcing program.
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 element of income that did not arise from continuing operations.
28
vi. The causes for any material change from period to period which shall include vertical and
horizontal analyses of any material item:
Results of our Horizontal (H) and Vertical (V) analyses showed the following material
changes:
1. Cash and cash equivalents- H- 34%

2. Receivables-net- H- (8%)
3. Expendable parts, fuel, materials & supplies- H- 44%
4. Property, plant and equipment- net- H- (11%) V- (5%)
5. Available-for-sale- investment- H– 5%
6. Investment properties- H- (40%)
7. Deferred tax assets- H- 14%
8. Other non-current assets- H- 65%
9. Notes payable- H- (13%)
10. Current portion of long-term obligations- H- (16%)
11. Accounts payable- H- 5%
12. Accrued expenses- H- 9%
13. Due to related parties- H- (98%)
14. Unearned transportation revenue- H- 14%
15. Long-term obligations- net of current portion- H- (27%) V- (9%)
16. Accrued employee benefits- H- 12%
17. Other components of equity- H- 43%
18. Deficit- H- (21%)
19. Minority interest- H- 152%
20. Revenue –H- 16%
21. Expenses – H- 12%
22. Income before income tax- H- 663%
23. Provision for income tax- H- (78%)
24. Total Other Comprehensive income- H- 110%
25. Total Comprehensive income- H- 459% V- 6%
All of these material changes were explained in the management’s discussion and analysis of
financial condition and results of operations stated above.
PAL experiences a peak in holiday travel during the months of January, April, May, June and
December.
B. Information on Independent Accountant and other Related Matters
(1) External Audit Fees and Services
a. Audit and Audit-Related Fees
a. The audit of the Company’s annual financial statements or services that are normally
provided by the external auditor in connection with statutory and regulatory filings or
engagements for 2011 and 2010.
Yr. 2011 - Estimated at P 500,000 exclusive of out-of-pocket expenses for the audit of
2011 financial statements.
Yr.2010 - P 500,098 audit fee and out-of-pocket expenses for the audit of 2010 financial
statements.
29
b. Tax Fees – None
c. All Other Fees – None
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 registrant’s accountants on any accounting and
financial disclosure during the three most recent fiscal years in the period ended March 31, 2011 or
in any subsequent interim period.
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Registrant
1. Directors, Executive Officers, Promoters and Control Persons
At present, 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 Age Citizen- Position /Term of Business Experience/Other Directorship

ship Office/Period Served within the last 5 years
Lucio C. Tan 76 Filipino Chairman/ 1 year/ 1 year Chairman of Philippine Airlines, Inc.,
Asia Brewery Inc., Fortune Tobacco
Corp., PMFTC Inc., The Charter House,
Inc., Grandspan Development Corp.,
Himmel Industries Inc., Lucky Travel
Corp., Eton Properties Philippines, Inc.,
Eton City, Inc., Belton Communities, Inc.,
FirstHomes, Inc., Tanduay Holdings, Inc.,
Tanduay Distillers, Inc., Tanduay Brands
International, Inc., Absolut Distillers, Inc.,
Progressive Farms, Inc., Manufacturing
Services & Trade Corp., REM
Development Corp., Foremost Farms,
Inc., Basic Holdings Corp., Dominium
Realty & Construction Corp.,
Shareholdings, Inc., Sipalay Trading
Corp., and Fortune Tobacco International
Corp.; Director of Philippine National
30
Bank, majority stockholder of Allied
Banking Corp., and Maranaw Hotels &
Resort Corp.
Jaime J. Bautista 54 Filipino President and Director/ 1 President and Chief Operating Officer of
year/ 1 year Philippine Airlines, Inc.; Vice Chairman
of the Board of Trustees of the University
of the East; Director MacroAsia Corp.,
MacroAsia Airport Services Corp., and
MacroAsia Catering Corp.; Member,
Board of Trustees of University of the
East Ramon Magsaysay Medical Center
Foundation; Treasurer of Tan Yan Kee
Foundation
Harry C. Tan 65 Filipino Director/ 1 year/ 1 year Vice Chairman of Eton Properties
Philippines, Inc., Eton City, Inc., Belton
Communities, Inc., FirstHomes, Inc., Pan
Asia Securities, Inc., Lucky Travel Corp.,
and Tanduay Holdings, Inc.; Managing
Director of The Charter House, Inc.;
Director/Chairman for Tobacco Board of
Fortune Tobacco Corp.,
Director/President of Maranaw Hotels &
Resort Corp.; Director of Allied Banking
Corp., PMFTC Inc., Asia Brewery Inc.,
Basic Holdings Corp., Philippine Airlines,
Inc., Foremost Farms, Inc., Himmel
Industries, Inc., Absolut Distillers, Inc.,
Progressive Farms, Inc., Manufacturing
Services & Trade Corp., REM
Development Corp., Grandspan
Development Corp., Dominium Realty &
Construction Corp., Fortune Tobacco
International Corp., Shareholdings, Inc.,
Sipalay Trading Corp., Tanduay Brands
International, Inc., and Tanduay Distillers,
Inc.
Domingo T. Chua 69 Filipino Director/ 1 year/ since Chairman of Allied Banking Corp., Air
September 30, 2009 Philippines Corp., and PNB Securities,
Inc.; Vice Chairman of PNB General
Insurers Co., Inc.; Managing
Director/Treasurer of Himmel Industries,
Inc.; Director/Treasurer of Dominium
Realty & Construction Corp., Asia
Brewery, Inc., Manufacturing Services &
Trade Corp., Grandspan Development
Corp., Foremost Farms, Inc., The Charter
House, Inc., Progressive Farms, Inc.,
Fortune Tobacco Corp., Fortune Tobacco
International Corp., Lucky Travel Corp.,
Eton Properties Philippines, Inc.,
Shareholdings, Inc., Sipalay Trading
31
Corp., Tanduay Holdings, Inc., Tanduay
Distillers, Inc., Tanduay Brands
International, Inc., Absolut Distillers, Inc.,
Eton City, Inc., Belton Communities, Inc.
and FirstHomes, Inc.; Director of Pan
Asia Securities Corp., Allied Commercial
Bank, Allied Bankers Insurance Corp.,
Maranaw Hotels & Resort Corp.,
Eurotiles Industrial Corp., and PNB Life
Insurance Inc.; Former Director of
Philippine National Bank
Lucio K. Tan, Jr. 45 Filipino Director/ 1 year/ 1 year Director/President of Tanduay Distillers,
Inc., Director/EVP of Fortune Tobacco
Corp.; Director of AlliedBankers
Insurance Corp., Philippine Airlines, Inc.,
Philippine National Bank, Eton Properties
Philippines, Inc., Tanduay Holdings, Inc.,
MacroAsia Corporation, PMFTC Inc.,
Lucky Travel Corp., Air Philippines
Corp., Tanduay Brands International, Inc.,
Absolut Distillers, Inc., Eton City, Inc.,
Belton Communities, Inc., FirstHomes,
Inc., Asia Brewery, Inc., Foremost Farms,
Inc., Himmel Industries, Inc., Progressive
Farms, Inc., The Charter House, Inc.,
REM Development Corporation,
Grandspan Development Corporation,
Dominium Realty & Construction Corp.,
Manufacturing Services & Trade Corp.,
Fortune Tobacco International Corp., and
Shareholdings, Inc.
Michael G. Tan 45 Filipino Director/1 year/ 1 year Director/President of Tanduay Holdings,

Inc.; Director/Chief Operating Officer of
Asia Brewery, Inc., Director of Eton City,
Inc., Allied Banking Corporation,
AlliedBankers Insurance Corp., Air
Philippines Corp., Eton Properties
Philippines, Inc., PMFTC Inc., Grandway
Konstruct, Inc., Lucky Travel Corp.,
Philippine Airlines, Inc., Philippine
Airlines Foundation, Inc., Tanduay
Brands International, Inc., Absolut
Distillers, Inc., and Shareholdings, Inc.
Wilson T. Young 54 Filipino Director/ 1 year/ 1 year Managing Director/Deputy CEO of

Tanduay Holdings, Inc.; Chairman of
Victorias Milling Company, Inc.;
Director/President of Tanduay Brands
International, Inc.; Chief Operating
Officer of Tanduay Distillers, Inc.,
Absolut Distillers, Inc., and Total Bulk
Corp.; Director of Flor De Caña Shipping,
32
Inc., and Eton Properties Philippines, Inc.;
Vice Chairman of the Board of Trustees
of University of the East Ramon
Magsaysay Medical Center; and Member,
Board of Trustees of the University of the
East
Juanita Tan Lee 68 Filipino Director/1 year/ 1 year Director of Eton Properties Philippines,
Inc. and Air Philippines Corp.;
Director/Corporate Secretary of Asia
Brewery, Inc., Dominium Realty and
Construction Corp., and Shareholdings,
Inc.; Corporate Secretary of Absolut
Distillers, Inc., The Charter House, Inc.,
Foremost Farms, Inc., Fortune Tobacco
Int’l Corp., Grandspan Development
Corp., Himmel Industries, Inc., Lucky
Travel Corp., Manufacturing Services &
Trade Corp., Marcuenco Realty &
Development Corp., Progressive Farms,
Inc., REM Development Corp., Sipalay
Trading Corp., Tanduay Distillers, Inc.,
Tanduay Brands International Inc.,
Tobacco Recyclers Corp., Total Bulk
Corp., Zebra Holdings, Inc., Fortune
Tobacco Corp. and PMFTC Inc.;
Assistant Corporate Secretary of Basic
Holdings Corp. and Tanduay Holdings,
Inc.
Antonino L. 72 Filipino Independent Director/ 1 Chairman of An-Cor Holdings, Inc.;

Alindogan, Jr. year/ 1 year Chairman and President of Landrum
Holdings, Inc.; President of C55, Inc.;
Independent Director of Philippine
Airlines, Inc., Rizal Commercial Banking
Corp., Eton Properties Philippines, Inc.,
and House of Investments, Inc.
Enrique O. Cheng 78 Filipino Independent Director/ 1 Chairman of Landmark Corporation;

year/ 1 year Chairman/President of Philippine Trade
Center; Director/Vice-Chairman of
Hideco Sugar Milling, Co., Inc.;
Independent Director of Philippine
Airlines, Inc.
Johnip G. Cua 54 Filipino Independent Director/ 1 Chairman of Advertising Foundation of

year/ since September 30, the Philippines; Director of Banco De Oro
2009 Private Bank, MacroAsia Corporation,
MacroAsia Catering Services, Board of
Trustees Member of Xavier School, and
Xavier School Educational & Trust Fund
Ma. Cecilia L. 58 Filipino Corporate Secretary/ 1 Corporate Secretary of Allied Banking

Pesayco year/ 1 year Corp., Allied Savings Bank, Eton
33
Properties Philippines, Inc., Eton City,
Inc., Belton Communities, Inc.,
FirstHomes, Inc.; Tanduay Holdings Inc.,
Air Philippines Corp., Flor De Caña
Shipping, Inc., and East Silverlane Realty
and Dev’t Corp.
Susan T. Lee 41 Filipino Chief Finance Officer/ 1 AVP and Asst. CFO of Tanduay
year/ 1 year Holdings, Inc.
2. Significant Employees
There are no other significant employees who are expected by the registrant to make a
significant contribution to the business.
3. Family Relationship
Chairman Lucio C. Tan is the father of Mr. Lucio K. Tan Jr. and Mr. Michael Tan while
Messrs. Lucio C. Tan and Harry C. Tan are brothers. Mr. Domingo Chua is a brother-in-law of
Chairman Lucio C. Tan and Mr. Harry C. Tan.
4. Pending Legal Proceedings (last 5 years)
The Directors and Executive Officers of the Corporation are not 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, including the nature of the offense, in a criminal proceeding,
domestic or foreign, excluding traffic violations and other minor offenses; 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
(a) CEO and Top Four Compensated Executive Officers
A fixed basic monthly salary was provided for the Corporation’s Chairman and CEO,
President and other officers of the Corporation and shall continue to be given in 2011. The
Corporation has no contract with any of its executive officers.
(b) Directors and Executive Officers
The directors of the Corporation are entitled to a per diem of Twenty Five Thousand Pesos
(P
=25,000.00) for their attendance in every board meeting and at the Annual Stockholders’
Meeting. Additionally, the Independent Directors are granted monthly transportation and
representation allowances 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. The
34
directors and executive officers receive no other remuneration in cash or in kind. None of
the directors and executive officers holds any outstanding warrant or option.
Summary Compensation Table
Year Salary Bonus Others

CEO and Top Four (4) 2011 2,190,000 N/A N/A
Management (Estimate)
2010 2,140,000 N/A N/A
2009 1,730,000 N/A N/A
All other officers and 2011 N/A N/A 4,305,000
directors as a group (Estimate)
unnamed
2010 N/A N/A 3,875,000
2009 860,000 N/A 3,155,000
The following constitute the Corporation’s four (4) most highly compensated executive
officers (on a consolidated basis):
1. Mr. Lucio C. Tan is the Chairman of the Board of Directors and Chief Executive
Officer of the Corporation.
2. Mr. Jaime J. Bautista is the President of the Corporation.
3. Mr. Domingo Chua is the Treasurer of the Corporation.
4. Ms. Ma. Cecilia L. Pesayco is the Corporate Secretary of the Corporation.
a.) Standard Arrangements – Other than the stated salaries & 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 Company’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
Company’s CEO, executive officers and all officers and directors as a group.
Item 11. Security Ownership of Certain Beneficial Owners and Management as of

June 30, 2011
(1) Security Ownership of Certain Record and Beneficial Owners of more than 5%
Title of Name, address of record owner Name of No. of Shares Percent

class and relationship with Issuer Beneficial Held
Owner and Citizenship
Relationship
with Record
35
Owner
Common Trustmark Holdings Filipino 5,297,280,230 97.708%
Corporation*
SMI Compound, C. Raymundo *
Ave., Maybunga, Pasig
City/(Shareholder)
* Trustmark Holdings Corp.(TMHC) is owned and controlled by the Lucio Tan Group of
Companies. Mr. Lucio Tan shall have the voting power over the shareholdings of TMHC.
(2) Security Ownership of Management as of June 30, 2011
Amount and
Title of class Name of beneficial nature of Citizenship Percent of
owner record/beneficial Class
ownership *
Common Lucio C. Tan 1,000 “r” Filipino Nil
Common Harry C. Tan 1,000 “r” Filipino Nil
Common Jaime J. Bautista 500 “r” Filipino Nil
Common Domingo T. Chua 1,000 “r” Filipino Nil
Common Wilson T. Young 500 “r” Filipino Nil
Common Lucio K. Tan, Jr. 1,000” r” Filipino Nil
Common Michael G. Tan 1,000 “r” Filipino Nil
Common Juanita Tan Lee 500 “r” Filipino Nil
Common Antonino L. Alindogan, Jr. 500 “r” Filipino Nil
Common Enrique O. Cheng 1,000 “r” Filipino Nil
Common Johnip G. Cua 1,000 “r” Filipino Nil
* All shares held by management are of record.
Security ownership of all directors and officers as a group is 9,000 representing 0.00% 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 registrant.
Item 12. Certain Relationships and Related Transactions
In addition to Note 18 of the Notes to the Consolidated Financial Statements on pages 95 to 99, the
following are additional relevant related party disclosures:
The Company’s cash and cash equivalents are deposited/placed with Allied Banking Corporation, an
affiliate, at competitive interest rates. The Company also has a lease and stock transfer agency
agreement with the said bank at prevailing rates. There are no preferential treatment in any of its
transactions with the Bank. There are no special risk or contingencies involved since the transactions
are done under normal business practice.
36
• Business purpose of the arrangements:
We do business with related parties due to stronger ties which is based on trust and
confidence and easier coordination.
• Identification of the related parties transaction business and nature of relationship:
• Allied Banking Corporation – deposits, rental and stock transfer services

• MacroAsia Corporation – investments
• Transaction prices are based on prevailing market rates.
• Transactions have been fairly evaluated since the Company adheres to industry standards and
practices.
• There are no any ongoing contractual or other commitments as a result of the arrangement.
2.) Not applicable – 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.
3.) Not applicable – the Company has no transactions with promoters.
37
PART IV - EXHIBITS AND SCHEDULES
Item 13. 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.
(a) 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) – OCTOBER 2010 TO MARCH 2011
Date of Report Subject Matter Disclosed

September 30, 2010
(Received by SEC on 1. The matters approved during the Annual Stockholders’
October 4, 2010) Meeting held last September 30, 2010
a. Minutes of the Annual Stockholders’ Meeting held on
September 30, 2009;
b. Audited Financial Statements of the Corporation as of
March 31, 2010;
c. Ratification of all acts, resolutions and transactions
entered into by the Board of Directors and Management
from the last stockholders’ meeting and up to the
present; and
d. Election of Directors
2. The matters approved during the Organizational Meeting of
the Board of Directors held on September 30, 2010
a. Election of Officers; and
b. Appointment of Members of Board Committees
PART V - CORPORATE GOVERNANCE
Item 14. Evaluation System
The Company subscribes and has adopted the prescribed rules and leading practices of good corporate
governance. It has been implementing and evaluating the performances of the Board of Directors and
Management thru the Performance Evaluation and the Corporate Governance Scorecard which is
submitted to the Securities and Exchange Commission and the Philippine Stock Exchange.
Item 15. Measures undertaken to Fully Comply
The Company has amended its Manual on Corporate Governance in accordance with SEC
Memorandum Circular No. 6, Series of 2009 to fully comply with the adopted leading practices on
good corporate governance. It continues to implement an evaluation system to ensure compliance by
38
the Board of Directors and Management with the provisions of the Manual.
Item 16. Deviations
The Company is substantially compliant with its Revised Manual on Corporate Governance Manual.
Item 17. Plan to improve
The Company strives to improve its good Corporate Governance by way of strengthening the audit
system thru its subsidiary. The Compliance Officer ensures that the Manual is periodically reviewed
by the Board of Directors in order that revisions can be promptly instituted to respond to the needs of
the Company and its stakeholders.
39
40
PAL HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
SEC FORM 17-A
Page No.
FINANCIAL STATEMENTS
Statement of Management’s Responsibility for Financial Statements 42-43

Report of Independent Auditors 45-46
Statements of Financial Position - March 31, 2011 and 2010 47-48
Statements of Comprehensive Income for the Period Ended March 31, 2011, 2010 and
2009 49-50
Statements of Changes in Equity for the Years Ended March 31, 2011, 2010 and 2009 51
Statements of Cash Flows for the Years Ended March 31, 2011, 2010 and 2009 52-53
Notes to Financial Statements 54-119
SUPPLEMENTARY SCHEDULES
Report of Independent Auditors on Supplementary Schedules 120
A. Marketable Equity Securities and Other Short-Term Cash Investments *
B. Amounts Receivable from Directors, Officers, Employees, Related Parties,

and Principal Stockholders (Other than Related Parties) *
C. Non-Current Marketable Equity Securities, Other Long-Term Investments
in Stock, and Other Investments *
D. Indebtedness of Unconsolidated Subsidiaries and Related Parties *
E. Intangible Assets and Other Assets *
F. Long- Term Debt 121-124
G. Indebtedness to Related Parties *
H. Guarantees of Securities of Other Issuers *
I. Capital Stock 125
J. Reconciliation of Retained Earnings 126
K. 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.
41
42
43
COVER SHEET
P W - 9 4
SEC Registration Number
P A L H O L D I N G S , I N C . A N D
S U B S I D I A R I E S
(Company’s Full Name)
7 t h F l o o r , A l l i e d B a n k C e n t e r
6 7 5 4 A y a l a A v e n u e , M a k a t i C i t y
(Business Address: No. Street City/Town/Province)
Susan T. Lee 817-8710

(Contact Person) (Company Telephone Number)
0 3 3 1 A A C F S
Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)
Not Applicable
(Secondary License Type, If Applicable)
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings

6,684
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
44
SyCip Go rres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax: (632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001

SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors

PAL Holdings, Inc.
7th Floor, Allied Bank Center
6754 Ayala Avenue, Makati City
We have audited the accompanying consolidated financial statements of PAL Holdings, Inc. and its
subsidiaries, which comprise the consolidated statements of financial position as at March 31, 2011
and 2010 and the consolidated statements of comprehensive income, statements of changes in equity
and statements of cash flows for each of the three years in the period ended March 31, 2011, and a
summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, 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.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements 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 entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
45
A member firm of Ernst & Young Global Limited
-2-
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of PAL Holdings, Inc. and its subsidiaries as of March 31, 2011 and 2010, and their
financial performance and their cash flows for each of the three years in the period ended
March 31, 2011 in accordance with Philippine Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.
Catherine E. Lopez
Partner
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-1
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641533, January 3, 2011, Makati City
July 7, 2011
46
PAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)
March 31
2011 2010
ASSETS
Current Assets
Cash and cash equivalents (Notes 5, 18, 27 and 28) P
=4,540,579 =3,397,021
P
Receivables (Notes 7, 18, 27 and 28) 5,370,915 5,839,686
Expendable parts, fuel, materials and supplies (Note 8) 1,771,915 1,234,497
Other current assets (Notes 9, 27 and 28) 1,719,773 1,775,350
Total Current Assets 13,403,182 12,246,554
Noncurrent Assets
Property and equipment (Notes 10, 13, 15, 18, 24 and 25)
At cost 49,328,677 56,400,973
At appraised values 654,506 68,842
Deposits on aircraft leases (Notes 18, 25, 27 and 28) 3,215,361 3,152,118
Available-for-sale investments (Notes 6, 18, 27 and 28) 560,974 532,677
Investment properties (Notes 11, 13 and 18) 806,390 1,352,163
Deferred income tax assets - net (Note 23) 826,011 722,844
Other noncurrent assets (Notes 12, 18, 27 and 28) 3,770,289 2,279,632
Total Noncurrent Assets 59,162,208 64,509,249
TOTAL ASSETS P
=72,565,390 =76,755,803
P
LIABILITIES AND EQUITY

