PAL Holdings, Inc. Sustainability Report 2019 Contents 03 Chairman’s Message 30 Health and Safety 04 About PAL Holdings, Inc. 41 Employee Training and Development Philippine Airlines PAL express 51 Energy Efficiency Our Vision, Mission and Core Values Buong-Pusong Alaga 58 Other Essential Topics Corporate Governance 12 Company Highlights Data Privacy and Security Awards and Recognition Our People and Values Customer Satisfaction Labor Management Practices Fleet Information Corporate Social Responsibilities Route Network Economic Performance Challenges and Outlook 27 About this Report Purpose, Reporting Standards, Scope and Coverage Materiality Assessment 2 The Chairman's Message To our dear stakeholders, Aviation (CORSIA). It is a global climate change initiative that sets a rigorous target of “carbon-neutral PAL Holdings, Inc. (PHI)’s flight path to a higher level growth” by capping future jet engine carbon of service excellence was affirmed by Skytrax in 2019 emissions at 2020 levels and cutting net emissions to when we won the World’s Most Improved Airline half of the 2005 levels by 2050. award after being re-certified as a 4-Star Global Airline - all thanks to the combined efforts of our two Environment: The Engine of Our Sustainable Success airline companies, Philippine Airlines (PAL) and PAL We seek to achieve those targets by maximizing fuel- express (PALex). Our investments have produced an saving measures and deepening a company-wide enhanced safety and service culture, upgraded culture of environmental protection. Having replaced products and processes, and a stronger global gas-guzzling older fleet with new-generation fuel- network anchored on a young fleet of advanced efficient aircraft, PHI will prepare over the long term aircraft and highly professional flight and ground for a switch to sustainable aviation fuels. crews. Winning with The Heart of the Filipino Sustainability Begins with the Focus on People The flag carrier works constantly to boost tourism, We commit to a sustainable business that focuses on facilitate trade, and uplift the national economy by the health, safety, knowledge, skills, values and bridging our island nation, providing direct links to key attitudes of our most valuable assets – our international markets, and serving the worldwide employees, supported by robust training, state-of- diaspora of Filipinos along with business and leisure the-art equipment and cutting-edge innovations such travelers from all over. In carrying out this sacred as virtual training modules. mission, we will employ discipline, creativity and technology to ensure sustainability for our Responsible Citizenship in the Aviation Industry stakeholders, always representing the Best of the PAL and PALex are active participants in the Carbon Filipino. DR. LUCIO C. TAN Offsetting and Reduction Scheme for International Chairman and Chief Executive Officer 3 About PAL Holdings, Inc. PAL Holdings, Inc. (the Parent Company or PHI) was incorporated in the Philippines on May 10, 1930 to engage in the business of a holding company. On October 5, 1979, the Parent Company applied and was granted an extension of its corporate life by the Philippine Securities and Exchange Commission (SEC) for another 50 years from May 1980. The Parent Company and its subsidiaries are primarily engaged in air transport of passengers and cargo within the Philippines and between the Philippines and several international destinations. The Group operates through its major subsidiaries: Philippine Airlines, Inc., the Philippine national flag carrier, and Air Philippines Corporation, a subsidiary under common control that was indirectly acquired through Zuma Holdings Management Corporation in 2017. PHI's registered office address is 8th Floor, PNB Financial Center, President Diosdado Macapagal Ave., CCP Complex, Pasay City, Metro Manila. 4 About PAL Holdings, Inc. Philippine Airlines Pioneering in end-to-end airline operations that constitute an industry of its own, Philippine Airlines, Inc. (PAL) lives on with its original name and the national colors, shining through for almost eight decades. PAL stemmed from the Philippine Aerial Taxi Company established in 1931 by co-founder Andres Soriano, who shut it down in 1939 and replaced it with Philippine Air Lines two years later. Braving the imminence of war, PAL had its inaugural flight with only five passengers from Makati to Baguio on March 15, 1941. A private entity for much of its existence, PAL was brought under government ownership in the 1970s and 1980s, reverting to private hands in the early 1990s. Today, PAL is the only privately-owned major flag carrier in Southeast Asia. Its Chairman and CEO, Dr. Lucio C. Tan, is PAL's longest-serving chief executive. Through the years, designated as the "national flag carrier" by R.A. 2232, PAL has been recognized to play a central role in boosting the growth of the Philippine economy and the emergence of a nation- wide tourism industry. PAL's flights helped to bridge the various regions of the archipelagic nation, while forging links to the rest of the world that promoted trade, commerce and public mobility. PAL is a major partner to nation- building as it brings the best of the Philippines to the world and the best of the world to the country. PAL also had the privilege of flying Philippine presidents on most of their state visits, as well as both St. John Paul II and Pope Francis during their respective visits to the Philippines and beyond. A multitude of beauty queens, celebrities and other VIPs also availed PAL's services through the years. 