PAL suspends Manila-Riyadh flights until April 8 amid conflict

FLAG CARRIER Philippine Airlines (PAL) said it is suspending its Manila-Riyadh flights until April 8 due to the conflict in the Middle East.

“This precautionary measure is being taken considering the security situation affecting parts of the Middle East and the resulting operational uncertainties in certain regional airspace corridors and airport operations,” it said in a statement on Monday.

PAL said it will continue to monitor developments and coordinate with aviation authorities to determine when it can safely resume operations.

The airline said cargo operations on the affected routes are also disrupted and that it is exploring alternative routing options to ensure the movement of essential goods.

Meanwhile, PAL Holdings, Inc., the listed operator of Philippine Airlines, said its Ba2 rating from Moody’s Ratings is expected to expand its access to diverse funding sources, while validating gains in operational reliability and financial performance.

“This inaugural Ba2 rating is a powerful validation of progress we have made over the past five years — enhancing operational reliability, rebuilding our network with discipline, and improving our cost and capital structure,” PAL President Richard Nuttall said in a statement on Monday.

According to Moody’s March 27 rating report, the company was assigned a stable Ba2 corporate rating, reflecting its role as the national flag carrier and its consistent market share across domestic and international routes.

Moody’s said the stable outlook indicates PAL’s operating and financial metrics are expected to remain aligned with its rating over the next 12 to 18 months, allowing some flexibility to absorb potential downside risks.

“The table outlook reflects our expectations that PAL’s operating and financial metrics will remain commensurate with its rating over the next 12 to 18 months, with some flexibility to absorb potential downside risks. We also expect PAL to effectively expand its fleet and maintain or expand its market shares both for domestic and international travel,” Moody’s said.

PAL said the Ba2 rating reflects its creditworthiness and economic resilience, noting that it is three notches below the country’s sovereign credit rating of Baa2.

“Importantly, having this rating will strategically broaden our access to diverse funding sources and provide our stakeholders with independent assurance of PAL’s financial resilience in a complex global aviation landscape,” Mr. Nuttall said.

Moody’s said PAL benefits from a stable position in the aviation industry and could see a rating upgrade if it achieves significant improvements in its operating and financial profile.

“Alongside sustained or expanded market share. Demonstrated success in fleet expansion will also be necessary for an upgrade,” it said.

In January, PAL received its first Airbus A350-1000 aircraft and expects to take delivery of four more out of its nine remaining orders this year.

However, Moody’s said PAL’s rating could be downgraded if its operating and financial performance weakens, such as if its earnings before interest and taxes (EBIT) margin falls below 7%.

“The rating could also come under pressure if PAL’s domestic or international market shares deteriorate significantly or the company faces liquidity pressures. Any indication of fuel supply disruptions or restrictions could also pressure PAL’s credit profile,” it said.

Moody’s also cited risks including airport infrastructure constraints, exposure to fuel price volatility, weaker foreign exchange, and the company’s history of restructuring under Chapter 11.

“While PAL has limited direct exposure to the Middle East, it remains indirectly exposed to fuel price volatility and potential demand weakness arising from geopolitical and macroeconomic uncertainty,” it said.

At the local bourse on Monday, shares in PAL Holdings rose one centavo, or 0.29%, to close at P3.39 apiece. — Ashley Erika O. Jose