Current Liabilities
Notes payable (Notes 13, 18, 27 and 28) P
=5,591,428 =6,432,590
P
Accounts payable (Notes 18, 27 and 28) 5,508,269 5,262,182
Accrued expenses (Notes 14, 16, 18, 27 and 28) 12,046,328 11,032,328
Due to related parties (Notes 2, 18, 27 and 28) 10,000 481,090
Unearned transportation revenue 6,819,136 5,997,253
Current portion of long-term obligations (Notes 15, 18,
25, 27 and 28) 7,013,431 8,378,382
Total Current Liabilities 36,988,592 37,583,825
Noncurrent Liabilities
Long-term obligations - net of current portion
(Notes 15, 18, 25, 27 and 28) 20,996,623 28,941,764
Accrued employee benefits (Note 21) 5,312,184 4,724,440
Reserves and other noncurrent liabilities
(Notes 16 and 18) 3,890,963 3,810,242
Total Noncurrent Liabilities 30,199,770 37,476,446
Total Liabilities 67,188,362 75,060,271
(Forward)
47
-2-
March 31
2011 2010
Equity
Attributable to the equity holders of the parent:
Capital stock (Notes 2 and 17) P
=5,421,568 P5,421,568
=
Additional paid-in capital (Notes 2 and 18) 17,998,373 17,517,283
Other components of equity (Note 17) (4,233,626) (2,967,170)
Deficit (Notes 2, 17, and 19) (14,613,528) (18,595,127)
Treasury stock - at cost (Note 17) (56) (56)
4,572,731 1,376,498
Non-controlling interests 804,297 319,034
Total Equity 5,377,028 1,695,532
TOTAL LIABILITIES AND EQUITY P
=72,565,390 =76,755,803
P
See accompanying Notes to Consolidated Financial Statements.
48
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands, Except Earnings Per Share)
Years Ended March 31

2011 2010 2009
REVENUE
Passenger P
= 62,667,001 =54,427,666
P =64,727,834
P
Cargo 5,941,290 4,606,314 4,597,819
Interest income (Notes 5, 12 and 18) 240,163 240,499 461,819
Others (Note 18) 5,758,866 4,813,301 4,006,403
74,607,320 64,087,780 73,793,875
EXPENSES AND OTHER CHARGES

(INCOME) (Note 20)
Flying operations (Note 28) 40,301,308 34,928,708 49,506,426
Aircraft and traffic servicing 9,324,494 8,957,125 8,786,530
Maintenance (Note 18) 8,754,940 10,856,593 9,957,436
Passenger service 4,881,594 4,777,994 5,099,346
Reservation and sales 4,382,572 3,868,047 4,037,930
General and administrative (Note 7) 2,646,022 2,621,065 3,761,948
Financing charges (Notes 13, 15 and 18) 1,661,570 2,569,540 3,746,429
Others - net (Notes 11, 15, 16, 18 and 28) (384,713) (4,889,814) 1,147,599
71,567,787 63,689,258 86,043,644
INCOME (LOSS) BEFORE INCOME TAX 3,039,533 398,522 (12,249,769)
PROVISION FOR INCOME TAX (Note 23) 46,615 211,281 543,364
NET INCOME (LOSS) 2,992,918 187,241 (12,793,133)
OTHER COMPREHENSIVE INCOME (LOSS)

(Note 19)
Net changes in fair values of available-for-sale
investments, net of deferred income tax (Note 6) 39,934 (13,058) (151,075)
Net realized gains on sale of available-for-sale
investments, net of deferred income tax (Note 6) – (53,885) (6,749)
Net changes in fair values of cash flow hedges,
net of deferred income tax (Note 28) (277,077) (878,189) (1,231,650)
Increase in revaluation increment due to appraisal, net
of deferred income tax (Note 10) 453,087 – 185,779
Effect of foreign exchange translation* (110,743) (105,002) 1,915,449
TOTAL OTHER COMPREHENSIVE

INCOME (LOSS) 105,201 (1,050,134) 711,754
TOTAL COMPREHENSIVE INCOME (LOSS) P

=3,098,119 (P
=862,893) (P
=12,081,379)
Net income (loss) attributable to:

Equity holders of the parent P
=2,533,394 =157,743 (P
P =10,832,633)
Non-controlling interests 459,524 29,498 (1,960,500)
P
=2,992,918 =187,241 (P
P =12,793,133)
(Forward)
49
-2-

2011 2010 2009
Total comprehensive income (loss) attributable to:

Equity holders of the parent P
=2,628,538 (P
=733,418) (P
=10,241,465)
Non-controlling interests 469,581 (129,475) (1,839,914)
P
=3,098,119 =862,893) (P
(P =12,081,379)
Basic/Diluted Earnings (Loss) Per Share**

Computed based on Net Income (Loss) P
= 0.4673 P0.0291
= (P
=1.9981)
Computed based on Total Comprehensive Income (Loss) 0.4848 (0.1353) (1.8890)
* Represent the effect of translating the US Dollar consolidated financial statements of Philippine Airlines, Inc., a
subsidiary, using the applicable year-end exchange rates to US$1 of =P 43.408, =P 45.291 and =P 48.422 as of March 31,
2011, 2010 and 2009, respectively, and the monthly average exchange rates for the years then ended. As of July 7, 2011,
the applicable exchange rate to US$1 is =
P 42.880.
**Computed using the weighted average number of issued and outstanding shares of stock of 5,421,512,096 in 2011, 2010
and 2009 (see Note 17).
50
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED MARCH 31, 2011, 2010 AND 2009
Other Components of Equity (Note 17)
Net Changes
Additional Cumulative in Fair Values Total Equity
Capital Paid-in Translation of Available- Revaluation Attributable
Stock Capital Adjustment for-sale Increment Deficit Treasury to Equity
(Notes 2 (Notes 2 (Notes 19 Investments (Notes 10 (Notes 17 Stock Holders of Non-controlling
and 17) and 18) and 28) (Note 6) and 11) Subtotal and 19) (Note 17) the Parent Interests Total
BALANCES AT MARCH 31, 2008 P
=5,421,568 P
= 17,517,283 (P
= 4,089,278) P
=270,239 P
= 1,424,267 (P
= 2,394,772) (P
=8,192,642) (P
= 56) P
= 12,351,381 P
= 2,288,371 P
= 14,639,752
Net loss for the year – – – – – – (10,832,633) – (10,832,633) (1,960,500) (12,793,133)
Other comprehensive income (loss) (Note 19) – – 578,967 (145,096) 157,297 591,168 – – 591,168 120,586 711,754
Total comprehensive income (loss) for the year – – 578,967 (145,096) 157,297 591,168 (10,832,633) – (10,241,465) (1,839,914) (12,081,379)
Net effect of transfer of portion of revaluation
increment in property realized through
depreciation, net of deferred income tax and
foreign exchange adjustment – – – – (84,262) (84,262) 84,262 – – – –
BALANCES AT MARCH 31, 2009 5,421,568 17,517,283 (3,510,311) 125,143 1,497,302 (1,887,866) (18,941,013) (56) 2,109,916 448,457 2,558,373
Adjustment in capital stock issued – – – – – – – – – 52 52
Net income for the year – – – – – – 157,743 – 157,743 29,498 187,241
Other comprehensive income (loss) (Note 19) – – (832,458) (58,703) – (891,161) – – (891,161) (158,973) (1,050,134)
Total comprehensive income (loss) for the year – – (832,458) (58,703) – (891,161) 157,743 – (733,418) (129,475) (862,893)
depreciation, net of deferred income tax
and foreign exchange adjustment – – – – (188,143) (188,143) 188,143 – – – –
BALANCES AT MARCH 31, 2010 5,421,568 17,517,283 (4,342,769) 66,440 1,309,159 (2,967,170) (18,595,127) (56) 1,376,498 319,034 1,695,532
Net income for the year – – – – – – 2,533,394 – 2,533,394 459,524 2,992,918
Other comprehensive income (loss) (Note 19) – – (328,363) 39,883 383,624 95,144 – – 95,144 10,057 105,201
Total comprehensive income (loss) for the year – – (328,363) 39,883 383,624 95,144 2,533,394 – 2,628,538 469,581 3,098,119
Reclassification of revaluation increment deemed
cost (Note 11) – – – – (1,120,877) (1,120,877) 1,120,877 – – – –
Conversion of amounts due to related parties into
additional paid-in capital (Note 18) – 481,090 – – – – – – 481,090 – 481,090
sale and depreciation, net of deferred income tax
and foreign exchange adjustment – – – – (240,723) (240,723) 327,328 – 86,605 15,682 102,287
BALANCES AT MARCH 31, 2011 P
=5,421,568 P
= 17,998,373 (P
= 4,671,132) P
=106,323 P
= 331,183 (P
= 4,233,626) (P
=14,613,528) (P
= 56) P
= 4,572,731 P
=804,297 P
= 5,377,028
51
CONSOLIDATED STATEMENTS OF CASH FLOWS

2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax P
=3,039,533 =398,522
P (P
=12,249,769)
Adjustments for:
Depreciation, amortization and impairment losses
(Notes 10, 11 and 20) 7,342,159 7,390,024 6,218,287
Financing charges (Note 20) 1,661,570 2,569,540 3,746,429
Net increase in accrued employee benefits (Note 21) 377,819 220,841 1,497,270
Realization of non-hedge derivatives (Note 28) (248,626) (1,935,664) 4,532,003
Interest income (240,163) (240,499) (461,819)
Unrealized foreign exchange loss (gain) - net 231,470 226,228 (1,092,910)
Loss (gain) on disposal of property and equipment,
and others (203,414) 757,788 (32,298)
Dividend income (187,774) (303,232) (163,776)
Increase in reserves and other noncurrent liabilities
(Note 16) 119,156 759,576 231,885
Gain on disposal of available-for-sale investments
and settlement of liability (Note 15) – (1,650,868) (15,939)
Operating income before working capital changes 11,891,730 8,192,256 2,209,363
Decrease (increase) in:
Receivables 639,280 (1,954,915) 8,578
Expendable parts, fuel, materials and supplies (537,418) (295,691) 546,645
Other current assets (328,214) 3,489,289 6,568,620
Increase (decrease) in:
Accounts payable 138,342 1,253,548 (2,051,993)
Accrued expenses 1,938,766 843,547 2,676,609
Due to related parties 10,000 – –
Unearned transportation revenue 821,883 928,341 (818,924)
Net cash settlement on derivative transactions (481,321) (2,927,711) (2,140,423)
Net cash generated from operations 14,093,048 9,528,664 6,998,475
Financing charges paid (1,360,746) (1,879,689) (2,347,820)
Interest received 38,181 29,760 243,295
Income taxes paid (including final and withholding taxes) (174,402) (102,460) (278,847)
Net cash flows from operating activities 12,596,081 7,576,275 4,615,103
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (Notes 10 and 24) (3,098,601) (2,627,688) (9,685,763)
Investments in:
Short-term investments – – (374,205)
Available-for-sale investments (358) (326) (121)
Proceeds from disposal of:
Short-term investments – 374,205 –
Available-for-sale investments – 295,141 113,713
Property and equipment 1,823,016 39,451 61,386
Dividend received (Note 6) 187,774 303,232 163,776
(Forward)
52
-2-

2011 2010 2009
Payments for security deposits (P
=1,786,421) (P
=309,492) (P
=20,103,873)
Return of various deposits 111,077 1,059,118 8,342,324
Proceeds from return of predelivery
payments (Notes 10 and 13) 709,958 – 940,082
Net cash flows used in investing activities (2,053,555) (866,359) (20,542,681)
CASH FLOWS FROM FINANCING ACTIVITIES

Availments of:
Notes payable (Note 13) – 668,573 13,461,218
Long-term obligations (Note 15) – – 8,605,201
Advances from affiliates (Notes 15, 18 and 24) – 3,245,322 –
Payments of:
Notes payable (Note 13) (280,836) (1,057,753) (8,049,410)
Long-term obligations (Notes 15 and 24) (8,365,246) (11,419,440) (6,827,281)
Advances from affiliates (Notes 15 and 18) (891,708) (829,229) –
Net cash flows from (used in) financing activities (9,537,790) (9,392,527) 7,189,728
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 138,822 242,644 (208,857)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,143,558 (2,439,967) (8,946,707)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,397,021 5,836,988 14,783,695
CASH AND CASH EQUIVALENTS
AT END OF YEAR (Note 5) P
=4,540,579 =3,397,021
P =5,836,988
P
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
PAL Holdings, Inc. (the Parent Company) was incorporated in the Philippines on May 10, 1930
under the name “Baguio Gold Mining Company” originally to engage in mining and other mineral
exploration activities. On September 23, 1996, the Parent Company changed its primary purpose
to that of engaging in the business of a holding company and changed its corporate name to
Baguio Gold Holdings Corporation.
The Parent Company’s Board of Directors (BOD) and its stockholders approved the change of the
Parent Company’s name to PAL Holdings, Inc. in separate meetings held on October 20 and
December 13, 2000, respectively. The change of the Parent Company’s name was approved by
the Philippine Securities and Exchange Commission (SEC) on January 19, 2007.
The Parent Company is a subsidiary of Trustmark Holdings Corporation (Trustmark), a domestic

corporation, and is part of the Lucio Tan Group of Companies (LT Group).
The Parent Company’s registered office address is 7th Floor, Allied Bank Center, 6754 Ayala
Avenue, Makati City.
The Parent Company and its subsidiaries (collectively referred to herein as “the Group”), through
Philippine Airlines, Inc. (PAL), the Philippine national flag carrier and the major subsidiary of the
Parent Company, is primarily engaged in air transport of passengers and cargo within the
Philippines and between the Philippines and several international destinations. These business
activities are further described in Note 29 to the consolidated financial statements.
The consolidated financial statements as at March 31, 2011 and 2010, and for each of the three
years in the period ended March 31, 2011 were authorized for issue by the BOD on
July 7, 2011.
2. Status of Operations and Reorganizations
b. Increase in capital stock of the Parent Company
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
=1.00 per share to P
P =20.00 billion divided into 20 billion shares with par value of P =1.00 per
share. Out of the increase in the authorized capital stock, 5.02 billion shares with a total par
value of P=5.02 billion have been subscribed and in payment thereof, the Parent Company
agreed to convert to equity a part of its debt to Trustmark, in the amount of P
=9.04 billion, at a
rate of P
=1.80 per share. As a result of the conversion, Trustmark’s ownership over the Parent
Company increased from 69.16% to 97.73%.
The increase in authorized capital stock was approved by the Philippine SEC on
January 19, 2007.
54
As a result of the above transactions, the Parent Company had a P=4.03 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 P =253.73 million against the additional paid-in capital.
b. Group reorganizations
Transactions in Fiscal Year 2007
In fiscal year 2007, the Parent Company undertook the following business restructuring
activities that were accounted for under the pooling of interests method:
On August 17, 2006, the BOD of the Parent Company approved the acquisition of 100% of the
total voting shares of its then subsidiaries, Cube Factor Holdings, Inc., Ascot Holdings,
Incorporated, POL Holdings, Inc., Sierra Holdings & Equities, Inc., Network Holdings &
Equities, Inc. and Maxell Holdings Corp. (collectively, the Holding Companies) for
=136.00 million from the individual stockholders representing interests of LT Group of
P
Companies (Nominees of the LT Group). The Holding Companies collectively owned 81.57%
of PAL. These Holding Companies also owned 82.33% of PR Holdings, Inc. (PR), 3.76%
owner of PAL.
Also on August 17, 2006, the Parent Company’s BOD approved the Parent Company’s
assumption of a portion of the liabilities of the Holding Companies to Trustmark aggregating
to about P
=9.04 billion. The BOD of Trustmark accepted the said assumption by the Parent
Company on August 18, 2006.
On October 2, 2006, the Nominees of the LT Group assigned their interests in the Holding
Companies to the Parent Company. Following the assignment, the Parent Company
effectively owned 84.67% of PAL through the Holding Companies and PR.
Transactions in Fiscal Year 2008
In fiscal year 2008, the Company’s management, realizing that the 2007 restructuring may not
have resulted in a corporate structure that is in line with their strategy, executed the following
additional series of corporate restructuring actions:
On June 27, 2007, the BOD of the Parent Company approved the assumption by the Parent
Company of the outstanding liability of the Holding Companies to Trustmark, amounting to
=14.08 billion as of June 27, 2007. Trustmark agreed to convert such receivable from the
P
Parent Company (after the assumption) into additional paid-in capital of the Parent Company.
On July 19, 2007, the Parent Company’s BOD approved the Parent Company’s acquisition of
the 81.57% aggregate ownership of the Holding Companies in PAL, and their 82.33%
ownership in PR. This gave the Parent Company the same effective ownership of 84.67% in
PAL that existed as of March 31, 2007.
As approved by the BOD, the acquisition will be made by way of a dacion en pago to pay-off
=12.12 billion out of the =
P P23.12 billion liabilities of the Holding Companies to the Parent
Company (after the assumption by the Parent Company of the P =14.08 billion receivable of
Trustmark from the Holding Companies). The remaining receivable of the Parent Company
from the Holding Companies after the dacion en pago, amounting to P =11.00 billion, will be
55
converted into additional paid-in capital in the Holding Companies. The additional paid-in
capital resulting from the conversion into equity of the Parent Company’s obligation to
Trustmark will be used to wipe out the Parent Company’s deficit.
On August 2, 2007, the BOD of the Parent Company resolved to amend the June 27, 2007
resolution so that the Parent Company only assumes P =3.08 billion (instead of P=14.08 billion)
out of the P=23.12 billion liabilities of the Holding Companies, as originally planned on
June 27, 2007. The remaining liabilities of the Holding Companies amounting to
=11.00 billion are thus retained with the Holding Companies as a result of the amendment.
P
Pursuant to the approval of the BOD on July 19, 2007 to acquire direct ownership in PAL and
PR, the Parent Company and the Holding Companies entered into various deeds of assignment
on August 13, 2007 for the Holding Companies to assign to the Parent Company their
respective ownerships in PAL and PR. As a result thereof, the Holding Companies assigned to
the Parent Company their respective investments in PAL and PR aggregating to
=12.44 billion and P
P =108.66 million, respectively, in exchange for the full payment of the
Holding Companies’ liabilities to the Parent Company totaling P =12.12 billion, including the
=9.04 billion receivables of the Parent Company from the Holding Companies, as of
P
March 31, 2007. This resulted in the recognition of a liability to Maxell Holding Corp.
(Maxell), one of the Holding Companies, amounting to P =431.60 million as of March 31, 2008.
On August 2, 2007, the BOD approved, upon concurrence of Trustmark, that the Parent
Company shall sell/assign its shares in the Holding Companies to Trustmark. In payment
thereof, Trustmark agreed to assume the obligations of the Parent Company to the previous
stockholders of the Holding Companies aggregating to P
=136.00 million.
On August 14, 2007, the Parent Company and Trustmark executed a memorandum of
agreement and entered into a deed of assignment effecting the assignment of shares to and
assumption of liabilities by Trustmark.
As a result of the restructuring in fiscal year 2008, the Parent Company still owns 84.67% of
PAL, through direct ownership of 81.57% and an indirect ownership of 3.10% through PR.
The Company owns 82.33% of PR, which in turn owns 3.77% of PAL shares.
The release of the investments in the Holding Companies to Trustmark was accounted for as a
disposal of “legal rights” to the Holding Companies as said investee companies did not have
assets that were derecognized in the process other than the investment in shares of stock of
PAL that has no carrying value at consolidated level. The disposal though relieved the Group
with the liabilities that were settled as they were assumed by Trustmark, the ultimate parent
company. Accordingly, the transaction was accounted for as an equity transaction where the
reduction in consolidated liabilities was treated as an additional equity investment (or
additional paid-in capital of the Parent Company) by Trustmark.
c. Status of PAL’s rehabilitation and operations
On June 7, 1999, the Philippine SEC confirmed its approval of PAL’s Amended and Restated
Rehabilitation Plan (Rehabilitation Plan) dated March 15, 1999. The Philippine SEC also
appointed a Permanent Rehabilitation Receiver (PRR) to, among other things, monitor and
supervise the strict and faithful implementation of the Rehabilitation Plan. With the approval
of the Rehabilitation Plan, the exercise of creditors’ and third parties’ rights under various
agreements became subject to Philippine SEC’s jurisdiction. As part of the Rehabilitation
Plan, various liabilities were restructured (reflected as part of “Long-term obligations” in the
56
consolidated statements of financial position, see Note 15). On May 28, 2007, the BOD of
PAL authorized management to initiate action, obtain required approvals and file necessary
applications and other documents for the proposed exit from rehabilitation and quasi-
reorganization of PAL.
On September 7, 2007, the Philippine SEC approved PAL’s request to undergo an equity
restructuring to wipe out its deficit as of March 31, 2007.
On September 14, 2007, the members of the PRR endorsed to the Philippine SEC PAL’s
application for exit from rehabilitation. Finding the recommendations of the PRR and The
Office of the General Accountant of the Philippine SEC meritorious, the Philippine SEC
approved the termination of the rehabilitation proceedings with the successful implementation
of PAL’s rehabilitation plan. Accordingly, on September 28, 2007, PAL went out of
rehabilitation.
Subsequent to PAL’s exit from rehabilitation, PAL generated consolidated total

comprehensive income of P =3.17 billion in 2011 and incurred consolidated total comprehensive
loss of P
=739.53 million and P =13.93 billion in 2010 and 2009, respectively. Moreover, PAL
reported a deficit of P
=4.34 billion and P=9.05 billion, and total current liabilities exceeding total
current assets by P =23.59 billion and P =24.86 billion as of March 31, 2011 and 2010,
respectively. To improve its financial condition and results of operations, PAL has lined up
various revenue enhancement programs, cash generation strategies and cost control initiatives.
Part of these initiatives is the spin-off/outsourcing of the non-core activities such as catering,
airport and reservation services. On June 15, 2010, PAL received a favorable decision from
the Department of Labor and Employment confirming the legality of the spin-off/outsourcing
program. At the appeal of the employees, the case was elevated to the Office of the President
where it was again decided in favor of PAL.
In light of the foregoing, PAL recognized a provision included under “Reserves and other
noncurrent liabilities” as of March 31, 2011 (see Note 16). As of July 7, 2011, the case is still
under further appeal.
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 which are carried at revalued amounts and available-for-
sale 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, and rounded to the nearest thousand, except when otherwise
indicated.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with Philippine Financial
Reporting Standards (PFRS).
Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial years except
for the adoption of the following new and revised standards, amendments to existing standards and
57
new and amendments to Philippine Interpretations based on International Financial Reporting
Interpretations Committee (IFRIC) interpretations which became effective to the Group beginning
April 1, 2010.
• Revised PFRS 3, Business Combinations and PAS 27, Consolidated and Separate Financial
Statements (Amended). PFRS 3 introduces a number of changes in the accounting for
business combinations that will impact the amount of goodwill recognized, the reported results
in the period that an acquisition occurs, and future reported results. The revised
PAS 27 requires, among others, that (a) change in ownership interests of a subsidiary (that
does not result in loss of control) will be accounted for as an equity transaction and will have
no impact on goodwill nor will it give rise to a gain or loss; (b) losses incurred by the
subsidiary will be allocated between the controlling and non-controlling interests (previously
referred to as “minority interests”) even if the losses exceed the non-controlling equity
investment in the subsidiary; and (c) on loss of control of a subsidiary, any retained interest
will be remeasured to fair value and this will impact the gain or loss recognized on disposal.
The changes introduced by the revised PFRS 3 must be applied prospectively, while the
revised PAS 27 must be applied retrospectively, with certain exceptions. These changes will
affect future acquisitions and transactions with non-controlling interests. The adoption of
these revised standards did not have a significant impact on the Group’s consolidated financial
statements.
• Amendment to PAS 39, Financial Instruments: Recognition and Measurement - Eligible