5 About PAL Holdings, Inc. Philippine Airlines (cont’d) During calamities and times of urgent public need, PAL has engaged in relief services by flying home Filipino evacuees from crisis-torn countries in the Middle East, Africa and elsewhere, while providing critical services to communities in need after typhoons and other natural disasters. Today, PAL is the Philippines' largest international airline and the only full-service Filipino air carrier offering Business Class, Premium Economy and Regular Economy services. Its growing fleet, one of the world's youngest, consists of modern high-technology aircraft such as the Boeing 777 along with the Airbus A350 and A330 for long-haul routes and the A320/A321 family for regional and domestic routes. PAL's network now stretches across the world. The flag carrier operates from four hub airports (Manila, Cebu, Clark and Davao) in the Philippines to an inclusive total of 32 domestic destinations and 41 points in Asia, Australia/Oceania, the Middle East, Europe and North America. PAL operates the country's only direct air links to mainland U.S.A., Hawaii, Canada, New Zealand and Western Europe, as well as to Sapporo (Japan) and Brisbane (Australia). PAL is a member of the International Air Transport Association (IATA), Association of Asia Pacific Airlines (AAPA), Air Carriers Association of the Philippines (ACAP), Flight Safety Foundation (FSF), and the National Fire Safety (NFS). PAL is part of the AAPA Environment Working Group, a sponsor of the Philippine Eagle Foundation. PAL also signed up with the United for Wildlife Transport Taskforce Buckingham Palace Declaration, which aims to reduce illegal trade of wildlife. 6 About PAL Holdings, Inc. PAL...Shining Through the Years First airline in Asia (1941) First Asian airline to cross the Pacific (1946) First South East Asian airline to fly to Europe (1947) First airline to be honored by Les Chaines de Rotisseurs (1979) First Asian airline to fly to China (1979) First to have B747-200 with Skybeds (1980) First Philippine carrier to be IOSA-certified (2006) First to launch PAL Mobile App in the Philippines (2009) First to accept BancNet ATM cards as form of payment online (2009) First to show nationwide crowd-sourced inflight safety video (2017) First to have a Skytrax 4-star rating in the Philippines (2018) Change of hands over the years February 1941 September 1948 January 1965 January 1992 September 1998 June 1999 October 2007 April 2012 October 2014 Philippine Airlines Government Government PAL was Asian financial crisis PAL is placed PAL exits from San Miguel Lucio Tan Group was established as became the relinquished control privatized thru PR led to suspension of under a 10- receivership two Corporation takes reassumes a private company majority over PAL, only to be Holdings operations, but year rehabilitation years ahead of the management management stockholder reassumed in 1977 resumed two weeks program 10-year plan control of PAL control of PAL after 7 About PAL Holdings, Inc. PAL express (PALex) Air Philippines Corporation, currently doing business under the name and style of Philippine Airlines or PAL express (PALex), was incorporated in the Philippines on February 8, 1995 while commercial operation began on February 1, 1996. It is the 3rd biggest airline in the country operating Airbus A321-200s, A320-200s, and De Havilland DASH 8- 400s and DASH 8-300s. It was in 1999 when the Lucio Tan Group of Companies took over management of PALex. The Lucio Tan Group of Companies’ entry into picture resulted in a big improvement in the Company as it allowed PALex to continue to provide low-cost air travel to the riding public. The increase in routes and passenger sales allowed PALex to significantly increase its partnership with Philippine Airlines, including the merging of timetables and ticket sales. The strong relationship with the country’s flag carrier also allowed PALex to move into the PAL terminal at the Ninoy Aquino International Airport. PALex was known for its safety, professionalism and first-class service. PALex is the 2nd Philippine carrier that was included in the IATA Operational Safety Audit Registry in 2014. The airline was also certified by SGS last December 2018 on the ISO 9001:2015 Quality Management System. This certification is renewed annually. 8 About PAL Holdings, Inc. PAL express (PALex) (cont’d) PAL express is a member of the Air Carriers Association of the Philippines (ACAP), Philippine Society for Quality (PSQ), People Management Association of the Philippines (PMAP), Philippine Society for Talent Development (PSTD), and the Employers Confederation of the Philippines (ECOP).