Hedged Items, addresses only the designation of a one-sided risk in a hedged item, and the
designation of inflation as a hedged risk or portion in particular situations. The amendment
clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow
variability of a financial instrument as a hedged item. The adoption of this revised standard
did not have a significant impact on the Group’s consolidated financial statements.
• Philippine Interpretation IFRIC 17, Distributions of Noncash Assets to Owners, covers

accounting for all nonreciprocal distribution of noncash assets to owners. It provides guidance
on when to recognize a liability, how to measure it and the associated assets, and when to
derecognize the asset and liability and the consequences of doing so. The adoption of this
revised standard did not have an impact on the Group’s consolidated financial statements.
Improvements to PFRS
The omnibus amendments to PFRS issued in fiscal year 2010 were issued primarily with a view to
remove inconsistencies and clarify wordings. There are separate transitional provisions for each
standard. The adoption of these amendments did not significantly impact the financial position or
performance of the Group.
• PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations, clarifies that the
disclosures required in respect of noncurrent assets and disposal groups classified as held for
sale or discontinued operations are only those set out in PFRS 5. The disclosure requirements
of other PFRS only apply if specifically required for such noncurrent assets or discontinued
operations.
• PFRS 8, Operating Segments, clarifies that segment assets and liabilities need only be reported
when those assets and liabilities are included in measures that are used by the chief operating
decision maker.
• PAS 1, Presentation of Financial Statements, clarifies that the terms of a liability that could
result at anytime in its settlement by the issuance of equity instruments at the option of the
counterparty do not affect its classification.
58
• PAS 7, Statement of Cash Flows, explicitly states that only expenditure that results in a
recognized asset can be classified as a cash flow from investing activities.
• PAS 17, Leases, removes the specific guidance on classifying land as a lease. Prior to the
amendment, leases of land were classified as operating leases. The amendment now requires
that leases of land are classified as either “finance” or “operating” in accordance with the
general principles of PAS 17. The amendments were applied retrospectively.
• PAS 36, Impairment of Assets, clarifies that the largest unit permitted for allocating goodwill,
acquired in a business combination, is the operating segment as defined in PFRS 8 before
aggregation for reporting purposes.
• PAS 38, Intangible Assets, clarifies that if an intangible asset acquired in a business
combination is identifiable only with another intangible asset, the acquirer may recognize the
group of intangible assets as a single asset, provided the individual assets have similar useful
lives. It also clarifies that the valuation techniques presented for determining the fair value of
intangible assets acquired in a business combination that are not traded in active markets are
only examples and are not restrictive on the methods that can be used.
• PAS 39, Financial Instruments: Recognition and Measurement, clarifies the following:
(a) that a prepayment option is considered closely related to the host contract when the
exercise price of a prepayment option reimburses the lender up to the approximate present
value of lost interest for the remaining term of the host contract; (b) that the scope exemption
for contracts between an acquirer and a vendor in a business combination to buy or sell an
acquiree at a future date applies only to binding forward contracts, and not derivative contracts
where further actions by either party are still to be taken; and (c) that gains or losses on cash
flow hedges of a forecast transaction that subsequently results in the recognition of a financial
instrument or on cash flow hedges of recognized financial instruments should be reclassified
in the period that the hedged forecast cash flows affect profit or loss.
• Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives, clarifies that it

does not apply to possible reassessment at the date of acquisition, to embedded derivatives in
contracts acquired in a business combination between entities or businesses under common
control or the formation of joint venture.
• Philippine Interpretation IFRIC 16, Hedge of a Net Investment in a Foreign Operation, states
that, in a hedge of a net investment in a foreign operation, qualifying hedging instruments may
be held by any entity or entities within the group, including the foreign operation itself, as
long as the designation, documentation and effectiveness requirements of PAS 39 that relate to
a net investment hedge are satisfied.
Future Changes in Accounting Policies

The Group reasonably expects the following new and amended accounting standards and
interpretations that will become effective subsequent to fiscal year 2011 to be applicable at a
future date. The Group has not early adopted these standards, interpretations and amendments to
existing standards and does not expect the adoption to have a significant impact on the
consolidated financial statements. The relevant disclosures will be included in the consolidated
financial statements when these become effective.
59
Effective in fiscal year 2012
• Amendment to PAS 24, Related Party Disclosures, clarifies the definition of a related party to
simplify the identification of such relationships and to eliminate inconsistencies in its
application. The revised standard introduces a partial exemption of disclosure requirements for
government-related entities.
• Amendment to PAS 32, Financial Instruments: Presentation - Classification of Rights Issues,

amended the definition of a financial liability in order to classify rights issues (and certain
options or warrants) as equity instruments in cases where such rights are given prorata to all of
the existing owners of the same class of an entity’s non-derivative equity instruments, or to
acquire a fixed number of the entity’s own equity instruments for a fixed amount in any
currency.
• Amendment to Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding

Requirement, provides guidance on assessing the recoverable amount of a net pension asset.
The amendment permits an entity to treat the prepayment of a minimum funding requirement
as an asset.
• Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity

Instruments, clarifies that equity instruments issued to a creditor to extinguish a financial
liability qualify as consideration paid. The equity instruments issued are measured at their fair
value. In case that this cannot be reliably measured, the instruments are measured at the fair
value of the liability extinguished. Any gain or loss is recognized immediately in profit or
loss.
Improvements to PFRS
The omnibus amendments to PFRS issued in fiscal year 2011 were issued primarily with a view to
remove inconsistencies and clarify wordings. The amendments are effective for annual periods
beginning on or after March 31, 2011. The Group has not early adopted the following
amendments and anticipates that these changes will have no material effect on the consolidated
financial statements.
• PFRS 3, Business Combinations, clarifies that the amendments to PFRS 7, PAS 32 and
PAS 39, eliminating the exemption for contingent consideration, do not apply to contingent
consideration that arose from business combinations whose acquisition dates precede the
application of PFRS 3. The amendment limits the scope of the measurement choices for
components of non-controlling interests that are present ownership interests and entitle their
holders to a proportionate share of the entity’s net assets, in the event of liquidation. The
amendment also requires an entity (in a business combination) to account for the replacement
of the acquiree’s share-based payment transactions (whether obliged or voluntarily) and
amendment specifies the accounting for share-based payment transactions that the acquirer
does not exchange for its own awards.
• PFRS 7, Financial Instruments: Disclosures, emphasizes the interaction between quantitative

and qualitative disclosures and the nature and extent of risks associated with financial
instruments.
• PAS 1, Presentation of Financial Statements, clarifies that an entity will present an analysis of
other comprehensive income for each component of equity, either in the statement of changes
in equity or in the notes to the financial statements.
60
• PAS 27, Consolidated and Separate Financial Statements, clarifies that the consequential
amendments from PAS 27 made to PAS 21, The Effect of Changes in Foreign Exchange
Rates, PAS 28, Investments in Associates and PAS 31, Interests in Joint Ventures, apply
prospectively for annual periods beginning on or after July 1, 2009 or earlier when PAS 27 is
applied earlier.
• Philippine Interpretation IFRIC 13, Customer Loyalty Programmes, clarifies that when the fair
value of award credits is measured based on the value of the awards for which they could be
redeemed, the amount of discounts or incentives otherwise granted to customers not
participating in the award credit scheme, is to be taken into account.
• Amendments to PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets,

allow users of financial statements to improve their understanding of transfer transactions of
financial assets (e.g., securitizations), including understanding the possible effects of any risks
that may remain with the entity that transferred the assets. The amendments also require
additional disclosures if a disproportionate amount of transfer transactions are undertaken
around the end of a reporting period.
• Amendment to PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets,
provides a practical solution to the problem of assessing whether recovery of an asset will be
through use or sale. It introduces a presumption that recovery of the carrying amount of an
asset will normally be through sale.
• PFRS 9, Financial Instruments: Classification and Measurement, reflects the first phase of the
work on the replacement of PAS 39 and applies to classification and measurement of financial
assets and financial liabilities as defined in PAS 39.
The Group is currently assessing the impact of these accounting standards, amendments and
interpretations. The effects and required disclosures of the adoption of the relevant standards,
amendments and interpretations, if any, will be included in the consolidated financial statements
when these are adopted subsequent to fiscal year 2011.
Basis of Consolidation
The consolidated financial statements consist of the financial statements of the Parent Company
and its subsidiaries as at March 31, 2011 and 2010. The financial statements of the subsidiaries
are prepared using consistent accounting policies as those of the Parent Company.
The subsidiaries and the related percentages of ownership (see Note 2) of the Parent Company as
of March 31, 2011 and 2010 are as follows:
Percentages of Ownership
Direct Indirect
PAL 81.57% –
Abacus Distribution
Systems Philippines, Inc. (ADSPI) – 70.23%
Synergy Services Corporation (SSC) – 54.19%
(Forward)
61
Percentages of Ownership
Direct Indirect
Pacific Aircraft Ltd. – 84.67%
Pearl Aircraft Ltd. – 84.67%
Peerless Aircraft Ltd – 84.67%
PR 82.33% –
PAL – 3.10%
The subsidiaries operations and principal activity are as follows: ADSPI engages in development
and marketing of computerized airline reservation system; SSC engages in sanitation and janitorial
services; and Pacific Aircraft Ltd., Pearl Aircraft Ltd. and Peerless Aircraft Ltd., used to be the
trustor or beneficiary in the lease of aircraft prior to the refinancing of the lease.
ADSPI and SSC are domiciled in the Philippines. The three other subsidiaries were incorporated
in the Cayman Islands.
Subsidiaries are consolidated from the date on which control is transferred to the Parent Company
and cease to be consolidated from the date on which control is transferred out of the Parent
Company. All intercompany accounts and transactions with subsidiaries are eliminated in full.
The equity and net income attributable to noncontrolling interests of the consolidated subsidiaries
are recognized and, where material, are shown separately in the consolidated statement of
financial position and consolidated statement of comprehensive income, respectively.
Noncontrolling interest represents the interest in a subsidiary, which is not controlled, directly or
indirectly through subsidiaries, by the Parent Company. Losses are attributed to the
noncontrolling interest even if these result to a deficit balance. Noncontrolling interests represent
the interests in PAL and PR not held by the Parent Company.
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.
Financial and Derivative Instruments

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 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.
The fair value of financial instruments including derivatives traded in active markets at the end of
the reporting period is based on their quoted market prices or dealer price quotations (bid price for
long positions and ask price for short positions), without any deduction for transaction costs.
When current bid and ask prices are not available, the price of the most recent transaction is used
since it provides evidence of the current fair value as long as there has not been a significant
change in economic circumstances since the time of the transaction.
For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques include discounted cash flow
62
methodologies, comparison to similar instruments for which market observable prices exist, option
pricing models, and other relevant valuation models. In the absence of a reliable basis of
determining fair value, investments in unquoted equity securities are carried at cost, net of
impairment.
Financial instruments are classified as debt or equity in accordance with the substance of the
contractual arrangement. Interest, 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 consolidated equity.
Financial assets are classified as either financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments or available-for-sale investments, as appropriate.
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or
other financial liabilities.
When financial assets and financial liabilities are recognized initially, they are measured at fair
value. In the case of financial assets not classified at fair value through profit or loss and financial
liabilities classified as other liabilities, fair value at initial recognition includes any directly
attributable transaction cost. The Group determines the classification of its financial instruments
upon initial recognition and, where allowed and appropriate, reevaluates this designation at the
end of each reporting period.
Financial assets and financial liabilities carried in the Group’s consolidated statement of financial
position include cash and cash equivalents, receivables, available-for-sale investments, margin
deposits and lease deposits, short-term and long-term obligations, and derivative instruments such
as fuel, interest rate and currency derivative instruments.
“Day 1” difference
Where the transaction price in a non-active market is different to 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 the consolidated 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 the
consolidated 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 or those designated upon initial
recognition as at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling in
the near term. Derivatives, including separated embedded derivatives, are also classified as held
for trading unless they are designated as effective hedging instruments or a financial guarantee
contract. Gains or losses on investments held for trading are recognized in the consolidated profit
or loss. Interest earned or incurred and dividend income is recorded when the right to received
payment has been established.
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
63
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 on
initial recognition if any of the following criteria are 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; or
• 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 gain or loss being recognized in
consolidated profit or loss.
The Group accounts for its derivative transactions (including embedded derivatives) under this
category with fair value changes being reported directly to consolidated profit or loss, except when
the derivative is treated as an effective accounting hedge, in which case the fair value change is
reported in consolidated statement of comprehensive income with the corresponding adjustment
from the hedged transaction (fair value hedge) and deferred in equity (cash flow hedge) under
“Cumulative translation adjustment” account.
Loans and Receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments that
are not quoted in an active market. This category includes cash and cash equivalents, receivables
arising from operations, deposits for aircraft leases and security and refundable deposits. Such
assets are carried at amortized cost using the effective interest rate method. Gains and losses are
recognized in the consolidated 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 end of the
reporting period. Otherwise, these are classified as noncurrent assets.
The Group classified its cash and cash equivalents, receivables, margin deposits and lease deposits
as loans and receivables as of March 31, 2011 and 2010. Information regarding the Group’s
outstanding receivables is included in Note 7.
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 available-for-sale
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
64
recognized minus principal repayments, plus or minus the cumulative amortization using the
effective interest rate 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 the
consolidated 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 end of the reporting period. Otherwise, these are classified as
noncurrent assets.
The Group has no held-to-maturity investments as of March 31, 2011 and 2010.
Available-for-sale Investments
Available-for-sale 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,
available-for-sale investments are measured at fair value with gains or losses being recognized in
the consolidated statement of comprehensive income and as a separate component of equity
(“Cumulative change in fair value of available-for-sale investments”) 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 consolidated profit or loss. The effective
yield and (where applicable) results of foreign exchange restatement for available-for-sale debt
investments are reported immediately in the consolidated 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 consolidated statement of financial position date.
Available-for-sale investments as of March 31, 2011 and 2010 represent the Group’s investment in
United States (US) Treasury bonds, shares of stock of MacroAsia Corporation (MAC) and other
equity instruments as shown in Note 6.
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 rate method of amortization (or
accretion) for any related premium, discount and any directly attributable transaction costs. These
financial liabilities (or portion of these financial liabilities) are reported as current liabilities if
maturity is within 12 months from the end of the reporting period or the Group does not have an
unconditional right to defer settlement of these liabilities for at least 12 months from the end of the
reporting period. Otherwise, they are classified as noncurrent assets.
Included under this category are the Group’s accounts payable, accrued expenses, notes payable,
due to related parties and long-term obligations.
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 an asset, liability or a 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 any of its derivatives as fair value hedges. The Group designated its pay-fixed, receive-
floating interest rate swaps and certain fuel derivatives as cash flow hedges.
65
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 other comprehensive income, net of related deferred
income tax. The ineffective portion is immediately recognized in consolidated profit or loss.
For cash flow hedges with critical terms that match those of the hedged items and where there are
no basis risks (such as the pay-fixed, receive-floating interest rate swaps), the Group expects the
hedges to exactly offset changes in expected cash flows relating to the hedged risk
(e.g., fluctuations in fuel price and benchmark interest rates). This assessment on hedge
effectiveness is performed on a quarterly basis by the Group by comparing the critical terms of the
hedges and the hedged items to ensure that they continue to match and by evaluating the continued
ability of the counterparties to perform their obligations under the derivative contracts.
For cash flow hedges with basis risks (such as crude oil derivatives entered into as proxy hedges
for forecasted jet fuel purchases), the Group assesses the effectiveness of its hedges (both on a
prospective and retrospective basis) by using a regression model to determine the correlation of
the percentage change in prices of underlying commodities used to hedge jet fuel to the percentage
change in prices of jet fuel over a specified period that is consistent with the hedge time horizon or
30 data points whichever is longer.
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 consolidated equity to the consolidated profit or loss in
the same period or periods during which the hedged forecasted transaction or recognized asset or
liability affect the consolidated 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
consolidated equity is recognized in the consolidated 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 the consolidated profit or loss.
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 consolidated 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
66
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 right to receive cash flows from the asset has expired;
• the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a “pass-through” arrangement;
or
• the Group has transferred its right to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.
When the Group has transferred its right to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards 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.
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 a 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 the consolidated profit or
loss.
Impairment of Financial Assets

The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset may be impaired. If such evidence exist, any impairment loss is recognized in the
Financial assets carried at amortized cost

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 receivables, an impairment loss has
been incurred. 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 the consolidated
profit or loss.
The Group initially assesses whether objective evidence of 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
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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.
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 carrying amount of the receivable is reduced through the use of an allowance account.
Impaired receivables are derecognized when they are assessed as uncollectible.
Receivables, together with the associated allowance accounts, are written off 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. Any
subsequent reversal of an impairment loss is recognized in the consolidated profit or loss, to the
extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
Assets carried at cost

If there is objective evidence that an impairment loss on financial assets carried at cost such as an
unquoted equity instrument that is not carried at fair value because its fair value cannot be
measured reliably, or on a derivative asset that is linked to and must be settled by delivery of such
an unquoted equity instrument has been incurred, 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 current market rate of return for a similar financial asset.
Available-for-sale investments
In case of equity investments classified as available-for-sale investments, impairment would
include a significant or prolonged decline in the fair value of the investments below their cost.
Where 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 income - is removed from the consolidated equity and recognized in
the consolidated profit or loss. Impairment losses on equity investments are not reversed through
consolidated profit or loss. Increases in fair value after impairment are recognized directly as
other comprehensive income and consolidated statement of changes in equity.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the
same criteria as financial assets carried at amortized cost. Future interest income is based on the
reduced carrying amount and is accrued based on 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 related objectively to an event occurring after the
impairment loss was recognized against income, the impairment loss is reversed through the
Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated
statement of financial position if, and only if, there is a currently enforceable legal right to offset
the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously. This is not generally the case with master netting agreements,
and the related assets and liabilities are presented gross in the consolidated statement of financial
position.
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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 is determined using the weighted average method. Net realizable value represents the
amount expected to be realized from the use of the expendable parts, fuel, materials and supplies,
considering factors such as age and physical condition of these assets.
Asset Held for Sale

Noncurrent assets and disposal groups are classified as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use. This
condition is considered met only when the sale is highly probable and the asset (or disposal group)
is available for immediate sale at its present condition. Management must be committed to the
sale, which should be expected to qualify for recognition as a completed sale within one year from
the date of classification. However, events or circumstances may extend the period to complete the
sale beyond one year. An extension of the period required to complete a sale does not preclude an
asset (or disposal group) from being classified as held-for-sale if the delay is caused by events or
circumstances beyond the Group’s control and there is sufficient evidence that the entity remains
committed to its plan to sell the asset (or disposal group).
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 and independent appraisers.
Revaluations are made with sufficient regularity. The latest appraisals reports are as of March 31,
2011.
For subsequent revaluations, the accumulated depreciation at the date of the revaluation is
eliminated against the gross carrying amount of the asset and the net amount restated to the
revalued amount of the asset. Any resulting increase in the asset’s carrying amount as a result of
the revaluation is recognized as other comprehensive income credited directly to equity as
“Revaluation increment”, net of the related deferred income tax liability. Any resulting decrease
is directly charged against the related revaluation increment to the extent that the decrease does not
exceed the amount of the revaluation increment in respect of the same asset and any excess is
charged against consolidated profit or loss.
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 significant assets under construction and other directly attributable costs of bringing the asset
to its working condition and location for its intended use. Manufacturers’ credits that reduce the
price of the aircraft, received from aircraft and engine manufacturers are recorded upon delivery of
the related aircraft and engines. Such credits are applied as a reduction from the cost of the
property and equipment (including those under finance lease).
Expenditures incurred after the property and equipment have been put into operation, such as
repairs and maintenance costs, are normally charged to income 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.
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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
Buildings and improvements 8 to 40
Passenger aircraft (owned and under finance lease) 12 to 20
Other aircraft 5 to 10
Spare engines 12 to 20
Rotable and reparable parts 3 to 18
Other ground property and equipment 3 to 8
Leasehold improvements are amortized over the term of the lease or life of the improvements,
whichever is shorter.
Expenditures for heavy maintenance on passenger aircraft are capitalized at cost and depreciated
over the estimated number of years until the next major overhaul or inspection. Generally, heavy
maintenance visits are required every five to six years for airframe and 10 years for landing gear.
The estimated useful lives, depreciation and amortization method and residual values are reviewed
periodically to ensure that the periods and method of depreciation and residual values are
consistent with the expected pattern of economic benefits from items of property and equipment.
Any changes in estimate arising from the review are accounted for prospectively.
When assets 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 as income and included in the consolidated
profit or loss.
The portion of “Revaluation increment, net of related deferred income tax”, realized through
depreciation or upon the disposal or retirement of the property is transferred to the consolidated
deficit.
Construction in progress represents predelivery payments and related borrowing costs on aircraft
under construction and aircraft modifications in progress and buildings and improvements and
other ground property under construction. Construction in progress is not depreciated until such
time when the relevant assets are completed and available for use.
Asset Retirement Obligation

The Group 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.
The Group provides for these costs over the terms of the leases, based on aircraft hours flown until
the next scheduled checks.
Investment Properties
Investment properties include parcels of land and building and building 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 are subsequently measured at cost less accumulated depreciation (except
land) and any impairment in value. Land is subsequently carried at cost less any impairment in
value.
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Depreciation and amortization of depreciable investment properties is calculated on a straight-line
basis over the estimated useful lives ranging from six to eight years.
Transfers are made to investment properties when, and only when, there is a change in use,
evidenced by cessation of owner-occupation, commencement of an operating lease to another
party or completion of construction or development. 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 sale.
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.
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 the consolidated
profit or loss in the year of retirement or disposal.
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 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 cash generating unit to which the asset belongs.
Impairment losses, if any, are recognized in the consolidated profit or loss.
An assessment is made at each reporting period as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying amount of
the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation and amortization, had no impairment
loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated
profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as
a revaluation increase. After such reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining useful lives.
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 or 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.
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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 consolidated profit or loss.
Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset
and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the
end of the lease term.
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 the consolidated profit or
loss on a straight-line basis over the terms of the lease agreements.
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. 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.
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Equity
Capital stock is measured at par value for 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. When shares are issued for a consideration
other than cash, the proceeds are measured by the fair value of the consideration received. In case
the shares are issued to extinguish or settle the liability, the shares shall be measured either at
the fair value of the shares issued or fair value of the liability settled, whichever is more reliably
determinable.
Deficit represents the cumulative balance of net income or loss, net of any dividend declaration
and other capital adjustments.
Where any member of the Group 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 the consolidated
equity.
Revenue and Related Commissions

Passenger ticket and cargo waybill sales, 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 profit or loss
when the transportation service is rendered (e.g., when passengers and cargo are flown/lifted).
Revenue is measured at fair value of the consideration received or receivable excluding sales
taxes, discounts and commissions. Revenue also includes recoveries from surcharges during the
year.
The related commission is recognized as expense in the same period when the transportation
service is provided and is included as part of “Reservation and sales” in the consolidated profit or
loss.
Liability Under Frequent Flyer Program

The Group 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 miles expected to be redeemed are measured at
fair value which is estimated using the applicable fare based on the historical redemption. 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.
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 the
consolidated profit or loss for the year in accordance with PFRS. Other comprehensive income of
the Group includes changes in revaluation increment in property, gains and losses on remeasuring
available-for-sale investments, movements in cumulative translation adjustment and any effective
portion of gains and losses on hedging instruments designated as cash flow hedges.
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Interest, Dividend and Lease Income
Interest on cash, cash equivalents and other short-term cash investments is recognized as the
interest accrues using the effective interest rate method. Dividend income from available-for-sale
equity investments is recognized when the Group’s right to receive payment is established. Lease
income is recognized on a straight-line basis over the lease term.
Retirement Benefits Cost

Retirement benefits cost under the defined benefit plan is actuarially determined using the
projected unit credit method. This method reflects services rendered by employees up to the date
of valuation and incorporates assumptions concerning employees’ projected salaries. Actuarial
valuations are conducted with sufficient regularity with option to accelerate when significant
changes to underlying assumptions occur. Actuarial gains and losses are recognized as income or
expense when the net cumulative unrecognized actuarial gains and losses for the plan at the end of
the previous reporting period exceeded 10% of the higher of the present value of defined benefit
obligation and the fair value of plan assets at that date. These gains or losses are recognized over
the expected average remaining working lives of the employees participating in the plan.
Past service cost is recognized as an expense on a straight-line basis over the average period when
the benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to, the retirement plan, past service cost is recognized immediately.
Retirement benefits cost includes current service cost, interest cost, amortization of unrecognized
past service costs, actuarial gains and losses, experience adjustments, effect of any curtailment or
settlement and changes in actuarial assumptions over the expected average remaining working
lives of covered employees. The defined benefit liability is the aggregate of the present value of
the defined benefit obligation and actuarial gains and losses not recognized, reduced by past
service cost not yet recognized, and the fair value of plan assets out of which the obligations are to
be settled directly. If such aggregate is negative, the asset is measured at the lower of such
aggregate or the aggregate of cumulative unrecognized net actuarial losses and past service cost
and the present value of any economic benefits available in the form of refunds from the plans or
reductions in the future contributions to the plan.
Retirement benefits cost under the defined contribution plan is based on the established amount of
contribution and is recognized as expense in the same year as the related employee services are
rendered.
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. 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.
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
the end of reporting period.
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Deferred income tax
Deferred income tax is provided, using the balance sheet liability method, on all temporary
differences at the end of reporting period between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
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,
carryforward 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 carryforward 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 and associates. With respect to investments with other
subsidiaries and associates, deferred income tax liabilities are recognized except where the timing
of reversal of the temporary differences can be controlled 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 period 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 period 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 to 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 at the end of the reporting
period.
Income tax relating to items recognized directly in equity is recognized in consolidated equity and
not included in the calculation of the consolidated profit or loss for the period.
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.
Functional Currency and Foreign Currency-denominated Transactions and Translations

Each entity in the Group determines its own functional currency and the items included in the
separate financial statements of each entity are measured using the functional currency.
Transactions in foreign currencies are initially recorded using the functional currency rate at the
date of the transaction. Outstanding monetary assets and liabilities denominated in foreign
currencies are translated using the functional currency rate of exchange at the end of reporting
period. All differences are taken to other comprehensive income. Non-monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange rates at
the dates of the transactions. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was determined.
The results of operations and financial position of all Group entities (none of which has the
functional currency of a hyperinflationary economy) that have functional currencies different from
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Philippine peso, which is the functional and presentation currency of the Parent Company, are
translated to Philippine peso as follows:
a. assets and liabilities for each statement of financial position presented are translated at the
closing rate at the end of reporting period;
b. comprehensive income items for each statement of comprehensive income presented are
translated at the monthly average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions);
c. capital stock and other equity items resulting from transactions with equity holders
(i.e., additional paid-in capital) and equity items resulting from income and expenses directly
recognized in equity (i.e., revaluation increment in property) are translated using the rates
prevailing on the transaction dates; and
d. all resulting exchange differences are recognized as other comprehensive income and a
separate component of the consolidated equity, in the account “Cumulative translation
adjustment”.
On consolidation, exchange differences arising from the translation of the net investment in
foreign operations are taken to the consolidated equity and recorded as other comprehensive
income. When a foreign operation is sold or disposed of, exchange differences that were
previously recorded in the consolidated equity are recognized in the consolidated profit or loss.
Earnings (Loss) Per Share

Basic earnings (loss) per share (EPS) is calculated based on net income (loss) and total
comprehensive income (loss) for the year. EPS is calculated by dividing net income (loss) before
other comprehensive income or total comprehensive income (loss) for the year, as applicable, by
the weighted average number of issued and outstanding shares of stock during the year, 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 Period Date

Post year-end events that provide additional information about the Group’s position at the
reporting period 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 the consolidated financial statements in accordance with PFRS requires the
Group’s 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.
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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 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 the US dollar (USD).
Classification of financial instruments

The Group exercises judgment in classifying a financial instrument, or its component parts, on
initial recognition as either a financial asset, a financial liability or an equity instrument in
accordance with the substance of the contractual arrangement and the definitions of a financial
asset, a financial liability or an equity instrument. The substance of a financial instrument, rather
than its legal form, governs its classification in the consolidated statement of financial position.
The classification of the Group’s financial assets and financial liabilities are presented in Note 28.
Application of hedge accounting

The Group applies hedge accounting treatment for certain qualifying derivatives after complying
with hedge accounting requirements, specifically on hedge documentation designation and
effectiveness testing. Judgment is involved in these areas, which include management
determining the appropriate data points for evaluating hedge effectiveness, establishing that the
hedged forecasted transaction in cash flow hedges are probable of occurring, and assessing the
credit standing of hedging counterparties (see Note 28).
Impairment of available-for-sale equity investments

The Group treats available-for-sale 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 greater than 12
months for quoted 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.
The carrying value of the Group’s available-for-sale equity investments amounted to

=560.97 million and P
P =532.68 million as of March 31, 2011 and 2010, respectively (see Note 6).
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.
77
PAL has lease agreements (as lessee) covering some of its aircraft where the lease terms
approximate the estimated useful lives of the aircraft, the present value of the minimum lease
payments amount to at least substantially all of the fair value of the leased aircarft or the risks and
rewards related to the asset are transferred to PAL. These leases are classified as finance leases.
The net carrying value of these aircraft amounted to P =35.79 billion and P =42.71 billion as of
March 31, 2011 and 2010, respectively (see Notes 10 and 25).
The Group also has lease agreements covering some of its aircraft (as lessee) where it has
determined that the risks and rewards related to the properties are retained with the lessors
(e.g., no bargain purchase option and transfer of ownership at the end of the lease term). The
leases are, therefore, accounted for as operating leases (see Notes 18 and 25).
Classification of leases - Group as lessor

PAL has lease agreements (as lessor) 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 18).
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 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 other
contingencies.
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 in the
following sections.
Estimation of allowance for doubtful accounts

The allowance for doubtful accounts relating to receivables 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). The amount and timing of recorded
expenses for any period could therefore differ based on the judgments or estimates made. An
increase in the Group’s allowance for doubtful accounts would increase its recorded general and
administrative expenses and decrease its current assets.
The carrying value of receivables, net of allowance for doubtful accounts, as of March 31, 2011
and 2010 amounted to P =5.37 billion and P
=5.84 billion, respectively. The allowance for doubtful
accounts as of March 31, 2011 and 2010 amounted to P =4.40 billion and P
=4.11 billion, respectively
(see Note 7).
Application of effective interest rate method of amortization

and impact of revisions in cash flow estimates
The Group carries certain financial assets and financial liabilities at amortized cost, which is
determined at inception of the instrument, taking into account any fees, points paid or received,
transaction costs and premiums or discounts, along with the cash flows and the expected life of the
instrument. In cases where the Group revises its estimates of cash flow receipts or payments and
projection of changes in its financial assets or financial liabilities, the Group adjusts the carrying
amounts to reflect actual and revised estimated cash flows. The Group recalculates the carrying
78
amount by discounting the estimated future cash flows using the financial asset or financial
liability’s original effective interest rate, with the resulting adjustment being recognized in
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 accounting 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 the
consolidated statement of comprehensive income or consolidated statement of changes in equity.
The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique: (a) Level 1 - quoted (unadjusted) prices in active markets for
identical assets or liabilities; (b) Level 2 - other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly or indirectly; and
(c) Level 3 - techniques which use inputs which have a significant effect on the recorded fair value
that are not based on observable market data.
The fair values of the Group’s financial assets and financial liabilities are presented in Note 28.
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 the expendable parts, fuel,
materials and supplies 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 expendable parts, fuel, materials and supplies as of
March 31, 2011 and 2010 amounting to P =1.77 billion and P
=1.23 billion, respectively, are stated at
the lower of cost and net realizable value (see Note 8).
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 property and equipment are performed by
professionally qualified independent appraisers using generally acceptable valuation techniques
and methods. Revaluations are made regularly to ensure that the carrying amounts do not differ
materially from those which would be determined using fair values at the end of reporting period.
The resulting revaluation increment, net of related deferred income tax, in the valuation of these
assets based on appraisal reports amounted to P =331.18 million (net of non-controlling interests’
share amounting to P =59.97 million) and P =1.31 billion (net of non-controlling interests’ share
amounting to P=237.05 million) as of March 31, 2011 and 2010, respectively (see Note 17). This is
79
presented as “Revaluation increment - net of deferred income tax” in the equity section of the
consolidated statement of financial position and the portion transferred to deficit resulting from its
realization and change in classification (e.g., reclassification to investment property) in the
consolidated statement of changes in equity. Increase in the value of property resulting from
revaluation is treated as other comprehensive income. The carrying value of property and
equipment carried at appraised value amounted to P =654.51 million and P =68.84 million as of
March 31, 2011 and 2010, respectively (see Note 10).
Estimation of useful lives and residual values of property

and equipment and investment properties
The Group estimates the useful lives of property and equipment and investment properties 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. The carrying amount of property and equipment, net of accumulated
depreciation, as of March 31, 2011 and 2010 amounted to P =49.98 billion and P=56.47 billion,
respectively (see Note 10). The carrying amount of investment properties, net of accumulated
depreciation, as of March 31, 2011 and 2010 amounted to P =806.39 million and P =1.35 billion,
respectively (see Note 11).
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 is the
greater of net selling price and value-in-use. Determination of impairment requires an estimation
of the value-in-use of the cash-generating units 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
cash-generating unit and also to choose a suitable discount rate in order to calculate the present
value of those cash flows. In discounting, the Group uses an applicable discount rate specific to
these assets. Other assumptions used in projecting the future cash flows include passenger load
factor, passenger yield, fuel surcharge rate and fuel cost, among others. As of March 31, 2011 and
2010, the aggregate net carrying value of the Group’s property and equipment and investment
properties amounted to P =50.79 billion and P =57.82 billion, respectively (see Notes 10 and 11).
Impairment losses for investment properties were recognized in 2011 amounting to
=489.77 million based on the most recent appraisal reports rendered for the properties
P
(see Note 11). No impairment loss was recognized in 2010 and 2009.
Estimation of liability under the Frequent Flyer Program

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 is 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 is 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
=184.15 million as of March 31, 2011 and
2010, respectively (see Note 16).
80
Estimation of retirement and other benefits cost
The Group’s retirement and other benefits cost relating to its defined benefit plan are actuarially
computed. These entail using certain assumptions like salary increases, return on plan assets and
discount rates. Accrued employee benefits as of March 31, 2011 and 2010 amounted to
=5.31 billion and P
P =4.72 billion, respectively. Unrecognized net actuarial gain (loss) amounted to
=804.74 million and (P
P =300.77 million) as of March 31, 2011 and 2010, 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 at the end of
reporting period. The amount of provision is being reassessed at least on an annual basis to
consider new and relevant information. Provisions recognized amounted to P =3.04 billion and
=2.61 billion as of March 31, 2011 and 2010, respectively (see Note 16).
P
Recognition of deferred income tax assets

The Group assesses at the end of each reporting period 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 of future taxable profits, including the timing of reversal of deferred
income tax liability, aided by forecasting and budgeting techniques. Deferred income tax assets
recognized amounted to P =3.75 billion and P =4.81 billion as of March 31, 2011 and 2010,
respectively (see Note 23).
5. Cash and Cash Equivalents

2011 2010
(In Thousands)
Cash on hand and in banks (Note 18) P
=3,869,578 =1,946,622
P
Cash equivalents (Note 18) 671,001 1,450,399
P
=4,540,579 =3,397,021
P
Cash in banks and cash equivalents earn interest at the respective bank deposit rates totaling
P38.18 million, P
= =29.76 million and P
=243.30 million in 2011, 2010 and 2009, respectively.
6. Available-for-sale Investments
The Group’s available-for-sale investments include investments in MAC (amounting to

P281.60 million and P
= =242.00 million as of March 31, 2011 and 2010, respectively), certain quoted
equity investments (amounting to P
=6.90 million and P
=6.79 million as of March 31, 2011 and 2010,
respectively) and unquoted equity investments (amounting to P
=283.88 million
as of March 31, 2011 and 2010, respectively).
The carrying value of these investments includes accumulated unrealized gain of P

=106.32 million
and P
=66.44 million (net of related deferred income tax) as of March 31, 2011 and 2010,
81
respectively, that is reflected as “Net changes in fair values of available-for-sale investments - net
of deferred income tax” presented as part of “Other components of equity” in the consolidated
statement of financial position.
The movements in “Net changes in fair values of available-for-sale investments - net of deferred
income tax” pertaining to quoted equity investments are as follows:
2011 2010
(In Thousands)
Balance at beginning of year P
=66,520 =133,463
P
Movements during the year recognized as other
comprehensive income:
Mark-to-market gain (loss) 39,934 (13,058)
Amount in equity transferred to
consolidated profit or loss – (53,885)
39,934 (66,943)
106,454 66,520
Less share of non-controlling interests 131 80
Balance at end of year P
=106,323 =66,440
P
The fair values of investments in MAC were determined based on published prices in the active
market while other quoted equity investments were determined based on published club share
quotes that are publicly available from the local dailies and from the website of club share brokers.
Available-for-sale investments with no market prices are measured at cost, net of impairment
losses, if any. The unquoted equity investments include the Group’s investments in shares of
stocks of various companies. The Group has no intention to dispose these investments in the near
future. Dividend received from investments in MAC amounted to P =5.72 million, P=5.28 million
and P=4.40 million in 2011, 2010 and 2009, respectively, included as part of “Others” in the
revenue section of the consolidated profit or loss (see Note 18).
7. Receivables
2011 2010
(In Thousands)
General traffic:
Passenger P
=3,481,148 =3,735,194
P
Cargo 720,486 575,060
International Air Transport Association (IATA) 199,850 198,827
Others 56,040 83,018
Non-trade (Note 18)* 5,313,790 5,354,212
9,771,314 9,946,311
Less allowance for doubtful accounts 4,400,399 4,106,625
P
=5,370,915 =5,839,686
P
* Non-trade receivables include accounts under litigation, accounts of defaulted agents, dividend receivable
and receivables from lessors.
82
Movements in allowance for doubtful accounts, presented by class, are as follows:
2011
General Traffic
Passenger Cargo Others Non-trade Total
(In Thousands)
Balance at beginning of year P
=151,815 P
=87,910 P =62,954 P = 3,803,946 P= 4,106,625
Charges for the year 27,485 199,296 535 313,243 540,559
Recoveries (42,051) − (10,335) (11,493) (63,879)
Foreign exchange difference (5,940) (8,744) (2,366) (165,856) (182,906)
=131,309 P =278,462 P =50,788 P = 3,939,840 P= 4,400,399
Collective impairment P
=79,740 P
=123,626 P
=50,788 P
=168,466 P
=422,620
Individual impairment 51,569 154,836 − 3,771,374 3,977,779
=131,309 P
=278,462 P
=50,788 P
= 3,939,840 P
= 4,400,399
2010
General Traffic
Passenger Cargo Others Non-trade Total
(In Thousands)
Balance at beginning of year =121,878
P =92,631
P =60,092 P
P =4,173,202 = P4,447,803
Charges for the year 59,417 27,986 20,529 515,595 623,527
Reversal (20,010) (26,665) (13,497) (619,186) (679,358)
Foreign exchange difference (9,470) (6,042) (4,170) (265,665) (285,347)
Balance at end of year =151,815
P =87,910
P =62,954 P
P =3,803,946 P =4,106,625
Collective impairment =63,407

P =28,398
P =14,719
P =26,812
P =133,336
P
Individual impairment 88,408 59,512 48,235 3,777,134 3,973,289
Balance at end of year =151,815
P =87,910
P =62,954
P =3,803,946
P =4,106,625
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, non-moving
accounts receivables, 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, collection experience and other factors that may affect collectability.
The net provision for (reversal of) impairment losses on the receivables (excluding recoveries of
previously written-off accounts) recognized in the consolidated statement of comprehensive
income under “General and administrative expenses” amounted to P =540.56 million,
(P
=55.83 million) and P
83
8. Expendable Parts, Fuel, Materials and Supplies
2011 2010
(In Thousands)
At cost:
Fuel P
=1,239,993 =643,495
P
Materials and supplies 247,382 217,487
Expendable parts 255,152 342,853
1,742,527 1,203,835
At net realizable value - expendable parts 29,388 30,662
P
=1,771,915 =1,234,497
P
The cost of expendable parts carried at net realizable value amounted to P

=85.86 million and
=89.59 million as of March 31, 2011 and 2010, respectively.
P
9. Other Current Assets
2011 2010
(In Thousands)
Derivative assets (Notes 27 and 28) P
=148,498 =193,211
P
Deposits 269,887 495,184
Prepayments and others - net of allowance
for probable losses of P
=2,567 in 2011 and P
=1,883
in 2010 (Notes 10, 11 and 18) 1,301,388 1,086,955
P
=1,719,773 =1,775,350
P
In line with the various purchase agreements and fuel hedging transactions (see Note 28), PAL has
short-term standby letters of credit amounting to = P80.13 million and P =338.14 million as of
March 31, 2011 and 2010, respectively, which serve as security or margin deposits to the various
fuel suppliers and hedging counterparties. Prepayments and others pertain to advance payments of
materials and supplies, various prepaid rentals, properties classified as held for sale, and
miscellaneous prepayments.
10. Property and Equipment

2011
Foreign
April 1, Disposals/ Reclassifications Exchange March 31,
2010 Additions Retirements and Others Difference 2011
(In Thousands)
At Cost
Cost
Passenger aircraft
(Notes 15 and 25) P
=89,240,979 P
=78,056 (P
=42,586) (P
=1,004,621) (P
=3,709,137) P
=84,562,691
Other aircraft 309,564 141,730 (379) 1,623 (14,682) 437,856
Spare engines (Note 15) 5,919,896 135,057 (674,866) (315,559) (213,250) 4,851,278
Rotable and reparable parts
(Notes 13 and 15) 7,722,297 1,347,321 (1,533,772) – (278,940) 7,256,906
Other ground property and
equipment 10,137,937 189,922 (396,319) 11,456 (404,522) 9,538,474
113,330,673 1,892,086 (2,647,922) (1,307,101) (4,620,531) 106,647,205
(Forward)
84
2011
Foreign
(In Thousands)
Accumulated Depreciation
Passenger aircraft (P
=43,400,961) (P
=5,608,066) P
=42,463 P
=930,563 P
=1,944,996 (P
=46,091,005)
Other aircraft (280,306) (12,167) 379 − 11,982 (280,112)
Spare engines (2,901,206) (298,716) 202,178 284,003 124,367 (2,589,374)
Rotable and reparable parts (4,075,284) (579,775) 607,973 − 172,488 (3,874,598)
equipment (9,008,425) (293,178) 218,298 − 374,271 (8,709,034)
(59,666,182) (6,791,902) 1,071,291 1,214,566 2,628,104 (61,544,123)
Net Book Value 53,664,491 (4,899,816) (1,576,631) (92,535) (1,992,427) 45,103,082
Construction in progress 15,082 141,495 − (5,901) (1,222) 149,454
Predelivery payments
(Notes 13 and 25) 2,721,400 2,456,339 − (971,423) (130,175) 4,076,141
Total P
=56,400,973 (P
=2,301,982) (P
=1,576,631) (P =2,123,824) P
=1,069,859) (P =49,328,677
At Appraised Value - Buildings

and improvements
Appraised value P
=385,698 P
=310,486 (P
=4,825) P
=− (P
=15,844) P
=675,515
Accumulated depreciation and
amortization (316,856) (60,129) 513 340,603 14,860 (21,009)
Net Book Value =68,842
P P
=250,357 (P
=4,312) P
=340,603 (P
=984) P
=654,506
2010
Foreign
(In Thousands)
At Cost
Cost
Passenger aircraft
(Notes 15 and 25) =93,804,309
P =1,128,083
P =–
P =458,905 (P
P =6,150,318) =
P89,240,979
Other aircraft 330,964 – – – (21,400) 309,564
Spare engines (Note 15) 6,329,143 – – – (409,247) 5,919,896
Rotable and reparable parts
(Notes 13 and 15) 7,635,907 1,407,028 (796,916) – (523,722) 7,722,297
equipment 10,575,268 381,074 (190,803) 66,535 (694,137) 10,137,937
118,675,591 2,916,185 (987,719) 525,440 (7,798,824) 113,330,673
Passenger aircraft (40,395,521) (5,853,502) – – 2,848,062 (43,400,961)
Other aircraft (298,908) (778) – – 19,380 (280,306)
Spare engines (2,753,082) (339,842) – – 191,718 (2,901,206)
Rotable and reparable parts (4,314,448) (528,317) 479,115 – 288,366 (4,075,284)
equipment (9,459,722) (356,269) 189,400 (259) 618,425 (9,008,425)
(57,221,681) (7,078,708) 668,515 (259) 3,965,951 (59,666,182)
Net Book Value 61,453,910 (4,162,523) (319,204) 525,181 (3,832,873) 53,664,491
Construction in progress 651,663 14,710 – (646,104) (5,187) 15,082
Predelivery payments
(Notes 13 and 25) 2,960,327 526,269 – (581,260) (183,936) 2,721,400
Total =65,065,900
P (P
=3,621,544) (P
=319,204) (P
=702,183) (P
=4,021,996) =56,400,973
P
At Appraised Value - Buildings

and improvements
Appraised value =408,731
P =–
P =–
P =3,562
P (P
=26,595) =385,698
P
Accumulated depreciation and
amorization (23,776) (307,021) – – 13,941 (316,856)
Net Book Value =384,955
P (P
=307,021) P–
= =3,562
P (P
=12,654) =68,842
P
85
If buildings and improvements were carried at cost less accumulated depreciation, the amounts as
of March 31 would be as follows:
2011 2010
(In Thousands)
Cost P
=7,206 =8,560
P
Accumulated depreciation (3,473) (4,076)
P
=3,733 =4,484
P
Property and equipment used to secure notes payable and obligations under finance leases are
described in Notes 13 and 15.
Outstanding liabilities pertaining to purchase of property and equipment amounted to

P300.82 million and P
= =790.52 million as of March 31, 2011 and 2010, respectively.
Fleet (see Notes 15, 18 and 25)
2011 2010
Owned
Boeing 737-300 1 1
Bombardier DHC 8-400 5 5
Bombardier DHC 8-300 3 3
Under finance lease
Boeing 747-400 4 4
Airbus 340-300 4 4
Airbus 330-300 8 8
Airbus 320-200 10 10
Under operating lease
Boeing 777-300ER 2 2
Boeing 747-400 1 1
Airbus 320-200 9 8
Airbus 319-100 4 4
51 50
Boeing 777-300ER
PAL took delivery of two Boeing 777-300ER aircraft under an operating lease arrangement with
Celestial Aviation through GE Capital Aviation Services (GECAS) in November 2009 and
January 2010 (see Note 25).
Airbus 320-200
PAL redelivered to the lessors three Airbus 320-200 aircraft upon expiration of their operating
lease terms in fiscal year 2011. In the same year, PAL took delivery of four Airbus 320-200
aircraft under operating lease arrangement. These newly acquired Airbus 320-200 aircraft were
subleased to Air Philippines Corporation (APC), an entity under common control (see Notes 18
and 25).
Boeing 737-300
As of March 31, 2011, the Group reclassified its Boeing 737-300 aircraft with carrying value of
=105.26 million from property and equipment to assets held for sale (included under “Other
P
current assets” see Note 9).
86
Buildings and Improvements
Buildings and improvements are carried at appraised values determined based on valuations
performed by various qualified and independent appraisers. In the valuation process, the
appraisers compared the fair market value of similar assets and considered the best use of the
properties at hand. The additional revaluation increase recorded in 2011 amounted to
=647.27 million. Amount presented under “Increase in revaluation increment due to appraisal” in
P
the 2011 consolidated statement of comprehensive income is net of the related deferred income tax
of P
=194.18 million.
11. Investment Properties

2011
Foreign
April 1, Exchange March 31,
2010 Additions Difference 2011
(In Thousands)
Cost
Land (Note 13) P
=1,351,800 P
=– (P
=56,201) P
=1,295,599
Buildings and improvements 36,007 – (1,498) 34,509
1,387,807 – (57,699) 1,330,108
Accumulated Depreciation,
Amortization and
Impairment Losses
Land − (489,772) 563 (489,209)
Buildings and improvements (35,644) (356) 1,491 (34,509)
Net Book Value 1,352,163 (490,128) (55,645) 806,390
2010
Foreign
April 1, Exchange March 31,
2009 Additions Difference 2010
(In Thousands)
Cost
Land (Note 13) =
P1,445,251 =
P– (P
=93,451) =
P1,351,800
Buildings and improvements 38,496 – (2,489) 36,007
1,483,747 – (95,940) 1,387,807
and Amortization
Buildings and improvements (33,702) (4,295) 2,353 (35,644)
Net Book Value =
P1,450,045 (P
=4,295) (P
=93,587) =
P1,352,163
Investment properties pertain to assets not used in operations and are carried at cost. The
aggregate fair value of investment properties amounted to P =867.42 million and P =1.46 billion as of
March 31, 2011 and 2010, respectively. These have been determined based on valuations
performed by various qualified and independent appraisers. The valuation undertaken considered
the sales of similar or substitute properties and related market data and established estimated value
by processes involving comparison.
In 2011, PAL recognized impairment losses amounting to P =489.77 million (included under
“Others - net” in the 2011 consolidated statement of comprehensive income) for investment
properties with carrying value higher than their fair values. Moreover, revaluation increment
amounting to P =1.42 billion of certain properties previously carried at revalued amounts in property
and equipment, treated as deemed cost upon its reclassification to investment properties, were
transferred to “Deficit” net of the related deferred income tax of P
=92.60 million.
87
In April 2009, a parcel of land previously carried as investment property was reclassified to asset
held for sale (see Note 9) when management was authorized to finalize the terms of the sale of the
property. In June 2010, the related Deed of Absolute Sale was executed (see Note 18) and the
asset was derecognized accordingly.
Direct costs related to these investment properties (e.g., depreciation, property taxes, etc.)
amounted to P
=0.36 million, P
=4.30 million and P
Investment properties used to secure notes payable are described in Note 13.
12. Other Noncurrent Assets
2011 2010
(In Thousands)
Long-term security deposits P
=3,318,759 1,713,404
Others 451,530 566,228
P
=3,770,289 =2,279,632
P
As of March 31, 2011 and 2010, long-term security deposits include cash and cash equivalents
amounting to P =819.15 million and P =168.17 million set aside to collateralize various surety bonds
issued (as required under the legal proceedings) in connection with certain litigations.
Other noncurrent assets include other security deposits and miscellaneous receivable from aircraft
manufacturer.
13. Notes Payable
The Group has an omnibus credit facility with Allied Banking Corporation (ABC), an entity under
common control (see Note 18), which is covered by a real estate mortgage on some real properties
and chattel mortgage on some land and rotable and reparable parts having an aggregate net
carrying value of P
=1.28 billion as of March 31, 2011 and 2010, respectively.
In 2010, PAL availed of short-term loans from various local banks amounting to P=200.00 million.
In fiscal year 2011, PAL paid short-term loans amounting to P =280.84 million and renewed other
matured loans amounting to P
=5.59 billion for another one-year term.
Interest rates on these notes payable range from 3.75% to 8.00% in 2011, 3.87% to 8.25% in 2010
and 4.22% to 8.00% in 2009. The related interest expense pertaining to all notes payable
amounted to P =342.02 million in 2011, P =391.15 million in 2010 and P=571.53 million in 2009.
Interest payable relating to short-term notes payable amounted to P =15.76 million and
=29.58 million as of March 31, 2011 and 2010, respectively, included in “Accrued expenses -
P
others” (see Note 14).
Notes payable as of March 31, 2010 include portion used to finance predelivery payments
amounting to P =330.76 million (see Note 10). The predelivery payments relate to PAL’s
acquisition of two Airbus 320-200 aircraft (see Note 25). These notes payable carry fixed interest
rates ranging from 1.57% to 6.40% per annum in 2011, 2010 and 2009. Cumulative interest
relating to these notes payable amounting to P =10.00 million and P
=6.02 million in 2011 and 2010,
respectively, was capitalized as part of property and equipment (see Note 10). In fiscal year 2011,
88
PAL financed the acquisition of the aircraft by entering into a sale and leaseback transaction with
an operating lessor (see Note 25). As a result, the buyer/lessor refunded the predelivery payments
amounting to P=641.18 million to PAL and assumed the notes payable and related accrued interest
amounting to P=320.59 million and P=9.65 million, respectively.
14. Accrued Expenses
2011 2010
(In Thousands)
Landing and take-off fees and
ground handling charges (Note 16) P
=5,943,640 =5,753,452
P
Maintenance (Note 18) 3,522,907 2,558,489
Derivative liabilities (Note 28) 10,288 286,556
Others (Notes 13 and 18) 2,569,493 2,433,831
P
=12,046,328 =11,032,328
P
Other accrued expenses pertain to accruals for the following expenses: passenger food/supplies,
salaries and wages, foreign station expenses, interest expense and other operating expenses.
15. Long-term Obligations
2011 2010
(In Thousands)
Obligations under aircraft finance
leases (Notes 18 and 25) P
=21,655,253 =28,675,906
P
Long-term debts (Note 18) 6,354,801 8,644,240
28,010,054 37,320,146
Less current portion 7,013,431 8,378,382
P
=20,996,623 P
=28,941,764
Note 27 presents the undiscounted contractual maturity analysis of financial liabilities, including
long-term obligations.
Obligations Under Aircraft Finance Leases
Relating to Boeing 747-400 Aircraft

In fiscal year 2009, PAL sold all of its four owned Boeing 747-400 aircraft and immediately
leased them back under finance lease agreements. PAL recognized P =4.69 billion liability arising
from the four Boeing 747-400 aircraft under finance leases. Interests on the finance leases are
paid based on three-month LIBOR plus margin. Annual principal payments in 2011 and 2010
amounted to P=718.90 million and P
=761.86 million, respectively.
Relating to Airbus 320-200 Aircraft

Obligations under finance leases as of March 31, 2011 and 2010 include obligations covering
eight Airbus 320-200 aircraft acquired in accordance with the Purchase Agreement signed with
Airbus as discussed in Note 25. As of March 31, 2011 and 2010, the aggregate present value of
future minimum lease payments for these leases amounted to P =9.67 billion (with current portion of
=1.01 billion) and P
P =11.07 billion (with current portion of P
=996.86 million), respectively. These
finance leases require rental payments over the lease term of 12 years.
89
The finance lease arrangements covering the Airbus 320-200 aircraft provide for aircraft purchase
or remarketing options. It also provides for quarterly or semi-annual installments, with maturities
generally ranging from 12 to 15 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.
Relating to Airbus 340-300 and Airbus 330-300 Aircraft

Finance lease agreements pertaining to Airbus 340-300 and Airbus 330-300 aircraft provide for
semi-annual installments, with restructured maturities of 15 years, including balloon payments for
certain finance leases at the end of the lease term, at fixed rates ranging from 7.71% to 7.96%
and/or floating interest rates based on certain margins over six-month LIBOR, as applicable.
As a result of the restructuring of the finance leases, the differences between the actual amount of
principal and interest under the original agreements and the principal, including capitalized
interest payable amounting to an aggregate of P =5.21 billion, were treated as a separate tranche.
Interests on these amounts are paid based on three-month or six-month LIBOR plus margin.
Contractual interest rates under the original agreements remain unchanged.
PAL assigned to the lessor its rights and interest over the Japanese yen (JPY)-denominated
deposits with the initial deposit amount aggregating to JPY6.39 billion or P=3.36 billion and
JPY6.39 billion or P
=3.19 billion as of March 31, 2011 and 2010, respectively, and all interest
accruing thereon maintained by PAL to secure the payment of the obligations for Japanese
Leveraged Lease (JLLs) on two Airbus 340-300, and one Airbus 330-300 aircraft.
The original lease agreements contain, among other things, provisions regarding merger and
consolidation, disposal of all or substantially all of PAL’s assets and ownership and control by the
present managing stockholder company.
PAL’s minimum lease commitments for obligations under finance leases are as follows:
Year Ending March 31 2011 2010

(In Thousands)
2011 P
=− =7,067,751
P
2012 5,643,431 6,039,147
2013 2,945,146 3,242,020
2014 7,651,355 8,074,072
2015 1,850,830 1,936,870
2016 and thereafter 6,317,383 6,592,376
Net minimum lease payments 24,408,145 32,952,236
Interest and others (2,752,892) (4,276,330)
Present value of net minimum lease payments P
=21,655,253 =28,675,906
P
As of March 31, 2011 and 2010, the current portion of obligations under finance lease amounted
to P
=5.02 billion and P
=6.18 billion, respectively.
90
Long-term Debts
2011 2010
(In Thousands)
Secured loans (Note 18) P
=5,072,181 P
=5,661,375
Terminated operating lease claims 119,372 278,494
Unsecured claims (Note 18) 1,163,248 2,704,371
6,354,801 8,644,240
P
=4,364,544 =6,440,878
P
Secured Loans
Long-term debts totaling P=5.66 billion ($125.00 million) pertain to loans obtained from a local
bank and a syndicate of local banks in 2009. The loan from a local bank amounting to
=2.89 billion consists of two tranches (P
P =2.75 billion for tranche one and P =141.08 million for
tranche two) and is secured by aircraft and various aircraft engines with total carrying value of
P =43.14 billion as of March 31, 2011 and 2010, respectively. The loan
agreement requires quarterly payments of principal and interest based on three-month LIBOR plus
margin. The first and second tranche will mature in 2015 and 2013, respectively, inclusive of a
two-year grace period.
The loan with the syndicate of local banks (including affiliate banks, see Note 18) amounting to
=2.54 billion also requires quarterly payments of principal and interest based on three-month
P
LIBOR plus margin and will mature in September 2015. Aircraft and various aircraft engines with
carrying value of P=3.82 billion and P =4.86 billion as of March 31, 2011 and 2010, respectively,
were used as collateral for this syndicated loan.
As of March 31, 2011 and 2010, secured loans amounted to P =5.07 billion and P=5.66 billion (with
current portion amounting to P
=707.64 million and =
P369.17 million), respectively.
Terminated Operating Lease Claims

In accordance with the Rehabilitation Plan, PAL terminated 26 operating leases relating to
Boeing 747-200, Airbus 340-200, Airbus 300-B4, Fokker 50, and Shorts 360 aircraft. Any claims,
net of security deposits and maintenance reserves held by the lessors, resulting from the
termination of operating leases (Terminated Operating Lease Claims) were treated as unsecured
claims.
Unsecured Claims
The restructured unsecured claims are noninterest-bearing and constitute 100% of the principal
and 100% of accrued but unpaid interest as of June 23, 1998.
For purposes of valuation of the unsecured claims (including Terminated Operating Lease Claims)
for statement of financial position carrying value, PAL used a discount rate of 12% per annum
(PAL’s estimated borrowing cost for instruments of similar type and tenor at the time of deemed
issuances of the restructured unsecured claims) to restate the unsecured claims (including
Terminated Operating Lease Claims) to present value. Adjustments in present value resulting
from the passage of time and the interest portion of prepayments made amounted to
=183.04 million in 2011, P
P =474.58 million in 2010 and P =998.51 million in 2009 and were
recognized as part of “Financing charges” in the consolidated profit or loss.
91
The amounts payable on the unsecured claims (including Terminated Operating Lease Claims)
under the restructured terms are as follows:
Percentages of
Maturity Dates Face Value 2011 2010
(In Thousands)
June 7, 2010 32 P
=– =1,834,195
P
June 7, 2011 32 1,309,359 1,363,304
Face value 1,309,359 3,197,499
Less imputed interest 26,739 214,634
1,282,620 2,982,865
P
=– =1,148,670
P
In May 2009, Trustmark purchased certain unsecured claims against PAL from various debt
holders amounting to P =5.26 billion in face value for a consideration amounting to P=3.25 billion.
These claims are carried in the books at amortized cost amounting to P =4.73 billion. In June 2009,
PAL purchased these unsecured claims from Trustmark at the same price that they were bought by
Trustmark (see Note 18). The difference of P =1.53 billion between the carrying amount of the
liability settled and the purchase price of the unsecured claims was recognized as income under
“Others - net” in the 2010 consolidated statement of comprehensive income.
All unsecured claims have been fully paid on June 7, 2011 in accordance with the restructured
schedule.
Excess Cash Flow Recapture Mechanism of the Rehabilitation Plan
Under the Excess Cash Flow Recapture mechanism of the Rehabilitation Plan, at the end of any
six-month period starting September 30, 1999, any Excess Cash Flow (the remaining cash balance,
excluding certain funds, in excess of the greater of $50,000 and the average of the preceding six
months’ revenue of PAL) will be used to prepay Eligible Creditors on a pro rata basis. Such
prepayments in respect of indebtedness will be applied in inverse order of maturity of claims.
PAL made prepayments under the Excess Cash Flow Recapture mechanism totaling P =7.52 billion
(covering the years 2001, 2003, 2006, 2007 and 2008). The last payment relating to the Excess
Cash Flow Recapture mechanism amounted to P =2.34 billion in 2008. There were no similar
payments made in fiscal years 2011, 2010 and 2009.
PAL’s obligations under the Excess Cash Flow Recapture mechanism shall terminate on the last to
occur of: (a) June 7, 2004 (five years after the implementation date of the Rehabilitation Plan);
(b) PAL’s public offering (as defined in the Rehabilitation Plan) of its shares; and (c) the end of
the fiscal year in which PAL has achieved profits calculated on a cumulative basis over the
preceding three fiscal years. With respect to each participating creditor class, rights to receive
prepayments under the Excess Cash Flow Recapture mechanism would also terminate on the date
on which creditors of that creditor class have been returned to their original pre-restructuring
repayment profiles.
92
16. Reserves and Other Noncurrent Liabilities
2011 2010
(In Thousands)
Provisions P
=3,039,689 =2,611,389
P
Derivative liabilities (Note 28) – 166,897
Other noncurrent liabilities (Note18) 851,274 1,031,956
P
=3,890,963 =3,810,242
P
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.
In 2011, additional provision amounted to P =1.12 billion (P=1.04 billion in 2010), reversal of
provisions recognized in prior years amounted to P =681.46 million (P=3.12 million in 2010) and
settlement of closed cases amounted to P
=2.41 million (P
=1.04 million in 2010). Revaluation due to
difference in exchange rates decreased the balance of provisions by P
=3.83 million (P
=8.82 million
in 2010).
Disclosure of additional details beyond the present disclosures may seriously prejudice PAL’s
position and negotiating strategy. Thus, as allowed by PAS 37, Provisions, Contingent Liabilities
and Contingent Assets, only general descriptions were provided.
Claims by Manila International Airport Authority (MIAA)

PAL and MIAA entered into a Compromise Agreement on November 14, 2006, which was
approved by the Court of Appeals on March 26, 2007. Under the Compromise Agreement, PAL
agreed to pay MIAA the total amount of P =2.93 billion, including the related Value-Added Tax
(VAT), through equal monthly installments over a period of seven years. These payments will
serve as full and final settlement of MIAA’s claim against PAL for landing and take-off fees,
parking fees, lighting charges and tacking charges for the period December 1, 1995 to
March 31, 2006.
As of March 31, 2011 and 2010, accrued expenses payable to MIAA, excluding the related VAT,
amounted to P =1.13 billion and =P1.42 billion, respectively. Of the amount, P=774.49 million and
=823.35 million was included as part of “Accrued expenses - landing and take-off fees and ground
P
handling charges” (see Note 14) classified under “Current liabilities”, and P =355.51 million and
=601.65 million was included as part of “Other noncurrent liabilities” in the consolidated
P
statements of financial position as of March 31, 2011 and 2010, respectively.
17. Equity Items
The following summarizes the capital stock account as of March 31, 2011 and 2010:
Number of Amount
Shares (In Thousands)
Authorized (Note 2) 20,000,000,000 =20,000,000
P
Issued 5,421,567,685 =5,421,568
P
Treasury stock - 55,589 shares, at cost (55,589) (56)
Issued and outstanding 5,421,512,096 =5,421,512
P
The issued and outstanding shares are held by 6,684 and 6,738 equity holders as of
93
March 31, 2011 and 2010, respectively.
The Parent Company has 55,589 treasury shares amounting to P =0.06 million. Future earnings are
restricted from dividend declaration to the extent of the cost of these treasury shares.
Details of other components of equity are as follows:
2011 2010
(In Thousands)
Cumulative translation adjustment - net of related
deferred income tax (Notes 19 and 28) (P
=4,671,132) (P
=4,342,769)
Net changes in fair values of available-for-sale
investments - net of related deferred income
tax (Note 6) 106,323 66,440
Revaluation increment - net of related deferred
income tax (Notes 10 and 11) 331,183 1,309,159
(P
=4,233,626) (P
=2,967,170)
18. Related Party Transactions
The Group, in the normal course of business, has transactions with its stockholders, entities under
common control, associated companies and related parties pertaining to leases of aircraft and
ground properties, availment of loans, temporary investments of funds, and purchases of goods
and services, among others. The significant related party transactions are as follows:
a. On August 9, 2010, the Parent Company’s BOD confirmed and agreed to the assignment by
Maxell of its receivable from the Parent Company amounting to P =431.60 million to
Trustmark. On the same meeting, the BOD also approved the conversion of this assigned
receivable and Trustmark’s existing receivable from the Parent Company totaling
=481.09 million into additional paid-in capital.
P
b. As of March 31, 2010, the Parent Company’s liability to Maxell amounted to P =431.60 million.
This resulted from the Parent Company’s August 2, 2007 BOD resolution that resolved to
amend its June 27, 2007 resolution so that the Parent Company only assumes P =3.08 billion,
instead of P=14.08 billion, out of the P
=23.12 billion liabilities of the Holding Companies, as
originally planned. The P =3.08 billion assumed liability was converted to additional paid-in
capital, as approved by the BOD on the same date. This also resulted in a total of P =12.12
billion receivables of the Parent Company from the Holding Companies, which were used in
exchange for the Parent Company’s acquisition of the Holding Companies’ investment in PAL
and PR amounting to P =12.44 billion and P=108.66 million, respectively (see Note 2). On
August 9, 2010, Maxell assigned the said liability to Trustmark (see Note 18.a).
c. As of March 31, 2011, the Parent Company has advances from Trustmark amounting to
=10.00 million that were availed for working capital purposes. On August 9, 2010, the Parent
P
Company’s advances from Trustmark amounting to P =49.49 million as of March 31, 2010, that
were used to pay filing fees and other expenses relating to the acquisition of the Holding
Companies and the Parent Company’s change in corporate name and increase in the
authorized capital stock, were converted to additional paid-in capital (see Note 18.a).
94
d. As of March 31, 2011 and 2010, the Parent Company owns 88 million common shares
(7.04% equity interest) of MAC. Certain members of the Company’s BOD are also officers
and members of the BOD of MAC. Dividends received from this investment amounted to
=5.72 million, P
P =5.28 million and P
=4.40 million in 2011, 2010 and 2009, respectively (see
Note 6).
e. Accounting, statutory reporting and compliance, and administrative services are provided by
an affiliate at no cost to the Parent Company.
f. PAL has finance lease agreements with entities under common control pertaining to three
Airbus 330-300 aircraft. Deposits on leases of said aircraft amounted to P =3.19 billion and
=3.13 billion as of March 31, 2011 and 2010, respectively (included under “Deposits on
P
aircraft leases”). Outstanding obligations under finance lease of the said aircraft amounted to
=2.95 billion and P
P =4.15 billion as of March 31, 2011 and 2010, respectively (see Note 15).
Financing charges attributable to these finance lease obligations amounted to P =49.40 million
in 2011,
=128.09 million in 2010 and P
P =331.11 million in 2009. Related accrued interest amounted to
=7.90 million and P
P =23.28 million as of March 31, 2011 and 2010, respectively.
g. PAL has a Technical Services Agreement (TSA) with Lufthansa Technik Philippines (LTP),
49% owned by MAC, which took effect on September 1, 2000 and was effective for a period
of 10 years until September 1, 2010, including the Heavy Maintenance Service Agreement for
D1-Checks (4C/5Y) of Airbus 340-300, Airbus 330-300 and Airbus 320-200 aircraft.
The TSA provides that for the entire duration of the agreement, LTP will serve as the sole and
exclusive provider to PAL of aircraft-related technical services and management of all
required maintenance work necessary to achieve the sound operation and optimal utilization of
PAL’s Airbus and Boeing aircraft. Upon expiration of the TSA, PAL and LTP entered into a
General Terms and Agreement (GTA) effective September 2010. Under the GTA, the scope
of LTP’s service was limited to line maintenance and other support services. The GTA was
for a period of one year, renewable upon consent of both parties.
During the year, LTP also provided C check services to certain aircraft under PAL’s operating
fleet.
Total LTP-related maintenance and repair costs charged to operations amounted to

=5.73 billion, P
P =9.04 billion and P
=8.03 billion in 2011, 2010 and 2009, respectively. In
addition, related expendable parts sold to LTP amounted to P =26.33 million in 2011,
=32.85 million in 2010 and =
P P26.15 million in 2009.
In connection with the sale of Maintenance and Engineering facilities to LTP in 2000, PAL
and LTP entered into several transition services agreements whereby PAL will render to LTP
various services such as information technology support, training and medical services, among
others. Revenue earned from the said transition services agreements (included under
“Others” in the revenue section of the consolidated statement of comprehensive income)
amounted to P=70.16 million in 2011, P
=60.88 million in 2010 and P=95.49 million in 2009.
As of March 31, 2011 and 2010, PAL has outstanding amounts payable to and estimated
unbilled charges from LTP totaling P =2.94 billion and P=3.04 billion, respectively, net of
unapplied credits from and advance payments to LTP amounting to P =241.96 million and
=65.31 million as of March 31, 2011 and 2010, respectively. Receivables from LTP amounted
P
to P
95
h. The transactions of PAL with APC, include joint services and code share agreements, and
endorsements of passengers during flight interruptions. In March 2010, PAL, APC and
Trustmark entered into an arrangement whereby PAL assigned P
=1.36 billion of its receivables
from APC to Trustmark. As of March 31, 2011 and 2010, PAL has net payable to APC
(shown as part of “Accounts payable”) amounting to P=211.70 million and P=298.69 million,
respectively.
In January 2008, PAL entered into an operating lease agreement with APC covering the
owned Boeing 737-300 aircraft at a fixed monthly rate, for a period of 36 months. In relation
to this, certain spare parts and tools of the said aircraft were also leased to APC. In fiscal year
2010, PAL and APC agreed to amend the rate of lease charges from a fixed amount to power-
by-the-hour basis. In 2009, PAL recognized income amounting to P =28.83 million (included
under “Others - net” in the consolidated statement of comprehensive income) for the lease of
the aircraft and related spare parts and tools. For the year ended March 31, 2011 and 2010, no
lease income was recognized as the said aircraft was grounded.
In October 2009, PAL leased out to APC three Bombardier DHC 8-300 and five Bombardier
DHC 8-400 owned aircraft under operating lease arrangement for 60 months. In March 2010,
PAL also subleased to APC two of its Airbus 320-200 aircraft for a period of 74 and 75
months. In fiscal year 2011, PAL subleased additional four Airbus 320-200 aircraft under
operating lease arrangements for 72 months. As of March 31, 2011 and 2010, the related
deposit from APC amounted to P =265.31 million and =
P100.55 million, respectively, (included
under “Reserves and other noncurrent liabilities” in Note 16). The outstanding security
deposits as of March 31, 2011 cover the deposit on eight Bombardier aircraft and six Airbus
320-200 aircraft which were already delivered to APC, and seven Airbus 320-200 aircraft for
delivery in 2011 to 2012 to be leased out to APC upon delivery (see Note 25).
The future minimum lease income receivable from these contracts are as follows:
2011 2010
(In Thousands)
Due within one year P
=1,453,821 =1,033,314
P
Due after one year but within five years 4,908,880 3,782,342
More than five years 316,184 372,971
P
=6,678,885 =5,188,627
P
On April 30, 2008, PAL and APC entered into a five-year TSA effective May 1, 2008. The
TSA provides that all required maintenance (all aircraft-related technical services and
management) related to the Bombardier aircraft will be handled by APC. When APC assumed
the operation of all the flights that use the Bombardier aircraft starting October 27, 2009, it
discontinued charging PAL of the maintenance cost under the TSA. Total APC-related
maintenance and repair costs amounted to nil in 2011, P =84.53 million in 2010 and
=123.40 million in 2009.
P
In June 2010, PAL sold to APC the spare engines, rotable and reparables, expendable parts
and maintenance tools of Bombardier aircraft for a consideration equal to its net book value
amounting to P=1.13 billion. On March 31, 2011, the same spare engines and maintenance
tools and all rotable and reparable parts as of such date were bought back from APC for
consideration amounting to P
=826.97 million (net of VAT).
i. As of March 31, 2010, the =P5.66 billion ($125.00 million) syndicated loan of PAL, presented
under “Secured loans”, includes loans obtained from banks under common control, Philippine
National Bank (PNB) and ABC, amounting to P =1.81 billion and P
As of March 31, 2011, the outstanding balance of these loans with PNB and ABC amounted to
96
P1.63 billion and P
= =549.37 million, respectively. The related financing charges on these loans
obtained from related parties represent about P =89.94 million, P =100.24 million and
=27.02 million of total financing charges of fiscal years 2011, 2010 and 2009, respectively.
P
The interest on these loans accrued as of March 31, 2011 and 2010 amounted to P =1.39 million
and P
j. Unsecured claims of PAL include loans from stockholders amounting to P=108.22 million and
=243.76 million as of March 31, 2011 and 2010, respectively. The related financing charges
P
on these loans amounted to P
=13.85 million, P
=37.51 million in 2011, 2010
and 2009, respectively.
k. As discussed in Note 13, PAL has outstanding short-term notes payable to ABC amounting to
=1.58 billion and P
P =1.74 billion as of March 31, 2011 and 2010, respectively. Also the
retirement funds of PAL is being managed by ABC.
As of March 31, 2011 and 2010, the Group’s cash and cash equivalents (included under
“Cash and cash equivalents” and “Other noncurrent assets” in the consolidated statements of
financial position) with ABC amounted to P =1.86 billion and P
=1.30 billion, respectively. The
related interest income on these investments and cash deposits amounted to P =15.01 million in
2011, P=17.37 million in 2010 and P
=40.29 million in 2009.
l. PAL maintains checking accounts and money placements with PNB. As of March 31, 2011
and 2010, total cash and cash equivalents maintained with PNB amounted to P
=383.08 million
and P
In 2009, PAL obtained short-term notes from PNB for additional working capital amounting
to P
=2.95 billion. The outstanding balance as of March 31, 2010 amounting to P
=180.85 million
was fully paid in fiscal year 2011. The related interest charges amounted to P=2.76 million,
P =24.35 million in 2011, 2010 and 2009, respectively.
PAL entered into an operating lease agreement with PNB, 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.
There is no outstanding rental liability relating to the said lease contract as of March 31, 2011
and 2010. Minimum rental commitments under this lease contract are as follows:
2011 2010
(In Thousands)
Due within one year P
=28,996 =28,986
P
Due after one year but within five years 127,533 122,240
More than five years 57,559 91,805
P
=214,088 =243,031
P
m. In June 2009, PAL obtained on demand noninterest-bearing advances from Trustmark

amounting to P =3.26 billion. Total settlement in 2010 amounted to P =2.25 billion, of which
=835.19 million was paid in cash while P
P =1.36 billion was paid via assignment of receivable
(see also Note 18.h). The outstanding balance as of March 31, 2010 amounting to
=905.82 million included under the “Accounts payable” account in the 2010 consolidated
P
statement of financial position was fully settled in fiscal year 2011.
n. In April 2009, PAL’s BOD authorized management to finalize the terms of the sale of one of
its parcels of land with a carrying value of P
=323.37 million to an entity under common control.
The related Deed of Absolute Sale was executed in June 2010 and the proceeds from sale were
collected in May 2010. This property was included under “Other current assets” as of March
97
31, 2010 (see Notes 9 and 11).
o. As of March 31, 2011 and 2010, PAL has cash and standby letters of credit with Oceanic
Bank, an entity under common control, amounting to P
=303.63 million,
respectively.
p. The compensation of key management personnel of the Group, consisting mainly of

short-term employee benefits, amounting to P =31.54 million, P =39.93 million and
=44.21 million in 2011, 2010 and 2009, respectively, and retirement benefits of
P
=5.84 million, P
P =6.09 million and P
19. Other Comprehensive Income
Other comprehensive income consists of net income or loss for the year, together with other gains
and losses that are not recognized in profit or loss for the year as required or permitted by the
PFRS (collectively described as “Other comprehensive income”).
Other comprehensive income includes the following:
• Unrealized mark-to-market gains (losses) on available-for-sale investments of P =39.93 million

in 2011, (P=13.06 million) in 2010 and (P =151.08 million) in 2009. These amounts are net of
the related deferred income tax of P=0.09 million in 2011 and 2010 and P=32.57 million in 2009.
On the other hand, the realized mark-to-market gains removed from equity and transferred to
profit and loss amounted to P =53.90 million in 2010 and P
=6.75 million in 2009. These amounts
are net of the related deferred income tax of P
=3.42 million in 2009.
• Net changes in fair value of cash flow hedges comprise (i) net changes in the fair values of
derivative assets and derivative liabilities designated by management as cash flow hedging
instruments amounting to nil in 2011, deferred loss of P=4.58 million in 2010 and deferred gain
of P
=1.84 billion in 2009, and (ii) amount transferred from equity to profit and loss amounting
to P
=277.08 million in 2011, (P=878.19 million) in 2010 and (P =1.23 billion) in 2009. Of these
amounts P=277.08 million in 2011 and (P =1.28 billion) in 2010, pertain to preterminated cash
flow hedges (see Note 28). The related deferred income tax on these net changes in fair value
of cash flow hedges amounted to P =66.73 million, P =376.37 million and P =645.73 million, in
2011, 2010 and 2009 respectively.
• Increase in revaluation increment in property arising from the results of an updated appraisal
or effect of exchange rate changes in the aggregate amount of P =453.09 million in 2011 and
=185.78 million in 2009. These amounts are net of the related deferred income tax of
P
P =67.72 million, respectively. The latest appraisal reports are as of
March 31, 2011.
• Effect of foreign exchange gains (losses) arising from the translation to Philippine peso of
the assets and liabilities of PAL amounting to (P =110.74 million), (P
=105.00 million) and
=1.91 billion in 2011, 2010 and 2009, respectively.
P
• Included under “Cumulative translation adjustment - net of deferred income tax” in the
consolidated statement of changes in equity as of March 31, 2010 are unrealized after-tax
gains on hedging contracts aggregating to P=277.08 million, which were realized in 2011. As
discussed in Note 28, certain derivative instruments (i.e., fuel derivatives and interest rate
swaps) that were designated as effective hedging instruments over the next two years are
expected to protect PAL against the impact of rising fuel prices and increasing interest rates.
The related hedging gains or losses are expected to be recognized in profit or loss at the same
98
time as the corresponding hedged items are recognized in profit or loss.
20. Expenses
The significant components of expenses by nature are as follows:
2011 2010 2009
(In Thousands)
Fuel and oil (Note 28) =27,468,265 P
P =22,363,479 =38,838,517
P
Repairs and maintenance (Note 18) 8,394,158 10,441,625 9,480,925
Crew and staff costs (Note 21) 6,985,966 7,304,860 7,955,141
Depreciation and
amortization (Notes 10 and 11) 6,852,387 7,390,024 6,218,287
Groundhandling charges 3,762,738 3,467,515 3,295,370
Aircraft lease rentals (Note 25) 3,570,382 2,531,820 1,992,666
Landing and take-off fees 2,621,841 2,276,526 2,300,914
Passenger food 1,672,154 1,561,801 1,719,498
Financing charges (Notes 13, 15 and 18) 1,661,570 2,569,540 3,746,429
21. Employee Benefits

As of March 31, the Group’s accrued employee benefits consisted of the following:
2011 2010
(In Thousands)
Regular retirement benefits P
=3,840,435 =3,574,980
P
Other benefits 1,471,749 1,149,460
P
=5,312,184 =4,724,440
P
PAL has a funded noncontributory defined benefit retirement plan covering all its permanent and
regular employees with benefits based on years of service and latest compensation.
The following tables summarize the components of the retirement benefits cost recognized in the
consolidated profit or loss and the amounts recognized in the consolidated statements of financial
position.
The details of net retirement benefits cost under the defined benefit plan are as follows:
2011 2010 2009
(In Thousands)
Current service cost P
=315,255 =283,161
P =517,398
P
Interest cost on benefit obligation 435,048 496,095 371,823
Expected return on plan assets (40,513) (55,347) (89,708)
Net actuarial loss (gain) recognized
during the year (268,339) (301,783) 259,805
Curtailment loss – 94,216 –
Retirement premiums – 117,608 –
P
=441,451 =633,950
P =1,059,318
P
Actual return on plan assets P
=34,350 =99,909
P =206,624
P
99
The details of net defined retirement benefits liability are as follows:
2011 2010
(In Thousands)
Defined benefit obligation P
=3,880,302 =4,686,011
P
Fair value of plan assets (844,609) (810,259)
3,035,693 3,875,752
Unrecognized net actuarial gain (loss) 804,742 (300,772)
Net defined benefit liability P
=3,840,435 =3,574,980
P
Changes in present value of defined benefit obligation are as follows:
2011 2010
(In Thousands)
Defined benefit obligation, beginning of year P
=4,686,011 =4,318,578
P
Current service cost 315,255 283,161
Interest cost 435,048 496,095
Benefits paid (175,996) (313,569)
Effect of curtailment – (285,762)
Actuarial loss (gain) on obligation (1,380,016) 187,508
Defined benefit obligation, end of year P
=3,880,302 =4,686,011
P
Changes in fair value of plan assets are as follows:
2011 2010
(In Thousands)
Fair value of plan assets, beginning of year P
=810,259 =1,327,979
P
Expected return on plan assets 40,513 55,347
Actual contributions to the plan 175,996 225,581
Benefits paid (175,996) (808,551)
Actuarial gain (loss) on plan assets (6,163) 9,903
Fair value of plan assets, end of year P
=844,609 =810,259
P
The major categories of plan assets as a percentage of the fair value of total plan assets are as
follows:
2011 2010
Cash and cash equivalents 69% 49%
Investments in government securities 30% 50%
Receivables 1% 1%
100% 100%
The overall expected return on the plan assets is determined based on the market prices prevailing
on the date applicable to the period over which the obligation is to be settled.
The principal assumptions used at the beginning of the fiscal years in determining retirement
benefits cost for PAL’s plans are as follows:
2011 2010
Discount rate per annum 8.54% to 9.65% 9.86% to 14.45%
Expected annual rate of return on plan assets 5% 5%
Future annual increase in salary 10% 10%
100
As of March 31, 2011, following are the information with respect to the above assumptions:
discount rate per annum of 7.20% to 8.73%, expected annual rate of return on plan assets of 2.00%
to 2.40% and future annual increase in salary of 10.00% to 11.00%.
There are 6,967, 7,237 and 7,816 employees in the plan as of March 31, 2011, 2010 and 2009,
respectively.
Relevant amounts for the current and prior periods are as follows:
2011 2010 2009 2008 2007
(In Thousands)
Defined benefit obligations P
=3,880,302 =4,686,011
P =4,318,578
P P5,149,365
= =4,480,529
P
Fair value of plan assets (844,609) (810,259) (1,327,979) (1,121,355) (583,863)
Deficit 3,035,693 3,875,752 2,990,599 4,028,010 3,896,666
Experience adjustment on plan
liabilities - loss (gain) (595,766) 506,156 (140,569) (318,793) 227,546
Experience adjustment on plan
assets - gain (loss) (6,163) 44,562 114,133 (85,908) 15,023
Retirement benefits cost under the defined contribution plan amounted to P

=211.59 million in 2011,
P =235.91 million in 2009.
The Group’s expected contribution to the retirement fund in fiscal year ending March 31, 2012 is
about P
=798.14 million.
22. PAL’s 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, fees, and licenses of any kind, nature, or description, imposed by any municipal, city,
provincial or national authority or government agency, except real property tax.
As further provided for under its franchise, PAL 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 23). In addition, the payment of the principal, interest, fees, and other charges on foreign
loans obtained by PAL, and all rentals, interest, fees and other charges paid by PAL to 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 PAL.
On May 24, 2005, the Expanded-Value Added Tax (E-VAT) law was signed as Republic Act
(RA) No. 9337 or the E-VAT Act of 2005. The E-VAT law took effect on November 1, 2005
following the approval on October 19, 2005 of Revenue Regulation (RR) No. 16-2005 which
provides for the implementation of the rules of the E-VAT law. Among the relevant provisions of
RA No. 9337 are the following:
a. The franchise tax of PAL is abolished;
b. PAL shall be subjected to the corporate income tax;

101
c. PAL shall remain exempt from any taxes, duties, royalties, registration license, and other fees
and charges, as may be provided by PAL’s franchise;
d. Change in corporate income tax rate from 32% to 35% for three years effective on
November 1, 2005, and 30% starting on January 1, 2009 and thereafter;
e. Change in unallowable deduction for interest expense from 38% to 42% of interest income
subject to final tax for three years effective on November 1, 2005, and 33% starting on
January 1, 2009; and
f. Increase in the VAT rate imposed on goods and services from 10% to 12% effective on
February 1, 2006.
23. Income Taxes
a. The provision for income tax consists of the following:
2011 2010 2009

(In Thousands)
Current income tax P
=216,099 =100,872
P =134
P
Deferred income tax (169,484) 110,409 543,230
P
=46,615 =211,281
P =543,364
P
b. In accordance with PAS 12, Income Taxes, a deferred income tax asset or deferred income tax
liability is recognized related to temporary differences arising from changes in exchange rate
due to measurement of the Group’s nonmonetary assets and liabilities in its functional
currency, which is different from the currency used in determining the Group’s taxable
income or loss. As a result, the Group recognized net deferred income tax liability amounting
to P
=1.31 billion and P=2.30 billion as of March 31, 2011 and 2010, respectively, in relation to
changes in exchange rates affecting its nonmonetary assets and liabilities.
c. The Group’s recognized net deferred income tax assets, all relating to PAL, are as follows:
2011
(In Thousands)
Deferred income tax assets on:
NOLCO P
=1,742,216 =3,021,484
P
Accrued retirement benefits cost and
unamortized past service cost contribution 1,235,435 488,192
Unrealized foreign exchange
adjustments - net 391,985 1,215,534
MCIT 317,222 −
Cumulative translation and fair value
adjustments - net − 16,712
Allowance for inventory losses 16,929 17,663
Reserves and others 44,103 55,210
3,747,890 4,814,795
(Forward)
102
2011
(In Thousands)
Deferred income tax liabilities on:
Changes in exchange rates related
to nonmonetary assets and
liabilities - net (P
=1,310,140) (P
=2,304,361)
Prepaid commission and others (1,203,791) (1,424,719)
Net present value adjustments on
financial liabilities (79,480) (147,377)
Revaluation increment in property (197,029) (215,494)
Investment properties carried at deemed cost (88,769) −
Cumulative translation and fair value
adjustments - net (42,670) –
(2,921,879) (4,091,951)
Net deferred income tax assets P
=826,011 =722,844
P
d. As of March 31, 2011 and 2010, the Parent Company did not recognize deferred income tax
asset on provision for probable loss amounting to = P2.57 million and P =1.88 million, and
carryforward benefits of NOLCO amounting to P =26.48 million and P =34.91 million,
respectively, as management believes that the Parent Company may not have sufficient future
taxable profits to allow all or part of the deferred income tax assets to be utilized in the future.
As of March 31, 2011, the Parent Company’s NOLCO that are available for deduction against
future taxable income are as follows:
Available until
Incurred during fiscal year Balance as of fiscal year
ended March 31 Amount Expired March 31, 2011 ending March 31
(In Thousands)
2008 =17,383
P (P
=17,383) =–
P 2011
2009 8,848 – 8,848 2012
2010 8,678 – 8,678 2013
2011 8,951 – 8,951 2014
=43,860
P (P
=17,383) =26,477
P
As of March 31, the deferred income tax assets on the following deductible temporary
differences were not recognized by PAL because management believes that PAL may not have
sufficient future taxable income against which these deductible temporary differences,
NOLCO and MCIT may be utilized.
2011 2010
(In Thousands)
Allowance for doubtful accounts (Note 7) P
=4,400,399 =4,106,625
P
Provisions 3,039,689 2,611,389
Accrued retirement benefits 2,119,613 3,986,197
NOLCO − 1,370,432
MCIT − 101,235
In 2011, PAL’s NOLCO incurred in 2009 amounting to P =5.63 billion was claimed as
deduction against taxable income. PAL’s remaining NOLCO amounting to P =1.37 billion
incurred in 2010 and P
=4.44 billion incurred in 2009 can be used as deduction against taxable
income until 2015 and 2014, respectively. The MCIT amounting to P =215.99 million incurred
103
in 2011 and P
=101.23 million incurred in 2010 can be used as credit against the regular income
tax payable until 2014 and 2013, respectively.
e. A reconciliation of the Group’s provision for (benefit from) income tax computed based on
income (loss) before income tax at the statutory tax rates to the provision for income tax
shown in the consolidated profit or loss is as follows:
2011 2010 2009

(In Thousands)
Provision for (benefit from) income tax
at statutory tax rates P
=911,860 =119,557
P (P
=4,134,297)
Adjustments resulting from:
Deductible temporary differences
used/recognized in current year
but for which no deferred income
tax assets were recognized in
prior years 499,354 (2,110,945) –
Movement in deductible temporary
differences for which no
deferred income tax assets
were recognized 218,047 3,808,854 3,759,991
Interest income subjected to final tax
and exempted from tax (8,155) (8,829) (69,128)
Nondeductible portion of interest
expense 2,717 2,926 27,489
Nondeductible expenses and
others - net (1,577,208) (1,600,282) 959,309
Provision for income tax P
=46,615 =211,281
P =543,364
P
f. 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
=10.96 million in 2011, P=9.89 million in 2010 and P
=16.03 million in 2009.
24. Note to Consolidated Statements of Cash Flows
Noncash investing activities consist of purchases of property and equipment on account amounting
to P
=300.82 million in 2011, P
=790.52 million in 2010 and P=13.23 billion in 2009.
The noncash financing activity in 2010 pertains to the P

=1.36 billion assignment of various
receivables discussed in Note 18.h.
25. Aircraft Lease Commitments and Purchases

Aircraft Purchases and Finance Leases
Airbus aircraft
On December 6, 2005, PAL finalized a Purchase Agreement with Airbus wherein PAL placed a
firm order for nine Airbus 320-200 aircraft and options for five aircraft for delivery in fiscal years
2010 to 2013. All nine aircraft on firm order were delivered to and accepted by PAL during fiscal
years 2008 to 2009.
104
PAL took delivery of the remaining five, out of this nine, Airbus 320-200 aircraft in fiscal year
2009. Four of these five aircraft were acquired under finance leases. Carrying values of passenger
aircraft under finance leases amounted to P
=35.79 billion and P=42.71 billion as of March 31, 2011
and 2010, respectively. The acquisition of the fifth aircraft was financed through a Japanese
Operating Lease (JOL) structure and the related predelivery payment was cancelled. Total
predelivery payments returned to PAL in fiscal year 2009 amounted to P =439.82 million.
On July 28, 2008, PAL exercised its right to purchase two of the five option aircraft for delivery in
fiscal year 2011 by virtue of an amendment agreement to the Purchase Agreement with Airbus.
PAL did not exercise its right, which lapsed in July 2009, to purchase the remaining three of the
five option aircraft.
As discussed in Note 13, the two option aircraft were acquired through sale and leaseback
transaction with a buyer/lessor. Gain recognized from the sale is included under “Others - net” in
the 2011 consolidated statement of comprehensive income.
Boeing aircraft
On October 30, 2006, PAL finalized a Purchase Agreement with Boeing wherein PAL placed a
firm order for two Boeing 777-300ER aircraft for delivery in fiscal years 2010 to 2011 and
purchase options for two additional aircraft.
In May 2007, PAL finalized a supplemental agreement with Boeing relating to its exercise of
purchase options for two Boeing 777-300ER aircraft for delivery in fiscal year 2012.
On June 2, 2009, PAL and Boeing agreed to reschedule the deliveries of four Boeing 777-300ER
aircraft from their original delivery schedules of fiscal years 2010, 2011 and 2012 to fiscal years
2013 and 2014.
As of March 31, 2011 and 2010, predelivery payments relating to the acquisition of four
Boeing 777-300ER amounted to P
=4.08 billion and P
=1.72 billion, respectively (see Note 10).
Operating Leases
In March 2010, PAL signed operating lease agreements for the lease of two brand new
Airbus 320-200 aircraft which were delivered in October and November 2010. Additional
Airbus 320-200 aircraft were also delivered in September and November 2010, representing the
two option aircraft covered by Purchase Agreement with Airbus.
In May 2010, PAL sold an aircraft engine and leased back the same under operating lease
arrangement for 96 months with the buyer/lessor.
In December 2006, PAL signed operating lease agreements for the lease of two brand new
Boeing 777-300ER aircraft, also as part of its refleeting program initiated in the October 2006
purchase agreement. The two aircraft were delivered in November 2009 and January 2010
(see Note 10).
The future minimum lease payments related to the operating lease agreements are shown in the
following table:

(In Thousands)
2011 P
=– =3,508,014
P
2012 3,555,506 3,457,787
(Forward)
105
(In Thousands)
2013 P
=3,555,506 =3,457,787
P
2014 3,264,716 3,154,382
2015 2,678,317 2,542,546
2016 and thereafter 11,140,099 11,192,901
P
=24,194,144 =27,313,417
P
In various dates in fiscal year 2011, PAL also signed operating lease arrangements for the lease of
seven Airbus 320-200 aircraft, which will be delivered from July 2011 to September 2012.
Management intends to sublease these aircraft to APC upon delivery (see Note 18).
On May 28, 2011, PAL agreed to acquire two Airbus 320-200 from GECAS under operating lease
arrangements for delivery in March and April 2012.
Capital Expenditure Commitments

PAL’s capital expenditure commitments relate principally to the acquisition of aircraft fleet
aggregating to P
=60.33 billion as of March 31, 2011 and 2010, respectively.
26. Capital Management
The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit and healthy capital ratios in order to support its business and maximize shareholder value.
The Group considers its equity 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. No changes were made in the objectives, policies or processes from
March 31, 2008 to March 31, 2011.
The Group manages its capital by monitoring its cash flows, earnings before interest, taxes,
depreciation, amortization and rentals, and debt levels.
27. 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
106
Committee. The Treasury Risk Office conducts marking-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, cash and
cash equivalents, investments in equities, and deposits. 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, accounts payables, and accrued
expenses, which arise directly from its operations.
The main risks arising from the use of financial instruments are market risk (consisting of foreign
exchange risk, cash flow interest rate risk, fuel price risk and equity price risk), liquidity risk,
counterparty risk and credit risk.
PAL uses derivative financial instruments to manage its exposures to currency, interest and fuel
price risks arising from PAL’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, price interest rate risk, fuel price risk and equity 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 hedge a portion of
its exposure. PAL’s significant foreign currency-denominated monetary assets and liabilities (in
Philippine peso equivalents) as of March 31 are as follows:
2011 2010
(In Thousands)
Financial assets and financial liabilities
Financial Assets:
Cash P
=2,426,377 =1,320,821
P
Receivables 5,748,521 5,522,920
Others* 1,164,029 1,686,320
9,338,927 8,530,061
(Forward)
107
2011 2010
(In Thousands)
Financial Liabilities:
Accounts payable (P
=1,361,926) (P
=956,591)
Accrued expenses (4,360,854) (4,389,106)
Others** (888,258) (1,271,998)
(6,611,038) (6,617,695)
Net foreign currency-denominated
financial assets 2,727,889 1,912,366
Nonfinancial liabilities
Accrued employee benefits (5,312,184) (4,724,440)
Provisions (3,039,689) (2,611,388)
(8,351,873) (7,335,828)
Net foreign currency-denominated monetary
liabilities (P
=5,623,984) (P
=5,423,462)
* Includes miscellaneous deposits and security deposits.
** Substantially pertaining to notes payable to a local bank.
The Group recognized P =209.23 million and P =96.61 million foreign exchange loss in 2011 and
2010, respectively and P =752.73 million foreign exchange gain in 2009, included under
“Others - net” in the consolidated statement of comprehensive income, arising from the translation
and settlement of these foreign currency-denominated financial instruments.
PAL’s foreign currency-denominated exposures comprise primarily of PHP and 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).
Shown below is the impact on the Group’s income before income tax of reasonably possible
changes in the exchange rates of foreign currencies against the USD, PAL’s functional currency
with all other variables held constant.
2011
Net Loss (Gain) Effect on Income Before Tax
Movement in Foreign Increase in Foreign Decrease in Foreign
Currency Exchange Rates Exchange Rates Exchange Rates
(In Thousands)
PHP 7.40% P
=199,677 (P
=199,677)
JPY 10.66% (90,810) 90,810
Others* 0.14% to 14.41% (104,223) 104,223
Net P
=4,644 (P
=4,644)
*Includes various currencies (i.e. CAD, AUD, EUR, HKD, SGD and others).
2010
Net Loss (Gain) Effect on Income Before Tax
Movement in Foreign Increase in Foreign Decrease in Foreign
Currency Exchange Rates Exchange Rates Exchange Rates
(In Thousands)
PHP 10.00% =283,159
P (P
=283,159)
JPY 13.11% (87,185) 87,185
Others* 0.32% to 16.23% (133,654) 133,654
Net =62,320
P (P
=62,320)
*Includes various currencies (i.e. CAD, AUD, EUR, HKD, SGD and others).
108
The Group’s major currency derivatives consist of options and forwards to buy USD and sell JPY.
Before taking into account the effect of income taxes, income for the period ended March 31, 2011
and 2010 would have either increased by P =99.32 million and P =36.19 million or decreased by
P =25.18 million, respectively, had the volatility of JPY/USD been at 10.66%
and 13.11%, respectively.
Other currency derivatives consist of options and forward contracts in AUD, CAD, and SGD.
Before taking into account the effect of income taxes, income for the period ended
March 31, 2011 and 2010 would either increase by P =11.37 million and P =43.21 million and
decrease by P
=15.45 million and P =93.98 million, respectively, had the various foreign exchange
rates changed with the range of 6.07% to 10.71% in 2011 and 6.30% to 13.80% in 2010. There is
no other impact on the Group’s equity other than those affecting profit or 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 and interest rate swaps. 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 to the total
borrowings is 0.68:1 and 0.72:1 as of March 31, 2011 and 2010, respectively. There were no
outstanding swap agreements entered into as of March 31, 2011 and 2010.
Income before income tax as of March 31, 2011 and 2010 would either decrease or increase by
P =142.49 million, respectively, if the USD interest rate for the periods had been
higher or lower by 35 basis points and 54 basis points, respectively. 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
PAL 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 derivative and hedging instruments. In managing this significant risk, PAL has a
portfolio of swaps, collars, and compound structures with sold options or option combinations
with extendible or cancellable features. PAL implements such strategies to manage and minimize
the risks within acceptable risk parameters.
PAL’s fuel derivatives are viewed as economic hedges and are not held for speculative purposes.
Short-term exposures are hedged primarily with fuel derivatives indexed to jet fuel. On long-term
exposures, PAL also uses fuel derivatives indexed to crude oil as proxy hedges due to liquidity
constraints in the refined oil products market (i.e., jet fuel). PAL 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 PAL 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.
The estimated potential three-day losses on its fuel derivative transactions, as calculated in the
VaR model amounted to P =16.35 million and P =50.59 million as of March 31, 2011 and 2010,
respectively.
109
The high, average and low VaR amounts are as follows:
High Average Low

(In Thousands)
April 1, 2010 to March 31, 2011 P
=102,722 P
=54,568 P
=23,030
April 1, 2009 to March 31, 2010 153,806 86,884 9,958
Equity price risk

Equity price risk is the risk that the fair values of equity securities decrease as the result of changes
in the levels of equity indices and the value of individual stocks. The prices of these investments
are monitored based on their current fair values.
Sensitivity analysis
Before taking into account the effect of taxes, equity as of March 31, 2011 and 2010 would either
decrease or increase by P=1.60 million and P =19.80 million, respectively, had the indices in MAC
shares changed by 0.57% in 2011 and 8.18% in 2010. The impact on the Group’s equity already
excludes the impact of transactions affecting profit or loss.
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 based on
contractual undiscounted payments (principal and interest):
As of March 31, 2011
>1-<2 >2-<3 >3-<4 >4-<5 >5

<1 Year Years Years Years Years Years Total
(In Thousands)
Accounts payable and accrued
expenses P
= 15,213,603 P
=– P
=– P
=– P
=– P
=– P
= 15,213,603
Due to related parties 10,000 − − − − − 10,000
Notes payable 5,616,561 – – – – – 5,616,561
20,840,164 − − − − − 20,840,164
Obligation under finance lease 5,643,431 2,945,146 7,651,355 1,850,830 1,122,227 5,195,156 24,408,145
Other long-term liabilities 2,199,049 903,190 889,387 852,056 2,395,948 – 7,239,630
Other liability
(under “Accrued expense” and
“Other noncurrent liabilities”)
(Note 16) 414,025 414,026 414,025 34,509 − − 1,276,585
Derivative instruments:
Contractual receivable (982,583) − − − − − (982,583)
Contractual payable 973,381 − − − − − 973,381
Fuel derivatives (124,624) − − − − − (124,624)
8,122,679 4,262,362 8,954,767 2,737,395 3,518,175 5,195,156 32,790,534
P
= 28,962,843 P
= 4,262,362 P
= 8,954,767 P
= 2,737,395 P
= 3,518,175 P
= 5,195,156 P
= 53,630,698
110
>1-<2 >2-<3 >3-<4 >4-<5 >5

(In Thousands)
expenses =13,773,385
P P
=– P
=– P
=– P
=– P
=– =
P13,773,385
Notes payable 6,103,098 – – – – – 6,103,098
19,876,483 – – – – – 19,876,483
Obligation under finance lease 7,067,751 6,039,147 3,242,020 8,074,072 1,936,870 6,592,377 32,952,237
Other long-term liabilities 2,439,102 2,343,039 1,008,585 965,423 907,315 2,513,288 10,176,752
Other liability
(under “Accrued expense” and
“Other noncurrent liabilities”)
(Note 16) 414,005 414,005 414,005 414,005 34,557 – 1,690,577
Due to related parties 481,090 – – – – – 481,090
Derivative instruments:
Contractual receivable (1,219,687) – – – – – (1,219,687)
Contractual payable 1,327,072 – – – – – 1,327,072
Fuel derivatives 97,285 166,897 – – – – 264,182
10,606,618 8,963,088 4,664,610 9,453,500 2,878,742 9,105,665 45,672,223
=30,483,101
P P
=8,963,088 P
=4,664,610 P
=9,453,500 P
=2,878,742 P
=9,105,665 =
P65,548,706
The Group’s total financial liabilities due to be settled currently amounting to P=28.96 billion and
=30.48 billion as of March 31, 2011 and 2010, respectively, include liabilities aggregating to
P
P =19.88 billion, respectively, that management considers as working capital.
Accounts payable and accrued expenses of P =15.21 billion and P=13.77 billion and due to related
parties of P=10.00 million and P
=481.09 million as of March 31, 2011 and 2010, respectively, include
liabilities that are payable on demand but are expected to be renegotiated in the future. For the
other liabilities amounting to P=8.12 billion and =P10.61 billion, as of March 31, 2011 and 2010,
respectively, management expects to settle these from the Group’s cash to be generated from
operations.
The following tables summarize the Group’s financial assets used to manage liquidity risk:
>1-<2 >2-<3 >3-<4 >4-<5 >5

(In Thousands)
Cash P
=3,869,578 P
=– P
=– P
=– P
=– P
=– P
=3,869,578
Loans and receivables:
Cash equivalents 671,001 – – – – – 671,001
Receivables - net 4,975,642 – – – – – 4,975,642
P
=9,516,221 P
=– P
=– P
=– P
=– P
=– P
=9,516,221
>1-<2 >2-<3 >3-<4 >4-<5 >5

(In Thousands)
Cash =1,946,622
P =
P– =
P– =
P– =
P– =
P– =
P1,946,622
Loans and receivables:
Cash equivalents 1,450,399 – – – – – 1,450,399
Receivables - net 5,839,686 – – – – – 5,839,686
=9,236,707
P =
P– =
P– =
P– =
P– =
P– =
P9,236,707
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
111
aggregate exposure on all outstanding derivatives to any individual counterparty, taking into
account its credit rating. PAL also enters into master netting arrangements and implements
counterparty and transaction limits to avoid concentration of counterparty risk.
The table below shows the maximum counterparty exposure before taking into account any
collateral and other credit enhancements of the Group as of March 31:
2011 2010
(In Thousands)
Cash in banks and cash equivalents,
excluding cash on hand P
=4,436,086 =3,150,673
P
Receivables - net 4,975,642 5,279,662
Investment in MAC 281,600 242,000
Derivative instruments 148,498 193,211
Margin deposits, lease deposits and others 6,804,007 5,360,643
P
=16,645,833 =14,226,189
P
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 March 31, 2011 and
2010 amounted to P =1.02 billion and P =1.11 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 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 assests 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 only a few days. An analysis of past
due accounts, by age, is discussed in the succeeding section.
112
The tables below show the credit quality of receivables and an aging analysis of past due accounts:
2011
Past Due but not Impaired Impaired
High Standard Substandard Over 30 Over 60 Over 90 Financial
Grade Grade Grade Days Days Days Assets Others Total
(In Thousands)
General traffic:
Passenger = 3,053,189
P P
=53,175 P
=35,508 P
=49,485 P
=83,430 P
=30,776 P
=131,309 P
=44,276 P
= 3,481,148
Cargo 391,453 24,482 − 13,022 − 13,067 278,462 − 720,486
IATA 199,850 − − − − − − − 199,850
Others − − 1,389 1,476 1,953 434 50,788 − 56,040
Non-trade* − − 178,754 104,266 174,110 160,262 1,138,028 306,851 2,062,271
Total P
=3,644,492 P
=77,657 P
=215,651 P
= 168,249 P
=259,493 P
=204,539 P
= 1,598,587 P
=351,127 P
= 6,519,795
*Excludes receivables arising from statutory requirements amounting to P3,251,519.
2010
Past Due but not Impaired Impaired
High Standard Substandard Over 30 Over 60 Over 90 Financial
Grade Grade Grade Days Days Days Assets Others Total
(In Thousands)
General traffic:
Passenger =
P2,954,604 =334,701
P =6,431
P =39,131
P =126,679
P =43,434
P =151,815
P =78,399
P =3,735,194
P
Cargo 473,563 13,587 – – – – 87,910 – 575,060
IATA 198,827 – – – – – – – 198,827
Others – – 8,922 7,020 3,170 952 62,954 – 83,018
Non-trade* – – 278,404 120,474 10,734 365,544 1,136,623 215,132 2,126,911
Total =3,626,994
P =348,288
P =293,757
P =166,625
P =140,583
P =409,930
P =1,439,302
P =293,531
P =6,719,010
P
*Excludes receivables arising from statutory requirements amounting to P3,227,301.
28. Financial Instruments
Fair Values of Financial Instruments

The table below presents a comparison by category of the carrying amounts and fair values of the
Group’s financial instruments:
2011 2010
Carrying Value Fair Value Carrying Value Fair Value
(In Thousands)
Financial Assets
Cash P
=3,869,578 P
=3,869,578 =1,946,622
P =1,946,622
P
Loans and Receivables:
Cash equivalents 671,001 671,001 1,450,399 1,450,399
Receivables - net
General traffic 3,996,965 3,996,965 4,289,465 4,289,465
Non-trade* 978,677 978,677 990,197 990,197
Margin deposits, lease deposits
and others 6,804,007 6,663,779 5,360,643 5,081,560
12,450,650 12,310,422 12,090,704 11,811,621
Available-for-sale Investments
Equity investments:
Quoted 288,502 288,502 248,794 248,794
Unquoted 272,472 272,472 283,883 283,883
560,974 560,974 532,677 532,677
Derivative Assets - Fair value
through profit or loss 148,498 148,498 193,211 193,211
P
=17,029,700 P
=16,889,472 =14,763,214
P =14,484,131
P
113
2011 2010
Carrying Value Fair Value Carrying Value Fair Value
(In Thousands)
Financial Liabilities
Financial Liabilities Carried at
Amortized cost:
expenses P
=15,213,603 P
=15,213,603 =13,773,385
P =13,773,385
P
Notes payable 5,591,428 5,591,428 6,101,830 6,101,830
Obligations under finance leases 21,655,253 22,220,468 28,675,906 29,350,153
Other long-term debts 6,354,801 6,281,224 8,644,240 8,830,432
Due to related parties 10,000 10,000 481,090 481,090
Other liability
(under “Accrued expenses” and
“Other noncurrent liabilities”) 1,129,997 1,202,011 1,424,991 1,521,687
49,955,082 50,518,734 59,101,442 60,058,577
Derivative Liabilities - Fair value
through profit or loss 10,288 10,288 453,453 453,453
P
=49,965,370 P
=50,529,022 =59,554,895
P =60,512,030
P
*Excludes receivables arising from statutory requirements (net of allowance) amounting to =
P 395,273 and =
P 560,024 as
of March 31, 2011 and 2010, respectively.
The following methods and assumptions are used to estimate the fair value of each class of
financial instruments:
Cash and cash equivalents and receivables
The carrying amounts of cash and cash equivalents approximate fair value. The carrying amounts
of receivables approximate fair value due to their short-term settlement period.
Other current financial instruments

Similarly, the historical cost carrying amounts of miscellaneous deposits, accounts payable,
accrued expenses and due to related parties approximate their fair values due to the short-term
nature of these accounts.
Equity investments (available-for-sale investments)

The fair values of quoted equity investments are based on market prices. Unquoted equity
investments are carried at cost (subject to impairment).
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 1.46% to 3.86% and
2.12% to 4.21% for March 31, 2011 and 2010, respectively.
Long-term obligations and short-term, fixed rate notes payable

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 range from 1.12% to 3.29% and
0.95% to 3.15% in 2011 and 2010, respectively. The discount rates used for PHP-denominated
loans amounted to 5.03% and 5.20% in 2011 and 2010, respectively. The discount rates used for
JPY-denominated loans amounted to 1.60% in both 2011 and 2010.
114
The carrying value of the short-term, fixed rate notes payable approximates its fair value due to the
short-term settlement period of the notes (i.e., effect of discounting is minimal).
Derivatives
The fair value of forward exchange contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles.
The fair value of interest rate swap transactions is the net present value of estimated future cash
flows.
The fair values of fuel derivatives that are actively traded in an organized and liquid market are
based on published prices. In the absence of an active and liquid market, and depending on the
type of instrument and the underlying commodity, the fair value of fuel 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. The fair values of
fuel derivatives with extendible or cancelable features are based on quotes provided by
counterparties.
Derivative Financial Instruments

The derivative financial instruments set out in this section have been entered into to achieve
PAL’s risk management objectives, as discussed in Note 27. PAL’s derivative financial
instruments are accounted for at fair value through profit or loss.
The following table provides information about PAL’s derivative financial instruments
outstanding as of March 31 and the related fair values:
2011 2010
Asset Liability Asset Liability
(In Thousands)
Fuel derivatives P
=130,701 P
=6,077 =179,307
P =443,444
P
Currency forwards 17,797 4,211 13,451 1,766
Structured currency derivatives − − 453 8,243
P
=148,498 P
=10,288 =193,211
P =453,453
P
As of March 31, 2011 and 2010, the positive and negative fair values of derivative positions that
will settle in 12 months or less are classified under “Other current assets” (P=148.50 million in
2011 and P =193.21 million in 2010) and “Accrued expenses” (P =10.29 million in 2011 and
=286.56 million in 2010), respectively. The negative fair values of derivative positions that will
P
settle in more than 12 months are classified under “Other noncurrent liabilities” (nil in 2011 and
=166.90 million in 2010). The derivative asset (liability) balances include amounts arising from
P
derivative settlements that are currently due to (due from) PAL which amounted to
=45.06 million and (P
P =60.06 million) as of March 31, 2011 and 2010, respectively.
Fuel derivatives
PAL is dependent on jet fuel to run its operations, and jet fuel costs have become a larger portion
of PAL’s expenses due to the increase in all energy prices over the years. Approximately 39.58%
and 33.89% of its operating expenses represent jet fuel consumption for 2011 and 2010,
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.
115
PAL accounts for some of its fuel derivatives as cash flow hedges. However, there are no
outstanding fuel derivatives accounted for as cash flow hedges as of March 31, 2011 and 2010.
The unrealized positive fair value after tax included under “Cumulative translation adjustment, net
of deferred income tax” included as part of “Other components of equity” in the equity section of
the consolidated statements of financial position from these fuel derivatives amounted to nil and
P
PAL’s fuel derivatives not accounted for as cash flow hedges still provide economic hedges
against jet fuel price risk. These derivatives include leveraged collars, spreads, written calls,
swaps and other structures with extendible, cancelable or knock-out features. These fuel
derivatives are carried at fair values in the consolidated statement of financial position, with fair
value changes being reported immediately in the consolidated profit or loss. As of March 31,
2011 and 2010, the outstanding notional amounts of fuel derivatives assets and liabilities not
accounted for as cash flow hedges totaled 360,000 and 120,000 barrels, and 2,205,000 and
1,725,000 barrels, respectively.
During fiscal year 2009, PAL incurred P =5.30 billion loss resulting from the early termination of
several fuel hedging contracts before maturity date and P
=2.85 billion loss from restructuring deals.
The pretermination includes fuel derivatives previously designated as cash flow hedges (see
discussion under Cash flow hedges).
Interest rate swaps
The interest rate swap agreements relative to the financing of two Airbus 330-300 aircraft have
aggregate notional amounts of $36.08 million as of March 31, 2009 and expired on August 27,
2009 and September 24, 2009. Under the agreements, PAL agreed with the counterparties to
exchange, at semi-annual intervals, the difference between PAL’s fixed interest rates and the
counterparties’ floating interest rates. The effect of these swap agreements is to effectively fix
PAL’s interest rate exposures under these financing agreements to rates ranging from 6.50% to
6.61%. As discussed under “Aircraft secured claims”, the unpaid swap costs amounting to P =51.94
million as of March 31, 1999 were converted into long-term liabilities in 1999 and included as part
of the outstanding principal balances of the related “Aircraft secured claims” (see Note 15). There
are no outstanding interest rate swaps as of March 31, 2011 and 2010.
Financing charges in the consolidated statements of comprehensive income include swap costs on
the interest rate swap agreements of nil and P
=38.75 million for the years ended March 31, 2011
and 2010, respectively.
Currency forwards
PAL’s currency forwards are carried at fair value in the consolidated statements of financial
position, with the fair value changes being reported immediately in the consolidated profit or loss.
PAL’s outstanding currency forwards consist of short term buy USD and sell various currencies
(i.e., JPY, SGD, AUD). The aggregate notional amount in USD is equal to $22.64 million and
$8.67 million as of March 31, 2011 and 2010, respectively. The net positive fair value of these
forwards amounts to P =13.59 million and P =11.69 million as of March 31, 2011 and 2010,
respectively.
Structured currency derivatives

PAL enters into structured currency derivatives consisting of option structures with combination of
long calls and short put. 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 the
consolidated profit or loss. Outstanding structured currency derivatives as of March 31, 2010 are
composed of options to buy USD and sell various currencies (i.e., AUD, JPY, CAD and SGD). As
of March 31, 2010, the contracts have bought and sold options with translated notional amounts of
$21.22 million and $17.20 million, respectively. The net fair value of these option structures as of
116
March 31, 2010 amounts to (P =7.79 million). There are no outstanding structured currency
derivatives as of March 31, 2011.
Cash flow hedges

For the year ended March 31, 2010, the effective portion of the positive fair value changes on
PAL’s cash flow hedges that were deferred in equity amounted to P =277.08 million (net of tax),
which is the effective fair value changes on fuel derivatives previously designated as cash flow
hedges and which were preterminated in fiscal year 2009. These amounts were recognized in the
consolidated profit or loss at the same time as the corresponding hedged items are recognized in
the consolidated profit or loss.
Below is a rollforward of PAL’s “Cumulative translation adjustments” on cash flow hedges for the
years ended March 31:
2011 2010
(In Thousands)
Beginning of year P
=277,077 =1,155,266
P
Items recognized as other comprehensive income:
Changes in fair value of cash flow hedges* − (4,578)
Transferred to profit or loss** (222,415) (1,282,505)
Tax effects of items taken directly to or
transferred from equity 66,729 376,373
Foreign exchange difference (121,391) 32,521
(277,077) (878,189)
End of year P
=− P277,077
=
* Refers to the mark-to-market change of the interest rate swaps agreements during the year, which eventually matured
and settled in August and September 2009.
**The amount from fuel derivatives transferred to consolidated profit or loss is included in flying operations expense as
mark-to-market gain or loss and the amount from interest rate swaps is included as part of financing charges as swap
income or cost.
Fair value changes on derivatives

The net changes in the fair values of all derivative instruments for the years ended March 31 are as
follows:
2011 2010
(In Thousands)
Beginning of year (P
=200,186) (P
=3,391,671)
Net changes in fair values of derivatives:
Designated as accounting hedges − (4,578)
Not designated as accounting hedges (66,818) 1,467,170
(66,818) 1,462,592
Fair value of settled instruments** 359,303 1,634,473
Foreign exchange difference 855 94,420
End of year* P
=93,154 (P
=200,186)
* Excludes balances that are currently due to (from) the Group amounting to = P45.06 million and (P=60.06 million) as of
March 31, 2011 and 2010, respectively.
** Includes fuel derivatives, interest rate swaps, currency forwards and structured currency derivatives.
117
Fair Value Hierarchy
As of March 31, 2011 and 2010, the Group’s quoted available-for-sale financial investments
measured at fair value under the Level 1 hierarchy amounted to P =288.50 million and
=248.79 million, respectively. The Group’s financial assets measured at Level 2, which consist of
P
derivative assets, amounted to =
P148.50 million and P =193.21 million as of March 31, 2011 and
2010, respectively, and financial liabilities measured at Level 2, which consist of derivative
liability of P
There were no transfers between the levels of fair value hierarchies in 2011 and 2010.
29. 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:
For the fiscal year ended March 31, 2011
Consolidated
Airline Adjustments Financial
Business and eliminations Statement
(In Thousands)
Revenue P
=71,442,322 P
=2,924,835 P
=74,367,157
Interest income 240,091 72 240,163
Interest expense (1,661,570) − (1,661,570)
Depreciation and amortization (6,814,978) (37,409) (6,852,387)
Net income 2,859,829 133,089 2,992,918
Reportable segment assets 72,270,500 294,890 72,565,390
Reportable segment liabilities 67,176,224 12,138 67,188,362
Consolidated
(In Thousands)
Revenue =61,714,270
P =2,133,011
P =63,847,281
P
Depreciation and amortization (7,359,557) (30,467) (7,390,024)
Net income (loss) 951,008 (763,767) 187,241
118
Consolidated
(In Thousands)
Revenue =71,797,517
P =1,534,539
P =73,332,056
P
Depreciation and amortization (6,195,231) 66,944 (6,128,287)
Net loss (10,847,949) (1,945,184) (12,793,133)
The Group’s major revenue-producing asset is the fleet owned by the Group, which is employed
across its route network (see Note 10).
119
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax: (632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001

SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors

PAL Holdings, Inc.
7th Floor, Allied Bank Center
6754 Ayala Avenue, Makati City
We have audited, in accordance with Philippine Standards on Auditing, the consolidated financial
statements of PAL Holdings, Inc. and its subsidiaries included in this Form 17-A and have issued
our report thereon dated July 7, 2011. 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 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 68.1 and
SEC Memorandum Circular No. 11, Series of 2008, 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 financial data
required to be set forth therein in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Catherine E. Lopez
Partner
CPA Certificate No. 86447
SEC Accreditation No. 0468-AR-1
Tax Identification No. 102-085-895
BIR Accreditation No. 08-001998-65-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641533, January 3, 2011, Makati City
July 7, 2011
120
A member firm of Ernst & Young Global Limited

PAL HOLDINGS, INC. and SUBSIDIARIES
Schedule F Long-term Obligations
March 31, 2011
(Amounts in Thousand Pesos)
Amount Amount Amount

Type of Obligation Authorized by Shown as Shown as
Indenture Current Long-term Total Remarks
Obligations under finance leases relating to:

Boeing 747-400 aircraft P - P 700,215 P 2,100,600 P 2,800,815
Airbus 320-200 aircraft 1,008,064 8,661,155 9,669,219
Airbus 340-300 aircraft 1,059,676 1,513,593 2,573,269
Airbus 330-300 aircraft - 2,255,219 4,356,731 6,611,950
- 5,023,174 16,632,079 21,655,253
Long-term debt:
Secured loans - 707,637 4,364,544 5,072,181 See Annex A
Estimated terminated operating lease claims* - 119,372 - 119,372 See Annex B
Unsecured claims* - 1,163,248 - 1,163,248 See Annex C
- 1,990,257 4,364,544 6,354,801
P - P 7,013,431 P 20,996,623 P 28,010,054
* Net of imputed interest
121
Schedule F Long-term Obligations - ANNEX A
March 31, 2011
Type of Obligation Amount Shown Amount Shown as Floating Payment Issue Maturity
as Current Long-term Interest Rate Term Date Date
Secured Loans:
From a local bank P 390,238 P 2,301,275 3 month LIBOR plus quarterly 2008 2015
margin of 3%
From a syndicate of local banks 317,399 2,063,269 3 month LIBOR plus quarterly 2008 2015
margin of 3%
P 707,637 P 4,364,544
122
Schedule F Long-term Obligations - ANNEX B
March 31, 2011
Amount Amount Shown Lease Expiry Early Lease Termination

Aircraft Type Shown as Current as Long-term Date Date
Net Present Value Net Present Value
Estimated Terminated Operating Lease Claims
B747-200 P 115,552 P - 1997, 1999, 2000 1998
SD-360 3,820 - 1999 1998
P 119,372 P -
Restructured Payment terms:

June 7, 2000 - 5%
June 7, 2009 - 31%
June 7, 2010 - 32%
June 7, 2011 - 32%
123
Schedule F Long-term Obligations - ANNEX C
March 31, 2011
Original Original Floating Original Original

Amount Shown Amount Shown Fixed Interest Rate Issue Maturity
Type of Obligation as Current as Long-term Interest Rate Date Date
Net Present Value Net Present Value
Unsecured Claims
U.S. Dollar denominated loans:
US$178.5 floating rate note - P 788,506 P - - 2% per annum over 01/16/97 01/16/00
6 month LIBOR
Others Loans 292,440 - 10.75% 1.5-4.5% per annum over various various
1 month LIBOR
1,080,946 -
Peso denominated loans 82,302 - 19.50% weighted average yield rate forvarious various
364-day treasury bill
P 1,163,248 P -
Restructured payment terms:

June 7, 2000 - 5%
June 7, 2009 - 31%
June 7, 2010 - 32%
June 7, 2011 - 32%
124
SCHEDULE I: CAPITAL STOCK
MARCH 31, 2011
Title of Issue No. Of shares reserved Number of shares held by

No. of shares No. of shares issued for options, warrants,
authorized and outstanding conversion and other Affiliates Directors, Officers Others
rights and Employees
Common Stock 20,000,000,000 5,421,512,096 - 5,297,280,230 9,000 124,222,866
125
PAL HOLDINGS, INC.
SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
MARCH 31, 2011
Deficit as of March 31, 2010 P (25,229)

Add: Net loss during the year closed to retained earnings (4,432)
Deficit as of March 31, 2011 P (29,661)
126

PAL 17A Mar2011

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COVER SHEET

(Company’s Full Name)

(Business Address: No. Street City/Town/Province)

Susan T. Lee 817-8710

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

To be accomplished by SEC Personnel concerned

File Number LCU

SEC FORM 17-A

1. For the fiscal year ended March 31, 2011

2. SEC Identification Number PW- 94 3. BIR Tax Identification No. 430-000-707-922

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

8. (632) 816-3311 local 3687 / 817-8710

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

Number of Shares of Common Stock Outstanding

Common Stock 5,421,512,096 shares

12. Check whether the registrant:

14. Not applicable

DOCUMENTS INCORPORATED BY REFERENCE

Philippine Airlines, Inc.

i) Percentage of sales or revenues and net income contributed by foreign sales

PAL's operations for FY2010-11 are described as follows:

Systemwide Operations: FY2010-11

Net Passenger Revenues Php millions 62,667.0

Net Cargo Revenues Php millions 5,941.3

Revenue Passenger Kms (‘000) 19,956,951

No. of Passengers 8,989,068

International Passenger Services

Asia and Australia

Domestic Passenger Services

Joint Services and Code Share Agreements

Frequent Flyer Programs

(ii) Distribution methods of products or services

(iii) Status of any publicly-announced new product or service

PAL's Market and Capacity Share:

Route Market Capacity Airline Competitors

Transpacific 37.7% 35.9% Delta Airlines, Hawaiian Airlines, Air

Asia and 31.1% 32.4% Japan Airlines, Cathay Pacific, Singapore

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

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

a. The franchise tax of PAL is abolished;

b. PAL shall be subject to the corporate income tax;

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

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

The US Department of Transportation’s Federal Aviation Administration (FAA) had previously

xii) Cost and effects of compliance with environmental laws

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

No cost to PAL for period covering FY2010-2011.

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

No cost to PAL for period covering FY2010-2011.

No cost to PAL. Certificate of Non-Coverage issued to IFC, Maintenance Base Complex

Cost: approximately Php 60,000 for disposal of busted fluorescent lamps.

7. Presidential Decree No. 1067, the “Water Code of the Philippines”.

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

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

As of March 31, 2011, PAL has a total workforce of 7,161 as follows:

Classification Number of Employees

Competition - PAL is exposed to increased competition with major international and

Financial market risk- fluctuations of interest and currency rates.

Procedures undertaken to manage risks

PAL’s fleet as of March 31, 2011 consists of:

Under Finance Lease: