Ceb 2016 Annual Report

Contents
2 Who We Are
4 Message to Shareholders
8 Board of Directors
10 Senior Management and Consultants
12 Key Operating Statistics and Financial Highlights
14 Route Map
16 Our Fleet
18 Our Products
24 2016 Highlights
32 Financial Statements
1
OUR MISSION
Cebu Pacific: The most successful

low-cost carrier in the world.
OUR VALUES
Accountability We take responsibility for what we say,

the decisions we make, and the actions we take.
Respect We uphold the dignity and individuality of each person.
Excellence We strive to be the best in everything we do.
Fun We enjoy our work and provide quality service

in a fun-filled manner.
Integrity We are honorable. We do what is right, not what is expedient.
Teamwork We value and harness the strengths of each team member.
We collaborate and cooperate with each other

to achieve our goals.
2
OUR VISION To bring people together
Why everyone flies. through safe, affordable,

reliable and fun-filled air travel.
We are committed to innovation
and excellence in everything we do.
We are an employer of choice

providing opportunities for
professional and personal growth.
We have a deep sense of family

values throughout our airline.
We enhance the quality of life of

the communities we serve and are
an active partner in our nation’s
progress.
We offer our shareholders a fair

return on their investments.
3
Lance Y. Gokongwei
PRESIDENT AND CEO
Ricardo J. Romulo
CHAIRMAN
4
Message to Shareholders
The year 2016 was a remarkable year for your CEB maintained leadership
Company. The Philippine economy once again in the domestic market
posted a solid growth of 6.8% in 2016, one of Fueled by strong domestic demand, CEB
the fastest GDP growths in Asia, spurred by remained the market leader on all important
increased consumer spending, investments, metrics. We continue to have the highest
and election-related spending. The growth of domestic market share, averaging 58% market
the economy coupled with people’s aspirations in 2016 based on CAB statistics. We flew 14.37
to travel served as a backdrop of the sustained million passengers domestically, up by 2.6% from
growth of your Company. last year, even with decreased seat capacity of
2.5%. This lead to a strong domestic seat load
CEB net income surged 122.3% to P9.75 billion factor posted at 88.6%, up by 4.4 points from
We are happy to report that CEB posted a last year. We bolstered our domestic network by
record-breaking consolidated net income launching direct flights on those underserved
of P9.75 billion for 2016, more than double inter-island routes such as Cebu to Calbayog,
previous year’s net income of P4.39 billion, Ormoc and Roxas. With this, we continued to fly
for a net margin of 15.8%. Consolidated total the most destinations through the most number
revenues reached P61.90 billion for 2016, 9.6% of routes and flights, as we flew to total of 36
higher than previous year, as we flew a total domestic destinations through 59 routes and
of 19.13 million passengers, 4.1% over 18.38 2,256 weekly flights.
million passengers flown in 2015. Consolidated
passenger revenues grew 9.2% to P46.59 billion,
while consolidated cargo revenues increased by “Fueled by strong domestic
3.0% to P3.56 billion. Ancillary revenue grew the demand, CEB remained
fastest at 9.6% to P11.74 billion.
the market leader on all
We continued to deliver industry leading important metrics.
operating performance, posting a healthy 86%
seat load factor and average daily aircraft
We continue to have the
utilization of 12.7 block hours per day for our highest domestic
Airbus fleet. Jet fuel prices continued to move in
our favor, averaging $52.83 per barrel in 2016
market share...”
from $64.79 per barrel in 2015. These drove our
EBITDAR to increase by 20.0% to P23.62 billion,
leading to a record EBITDAR margin of 38.2%,
while EBIT increased 26.3% to P12.25 billion, for
a notable 19.8% EBIT margin.
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“We are actively and continuously posted a unit cost of P1.91 per available seat
kilometer (ASK), one of the lowest in the industry,
managing our capacity to allow us allowing us to sustain lower fare offerings amidst
to meet expected demand.” increased competition.
CEB strengthened international presence With these, CEB’s international traffic grew 9.0%
In March 2016, we launched Manila to Guam, to 4.76 million passengers in 2016. We continued
CEB’s first US destination. We are the first low- to build our international market, as we flew to
cost carrier to operate this route. On the month 30 international destinations through 43 routes
that it launched, Filipino tourist arrivals in Guam and 564 weekly flights.
grew by 125% compared to the same month
of last year, based on statistics from the Guam CEB’s robust balance sheet supports growth
Visitors Bureau (GVB). Our balance sheet likewise remained strong.
Total assets stood at P100.51 billion, higher by
Last November 2016, we opened our regional P15.69 billion compared to Dec 31, 2015 as we
office in Korea as part of our regional promotion took a total of 6 aircraft last year (3 A320 in
and expansion. The Korea branch office provides 1st quarter, and 1 A330 and 2 ATRs in the last
tickets sales, reservations, cargo services and quarter) less the 4 A319 that we sold. With cash
customer support. Also in 2016, we joined the balance at P10.3 billion, our net debt-to-equity
Value Alliance, the world’s first, pan-regional low- remains healthy at 0.97 times, allowing us to
cost carrier alliance. Together with seven other continue to fund payments for upcoming aircraft
LCCs in the region, CEB will deliver greater value, acquisitions.
connectivity and choice for travel throughout
Southeast Asia, North Asia and Australia, as they Outlook
bring their extensive networks together. This Domestically, we continue to see growth
means more destinations, more routing options opportunities in the underserved inter-island
and greater convenience for the customers. routes through Cebgo and the ATR fleet. We
jump-started 2017 with four new routes, two of
The year 2016 was not without its challenges. which are in the fast-rising areas in Luzon, from
Our long-haul international business was Manila to Masbate and Tablas, and the other
particularly challenging, as seat capacity into two from the City of Golden Friendship, from
Middle East routes increased significantly. CEB Cagayan de Oro to Tagbilaran and Bacolod.
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Similarly, on short-haul international, we remain Our gratitude and appreciation
confident at our growth prospects. Starting We would like to thank you, our shareholders,
December 2016, we have upgraded our Hong and the members of our Board of Directors
Kong, Taipei and Narita flights to Airbus A330 for your steadfast trust and confidence in
allowing us to offer more seats to our customers. our Company. We truly value your trust and
Also, with the ABB’s Air Connection Engine (ACE) this has inspired us to continue to do well.
platform expected to go live by second quarter We also thank our management team, our
of this year, we will be able to serve a wider base dedicated employees and our business partners.
of international passengers. With more than 500 Driven by their passion for better ways, their
million visitors expected to arrive in Asia Pacific invaluable contributions have propelled our
by 2020, the new Value Alliance will connect success. Lastly, our deep gratitude goes to all
travellers to more of the unique destinations our loyal passengers who choose to fly with us
they wish to explore like the different islands in throughout these years and to our future patrons
the Philippines. who motivate us to sustain our successes and
overcome challenges along the way. We affirm
We remain consistently disciplined in our fleet our commitment of providing you with our
expansion plans. We ended the year with 57 trademark year-round low fares, safe and fun
aircraft in our fleet composed of 4 Airbus A319, flights, and effective service. We are very excited
36 Airbus A320, 7 Airbus A330, 8 ATR 72-500 on what lies ahead as we push forward in our
turboprop planes and 2 ATR 72-600. CEB journey to be a representative of a more global
average fleet age at 4.91 years is still one of the and confident Philippines.
youngest fleets in the world. This 2017, we take
delivery of six more ATR 72-600 and one Airbus
A330, and first two Airbus A321 NEO. We will Once again, maraming,
also be delivering out the rest of our Airbus A319
by early 2018 and taking delivery of 30 Airbus
maraming salamat po.
A321 NEO and 8 more ATR 72-600 between
2018 and 2021, to re-fleet our older ATR 72-500.
We are actively and continuously managing our
capacity to allow us to meet expected demand. Ricardo J. Romulo
CHAIRMAN
Lance Y. Gokongwei
PRESIDENT AND CEO
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Board of Directors
John L. Gokongwei, Jr.

DIRECTOR
Ricardo J. Romulo
CHAIRMAN
James L. Go
DIRECTOR
8
Lance Y. Gokongwei
PRESIDENT AND CEO
Frederick D. Go
DIRECTOR
Jose F. Buenaventura
DIRECTOR
Robina Y. Gokongwei-Pe
DIRECTOR
Wee Khoon Oh
DIRECTOR
Antonio L. Go
DIRECTOR
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Senior Management Michael Szucs
and Consultants
CHIEF EXECUTIVE ADVISER
Michael Ivan Shau

VP – AIRPORT SERVICES
Laureen Cansana
CHIEF INFORMATION OFFICER
Nik Laming
GENERAL MANAGER, GETGO
Robin Dui
Rhea Villanueva VP – COMPTROLLER
VP – HUMAN RESOURCES
Rick Howell
EXECUTIVE ADVISER,
GROUND OPERATIONS
Andrew Huang
CHIEF FINANCE OFFICER
10
Atty. JR Mantaring
VP – CORPORATE AFFAIRS
Alex Reyes
VP – CARGO OPERATIONS
Ian Wolfe
EXECUTIVE ADVISER, Candice Iyog
ENGINEERING & FLEET VP – MARKETING
MANAGEMENT & DISTRIBUTION
Joey Macagga
VP – FUEL PROCUREMENT
& FACILITIES Capt. Sam Avila III
VP – FLIGHT OPERATIONS
Alexander Lao
PRESIDENT & CEO, CEBGO
Rosita Menchaca
VP – IN-FLIGHT SERVICES
Jomar Rodriguez
VP – SAFETY & QUALITY
11
Key Operating Statistics
YEARS ENDED DECEMBER 31 2016 VS 2015

2016 2015 2014 INC (DEC) % CHANGE
Passengers carried (‘000) 19,130 18,376 16,870 754 4.1%

Available seats (‘000) 22,251 22,248 20,110 3 0.0%
Seat load factor 86.0% 82.6% 83.9% 3.4 ppts

RPK (million) 21,220 19,872 16,213 1,348 6.8%
ASK (million) 25,989 24,898 20,496 1,091 4.4%
Number of sectors flown 132,056 132,360 122,994 -304 -0.2%

Fleet size at period end 57 55 52 2 3.6%
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Financial Highlights
YEARS ENDED DECEMBER 31 2016 VS 2015

(PHP Million) 2016 2015 2014 INC (DEC) % CHANGE
Total revenues 61,899 56,502 52,000 5,398 9.6%

Total operating expenses 49,648 46,801 47,843 2,847 6.1%
Operating income (loss) 12,251 9,700 4,157 2,551 26.3%
Net income (loss) 9,754 4,387 853 5,367 122.3%
Pre-tax core net income 11,373 8,746 3,320 2,627 30.0%

EBITDAR 23,625 19,700 12,418 3,924 19.9%
Total assets 100,514 84,829 76,062 15,686 18.5%

Total liabilities 67,009 59,873 54,523 7,136 11.9%
Equity 33,505 24,955 21,539 8,550 34.3%
Basic/diluted earnings
per share (Php) 16.1 7.24 1.409 9 122.4%
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International Destinations
Australia Korea
Sydney Busan, Incheon
Brunei Kuwait
Cambodia Macau
Siem Reap
Malaysia
China Kota Kinabalu,
Beijing, Guangzhou, Kuala Lumpur
Shanghai, Xiamen
Qatar
Hong Kong Doha
Indonesia Singapore
Bali
Taiwan
Jakarta
Taipei
Japan
Thailand
Fukuoka, Nagoya,
Bangkok, Phuket
Narita, Osaka
United Arab Emirates
Kingdom of
Dubai
Saudi Arabia
Riyadh United States
Guam
Vietnam
Hanoi, Ho Chi Minh
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Route Maps
& Destinations
Domestic Destinations
Bacolod, Boracay (Caticlan),
Busuanga (Coron), Butuan, Calbayog,
Cagayan de Oro, Camiguin, Cauayan
(Isabela), Cebu, Clark, Cotabato,
Davao, Dipolog, Dumaguete,
General Santos, Iloilo, Kalibo, Laoag,
Legaspi, Manila, Masbate*, Naga,
Ormoc, Osamiz, Pagadian, Puerto
Princesa, Roxas, San Jose (Mindoro),
Siargao, Surigao, Tablas*, Tacloban,
Tagbilaran, Tandag, Tawi-Tawi,
Tuguegarao, Virac, and Zamboanga
*Note: CEB will begin flying Tablas and

Masbate by Feb. 15, 2017
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Our Fleet
CEB capped 2016 with 57 aircraft, comprised of 7 Airbus A330, 36 Airbus A320,
4 Airbus A319, 8 ATR 72-500, and 2 ATR 72-600 planes. Cebu Pacific operates
one of the youngest fleets in the world with an average age of 4.91 years
as of end of 2016.
Airbus
Cebu Pacific ended 2016 with 7 Airbus A330, eco-efficiency, reducing fuel burn by up to 4%
36 Airbus A320, and 4 Airbus A319 turbofan on longer sectors. These ‘Sharklets’ are made
aircraft. from light-weight composites and are 2.4 meters
tall. CEB’s Airbus A320 aircraft are also equipped
The Airbus A330 leads CEB’s Airbus fleet with a with the latest avionics from Honeywell, Thales
436-seating capacity, followed by the A320 with and Rockwell Collins, all global leaders in aviation
180 seats, and the 156-seater Airbus A319. Aside electronics.
from having one of the most modern engines,
Cebu Pacific’s brand-new Airbus A320 is also Between 2017 and 2021, Cebu Pacific will take
equipped with Sharklets—the newly designed delivery of one more brand-new Airbus A330 and
large wing-tip devices that enhance the aircraft’s 32 Airbus A321neo.
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ATR
In 2016, CEB took delivery of two of the 16 ATR 30% more stowage space when compared to
72-600 High Capacity aircraft it ordered at the the 72-500 model. The new 72-600 model is
2015 Paris Airshow. CEB ended the year with 10 also known to have a more efficient fuel burn,
in its ATR fleet, eight of which are its existing which translates to more affordable fares for
72-500 aircraft. everyJuan.
These turboprop aircraft manufactured by Cebu Pacific took delivery of its first ATR 72-600
Avions de Transport Regional (ATR) in Toulouse, aircraft in September 2016, flying to some of the
France, are known for their reliability, ease airline’s newest domestic destinations like Roxas,
of maintenance, and ability to land on short Ormoc, Calbayog, Masbate, and Tablas.
runways—making the ATR the top choice in the
turboprop class. Between 2017 and 2021, Cebu Pacific will
take delivery of 14 more brand-new ATR 72-
Equipped with the high-density Armonia cabin, 600 aircraft to be utilized for the continuous
the new high-capacity 72-600 also has 78 expansion of CEB’s inter-island operations.
slimline seats and wider overhead bins with
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Our Products
Fare Bundles
CEB Fare Bundles offer a simple solution for guests looking to

book their travel essentials in one easy step. Different fare options
are now available to guests with different travel preferences
and requirements: “Fly” is for airfare, “Fly+Bag” is for airfare and
baggage allowance, and “Fly+Bag+Meal” is for airfare, baggage
allowance, and meal.
CEB Fare Bundles are available for all flights to domestic and
international destinations.
GetGo
GetGo is CEB’s lifestyle rewards program that allows guests to
accumulate points with their Cebu Pacific and Cebgo flights, as
well as with their everyday expenses and transactions with GetGo
partners. With enough accumulated points, members may redeem
free flights. For more information, guests can visit the GetGo
website: www.GetGo.com.ph.
Mobile App
Cebu Pacific’s official Mobile

App is now available for
download on iOS and Android
devices to make it even more
convenient for guests to book
and check-in for their flights
while on the go.
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Fast Check-in Options
Cebu Pacific provides an enhanced check-in experience by offering many digital check-in channels, so
guests can get their seat and boarding pass even before they get to the airport.
Mobile Check-In Web Check-In Kiosk Check-In

Guests can check-in via the Cebu Pacific was the first airline CEB Kiosks are conveniently
official Cebu Pacific Mobile in the Philippines to provide located near Cebu Pacific’s
App from 7 days up to 4 hours guests the option to check-in check-in counters in select
before international flight for their flights online. This is Philippine airports. Guests may
departure, and up to 1 hour available from 7 days up to check-in at the kiosk for their
before domestic flight 4 hours before international flights from 8 hours up to an
departure. With the Cebu flight departure, and up to 1 hour before departure.
Pacific mobile app, there is no hour before domestic flight
need to get a paper boarding departure.
pass for domestic travel.
Guests can simply flash the
Boarding Pass from their app
and board the flight.
Prepaid Baggage
At the time of booking, passengers can now pre-purchase baggage

allowance to save on time and money at check-in.

Prepaid baggage options range from 15 kilos to 40 kilos. Guests
may avail of prepaid baggage at the time of booking until 4 hours
before flight departure.
Seat Selector
Every time guests book a flight online, seats can be selected for
a minimum fee. Guests can select preferred seats for additional
leg room and easy access to the aisle. Seats closer to exits are
available through the Standard Plus seat option. Standard seats
are all other available seats.
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Payment Centers
Cebu Pacific guests who are not credit card holders can book flights through the website and pay via
the airline’s payment centers:
• Cebuana Lhuillier • SM Business Services Center • Over-the-counter at
• 7-Eleven • Robinsons Department Robinsons Bank, Bank of the
• ECPay Store Philippine Islands, Metrobank,
• Bayad Center • ATM transactions using Banco de Oro, and Banco de
Bancnet and Megalink Oro Remittance Centers in
member banks Hong Kong and Macau
Payment Options
Cebu Pacific guests can also book online

and pay using their credit cards:
Paypal
Cebu Pacific is the first airline in the Philippines to offer the global
payment platform as a payment option.
Alipay
Cebu Pacific facilitates online booking and payment in China

through Alipay. Alipay is one of the largest payment channels
in China, with more than 160 financial institution members and
around 800 million registered account users.
Fun Shop Inflight Duty Free
Fun Shop Inflight Duty Free is available on international flights

to and from Manila. A wide range of world-class cosmetics, skin
care products, fragrances for men and women, jewelry, children’s
gifts and chocolates are available in-flight. Brands carried by
Cebu Pacific include Estée Lauder, Revlon, Lancôme, Calvin Klein,
Clinique, Ferragamo, and Bulgari, among others.
Airline branded souvenir items such as blankets, model airplanes

and stuffed toys are also available in Cebu Pacific’s Fun Shop.
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Fun Café
Cebu Pacific’s Fun Café presents a wide variety of flavorful buy-on-

board snacks and drinks fit for everyone’s taste. Hearty rice meals
and specialty snacks are exclusively available for pre-order at
cebupacificair.com.
TravelSure
Cebu Pacific offers TravelSure travel insurance underwritten by

Malayan Insurance Co., Inc. in partnership with international
insurers to provide guests with maximum protection. TravelSure
allows worry-free travel for guests from one to 65 years old.
TravelSure covers:
• Emergency medical treatment in case of accident or sickness
during travel
• Unexpected travel circumstances like cancellations or delays
due to weather, loss of travel documents or luggage, and other
unforeseen events
• Personal accidents
• Recovery of travel expenses or reimbursement of the unused
portion of travel and accommodation expenses
• Baggage Protect – an insurance add-on that covers any
unforeseen physical loss or damage to checked baggage
Sports Equipment
Guests can avail of Cebu Pacific’s sports equipment handling

service for a minimum fee upon booking. This service lets guests
bring their own sports equipment to their destination, to avoid
spending for equipment rental fees.
Equipment covered by this service include:

• Bicycles
• Fishing Equipment
• Golf Clubs
• Scuba/Diving Equipment
• Surfboards/Wakeboards
• Bowling balls
Transfers
Cebu Pacific and Cebgo guests can now avail of CEB Transfers, safe
and seamless transfer service available in Boracay and in Palawan.
Passengers can now book CEB Transfers from the Caticlan or
Kalibo airports to the guests’ hotel or resort in the island of
Boracay, and also to and from El Nido and Sabang (via Puerto
Princesa) in Palawan. The CEB Transfers product is in partnership
with Southwest Tours Inc. (Boracay), and Lexus Shuttle Services
(Palawan).
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Connect
Cebu Pacific guests with connecting flights through Singapore

Changi Airport may avail of CEB Connect and simply collect their
boarding pass for their onward flight at Transfer Lounge E within
the airport’s transit area. With CEB Connect, guests do not need to
clear immigration, collect checked-in luggage, and check-in again
for their onward flight connections via Singapore.
Hotels
Guests can now immediately view and book options for hotel
accommodations through our partner Agoda.com on the Cebu
Pacific website, right while booking for flights. Another hotel
partner, TravelBook.ph, provides options for accommodation in
local destinations.
Car Rentals
Cebu Pacific’s official car rental partner is rentalcars.com, offering
the best prices and up to 15% savings on guests’ car rental needs
in worldwide locations. Rentalcars.com is a booking service working
with all major car hire companies all over the world.
CEB passengers can avail of car rental services through touch

points within the Cebu Pacific website.
CEB Cargo
Cebu Pacific is the leading air cargo carrier in the Philippines,

linking islands together through exchange of goods. It provides
competitive, fast, flexible and straightforward air cargo service
to an extensive network including individual shippers and cargo
agents within the country and overseas.
The Cebu Pacific Air group is the largest domestic cargo carrier,
representing 46% of the market, with over 123 million kilos
delivered to domestic destinations in full year 2016. It services
more than two thousand accounts, tailor-fitting products to the
clients’ domestic and international cargo needs. This includes
express cargo service, seamless transshipment, and 30 interline
partnerships for worldwide reach.
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CEB BIZ
CEB BIZ, the corporate program of Cebu Pacific Air, lets companies
optimize their travel budget through exclusive features tailor-fitted
to meet company’s business travel requirements. Companies can
book Cebu Pacific Air flights using Sky Partner (online booking
facility), get corporate fares, waiver on admin fees, discounts on
baggage, various forms of payment, transferrable bookings and
volume-based incentive scheme among other perks.
Smile and Waytogo
CEB’s Smile Magazine has a readership of over a million per issue.

It features destination guides and news across the Cebu Pacific
network. Smile also ranked 7th in CNN Travel’s World’s 12 Best
Airline Magazines. Its online version, waytogo.cebupacificair.com,
is also a treasure trove of destination guides and insightful travel
features.
Bright Skies for EveryJuan
Cebu Pacific Air and Worldwide Fund for Nature – Philippines (WWF) have been joining forces since
2008 for Bright Skies for EveryJuan. This lets travelers contribute to climate change adaptation
programs for the communities near the Great Philippine Reefs (Tubbataha and Apo Reefs) namely
Cagayancillo, Palawan and Sablayan, Occidental Mindoro, respectively, while booking for flights.
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2016 HIGHLIGHTS
CEB scores in
flying everyJuan
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On March 8, 1996, a start-up airline took to the skies with a fleet of four
McDonnell Douglas DC-9-30 planes, following the deregulation of air travel
by the Philippine government. Today, that airline, Cebu Pacific Air, is the
Philippines’ leading carrier, paving the way for affordable air travel to more
people from all walks of life, as well as opening more opportunities in the
broader aviation industry.
As CEB marks 20 years—two decades or a score of aviation
service, it ushered in a new look and new livery.
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From one route in
1996, Cebu Pacific
has expanded our
flight network to
38 domestic and
30 international
destinations through
104 routes...
Cebu Pacific takes the delivery of its first ATR 72-600 aircraft. (L-R) Patrick de
Castelbajac, Chief Executive Officer of ATR; and Rick Howel, CEB Executive Adviser,
Ground Operations
Fun, friendly, Filipino seven Airbus A330, eight ATR denim jeans lined with yellow
CEB kicked-off its 20th 72-500, and two ATR 72-600, stitching. CEB also tapped
anniversary with the delivery of CEB has one of the youngest the expertise of renowned
brand-new Airbus A320 aircraft aircraft fleets in the world, with fashion and image consultant
dressed in new livery meant to an average age of 4.91 years. Tati Fortuna to make sure the
showcase a fresher, cooler look The new CEB look and cabin crew look polished and
that embodies the Philippines’ rebranding was capped off professional, while staying true
natural canvas and showcase with new cabin crew uniforms to the CEB brand promise of fun
the shades of the country’s designed by renowned Cebu- and friendly.
land, sea, sky, and sun. The based designer Jun Escario.
brand-new Airbus A320 are The stylish new look pays Bridging more of the
homage to the fun colors of
equipped with fuel-saving
the Philippines— azure skies Philippine islands to
wingtip devices called Sharklets,
which allow the aircraft to and aquamarine waters, and the rest of the world
either fly longer distances or warm, sunny Filipino hospitality. From one route in 1996, Cebu
take on a higher payload, on These colors are reflected in the Pacific has expanded our flight
reduced fuel consumption. bright yellow top and cardigan network to 38 domestic and
CEB also welcomes a new and blue denim skirt or pants. 30 international destinations
addition to its fleet, the ATR Keeping practicality in mind through 104 routes spanning
72-600 High Capacity aircraft. though, the ladies’ skirt is crisp, Asia, Australia, the Middle
Featuring advanced avionics, navy denim that comes in a East, and the USA, flying more
enhanced performance in hot slim silhouette—flattering than 2,600 flights weekly.
and high environments and and easy to move around in, Aircraft movement across the
increased cabin space, the a perfect execution of casual Philippines was made easier
ATR 72-600 is meant for inter- elegance. The skirt also features as CEB operates out of six
island short routes of Cebgo. Its fun ruffles and zipper details. strategically-located hubs—
78-seat capacity will allow for Tying the overall look together Manila, Cebu, Clark, Davao,
lower unit seat costs enabling is a scarf in a tropical print, Kalibo and Iloilo.
CEB to pass on the benefits featuring the CEB official colors. Staying true to its
through lower fares to its The scarf also has one standard commitment to link more of the
customers. knot style, to keep things simple Philippine archipelago, there
Ending 2016 with a fleet of yet stylish. For the men, a crisp are eight destinations where
57 aircraft, composed of four polo shirt in the same shade CEB maintains sole commercial
Airbus A319, 36 Airbus A320, of yellow goes together with air service—Cauayan, Isabela;
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San Jose, Occidental Mindoro;
Virac, Catanduanes; Ormoc
City; Camiguin; Pagadian City;
Tandag, Surigao del Sur; and
Tawi-Tawi. CEB also announced
it would begin direct flights
between Manila and Tablas,
Romblon—the only carrier to
begin commercial air operations
in this area; as well as Masbate
by the first quarter of 2017.
CEB also expanded its
route coverage in the Visayas CEB celebrates the opening of its organic office in Korea with a ceremonial toast.
through daily flights between
Cebu and Ormoc; Cebu and
Roxas; and four times weekly
between Cebu and Calbayog.
Flight frequencies were also
increased in Virac, Tagbilaran,
Puerto Princesa and other
destinations—as demand
for air travel picked up. These
new routes and increased
frequencies do not just benefit
travellers. Alongside air
passenger operations, each CEB
and Cebgo flight also has cargo
service, a boon for exporters
Cebu Pacific launches new route from Manila to its first US destination, Guam.
and other industries who need
to move goods across the
country. Guam. CEB is the only low-cost EveryJuan can fly
CEB also ramped-up its carrier flying directly between CEB has made air travel easier
international presence—with Manila and Guam, and its and more accessible to more
the launch of direct service maiden flights alone prompted passengers. Its entry in the
between Kalibo, Aklan to a surge in tourist arrivals in the industry had dramatically
Incheon, South Korea. This US territory whose economy is increased the number of
allows travellers from Western highly dependent on tourism. air travellers, unlocking new
Visayas to fly straight to Korea; Philippine visitors to Guam markets with its Low Cost
and for Koreans—among the grew by 125% in March 2016, Carrier model.
top tourists in the Philippines, compared to the same month In 2016, CEB carried flew
to get to Boracay Island faster. in 2015. For full-year 2016, the 19.13 million passengers, up
To further expand market Guam Visitors Bureau reported 4.1% from the 18.38 million
presence in Korea, CEB also a 74.3% year-on-year increase flown in 2015, setting a
opened an office in Seoul, in tourists from the Philippines, Philippine aviation record of
South Korea. CEB’s Korea versus just 2.9% in 2015. 64,684 passengers flown in a
branch office will provide tickets
sales, reservations services and CEB has made air travel easier and more
customer support.
2016 also marked a accessible to more passengers. Its entry in
milestone for CEB with the the industry had dramatically increased the
launch of its first destination
on United States territory, number of air travellers...
27
Cebu Pacific joins the world’s first pan-regional low-cost carriers’ alliance, “Value Alliance” along with seven other market champions:
Jeju Air, Nok Air, NokScoot, Scoot, Tigerair Singapore, Tigerair Australia and Vanilla Air.
single day last December 27, Giving back Scoot, Tigerair Singapore,
2016. Since its inception, CEB Tigerair Australia and Vanilla
has flown over 140 million
to everyJuan Air to form Value Alliance,
passengers, with market share Beyond changing travel habits CEB passengers will be able
at about 57%, on the back from year-round, low-cost fares to view, select and book the
of higher passenger volume and the game-changing Piso best-available airfares on
and a healthy load factor of Fare promos, CEB is giving flights from any of the airlines
86%. Tracking the growth in more travellers the chance to in a single transaction, directly
passenger volume, CEB 2016 make the most of their travel from each partner website,
revenues grew 9.6% to PHP61.9 budgets. thanks to groundbreaking
Billion in 2016, as it was also By joining forces with some technology developed by Air
supported by an increase in of the world’s largest LCCs— Black Box (ABB). This means
ancillary and cargo revenues. Jeju Air, Nok Air, NokScoot, more destinations, more
...CEB passengers
will be able to view,
select and book
the best-available
airfares on flights
from any of the
airlines in a single CEB collaborates with the Department of Budget and Management on discounted
fares for government employees. (L-R): Arlene Tena, Director for Passenger Sales of
transaction... Cebu Pacific; Andrew Huang, Chief Finance Officer of Cebu Pacific; Alexander Lao,
President and CEO of Cebgo; Michael Szucs, Chief Executive Adviser of Cebu Pacific;
Benjamin Diokno, Secretary of the Department of Budget and Management; Lance
Gokongwei, President and CEO of Cebu Pacific; Bingle Gutierrez, Executive Director of
DBM’s PS-PhilGEPS; Agnes Bailen, Undersecretary of DBM; Flerida Arias, Officer-in-
charge Director, Operations Group of PS-PhilGEPS; Rosa Maria Clemente, OIC Deputy
Executive Director V of PS-PhilGEPS; Dalisay Dela Chica, Chief, Sales Division of PS-
PhilGEPS; Leah Valdez, Chief, Marketing Division of PS-PhilGEPS.
(Photo by: Bryan Lagunay)
28
routing options and greater
convenience for customers of
each airline.
The Value Alliance
airlines serve more than 160
destinations—which means
greater value, connectivity and
choice for travel throughout
Southeast Asia, North Asia
and Australia. With more than
500 million visitors expected to
arrive in Asia Pacific by 2020,
Value Alliance will connect
travellers to more unique
destinations.
Giving back to government Cebu Pacific and UN children’s agency UNICEF to reach millions of vulnerable children
personnel and to taxpayers, in the Philippines through the Change for Good initiative.
CEB also collaborated with
the Department of Budget CEB is also the first and only airline-partner of
and Management to help
government rationalize
UNICEF for its Change for Good initiative in the
expenses on air travel. CEB Philippines and Southeast Asia.
is now part of the Philippine
Government Electronic
Procurement System (PhilGEPS), supplements to over 31,000 uses sophisticated Big Data
a portal where official and poor households with pregnant Algorithms. An OpenAirlines’
accredited suppliers of mothers and over 27,500 solution software, SkyBreathe®
government can browse for children who are at risk of continuously analyzes the flight
various goods and services and developing micronutrient data of all existing CEB aircraft,
find the best price for these. deficiencies in the Philippines. using multiple sources of data
This will allow government A portion of the funds also including flight data recorders.
employees discounted fares on supports barangay-level Through the meticulous
official business trips as well as information drives on nutrition monitoring of fuel consumption
other benefits such as waiver in UNICEF’s focus areas in patterns, SkyBreathe® helps
of fees and additional baggage Northern Samar, Zamboanga, implement a fuel-saving plan
allowance. and Maguindanao. Following that results in more optimal
CEB is also the first and only the successful roll-out for Manila flight operations and cost
airline-partner of UNICEF for flights, CEB and UNICEF plan reductions. The software will be
its Change for Good initiative in to expand the Change for Good installed in all upcoming aircraft
the Philippines and Southeast initiative to all flights to and of CEB that are on order from
Asia. Established by UNICEF from Cebu and Iloilo in 2017. 2017 until 2021.
in 1987 as an alliance with Like all other airlines, CEB has also partnered with
the global airline industry, carbon emission is a major the World Wide Fund for Nature
Change for Good is designed concern for CEB. The airline (WWF-Philippines) since 2008
to collect spare currency from has taken steps to reduce the for initiatives to fight global
passengers on board flights of impact of greenhouse gas warming. Project Bright Skies
partner airlines with the aim emissions from its operations is a program by which CEB
to reach millions of children in on the environment, foremost passengers can help affected
over 150 countries. Donations of which is the deployment communities adapt to the
of passengers of Cebu Pacific of SkyBreathe® Fuel effects of climate change by
on flights to and from Manila Efficiency, a complete fuel offsetting the carbon emissions
have so far provided nutritional management system which from their air travel through
29
Enhancing its
commitment
towards
environmental
conservation, CEB
entered into its
second year of
adopting Philippine
Eagle “Mindanao.”
CEB adopts Philippine Eagle, “Mindanao,” and participates in the environmental
campaign of preserving the Philippine national bird.
WWF donations through passenger donations reached food and necessary veterinary
the CEB website. CEB is the over PHP2.8 Million, with total care that will help flourish
only airline in the Philippines donations since the partnership and sustain the well-being of
that offers passengers an began eight years ago reaching “Mindanao,” but also support
opportunity to make a donation PHP32.5 Million. for PEF’s Conservation Breeding
for climate change adaptation Enhancing its commitment and Conservation Education
programs. All CEB passengers towards environmental initiatives that prevent the
booking online have the option conservation, CEB entered into complete extinction of the
to give a voluntary contribution its second year of adopting Philippine Eagle.
that goes to WWF’s adaptation Philippine Eagle “Mindanao.” Giving back to everyJuan
projects in Apo Reef, Sablayan, The fiver-year partnership has also meant putting the
Occidentral Mindoro; and with the Philippine Eagle smile, the fun and the spirit of
Cagayancillo, Palawan. In 2016, Foundation will not only entail adventure into travelling across
Winners from De La Salle Bacolod, #JFFJUANTeamPH, celebrate victory in Cebu Pacific’s ultimate seven-day race, Juan for Fun
Backpacker Challenge
30
Cebu Pacific partners with Kidzania Manila in an effort to help children from welfare organization HOPE Worldwide Philippines.
the Philippines. CEB held the first—the birth of baby ‘Haven’

fifth edition of its Juan for Fun mid-air on a CEB flight from
Backpacker Challenge, with Dubai to Manila. As a birthday
team De La Salle Bacolod of gift, baby ‘Haven’ received
#JFFJUANTeamPH winning one million GetGo points that
the seven-day race across the will never expire and can be
country—visiting some of shared with any of her family
the country’s most beautiful members.
islands. CEB, the official airline CEB has come a long way to
partner of KidZania Manila, has become the leading Philippine
also partnered with non-profit carrier with the widest route
organization Hope Worldwide network across the archipelago.
Philippines to give 60 children Today, CEB is the 3rd largest
who are victims of abuse or Low-Cost Carrier (LCC) in Asia,
abandoned by their parents and the 22nd in the world, well Cebu Pacific celebrates the birth of
the chance to be kids again at on track to attaining its mission Haven, the first baby born inflight.
KidZania—role-playing as pilots to become the most successful
or cabin attendants with CEB Low-Cost Carrier in the world. Today, CEB is the
volunteers and earning KidZos, As CEB soars higher and sets its
the official KidZania currency, sights towards a new horizon, 3rd largest Low-Cost
which they spent on other it will go from strength to Carrier (LCC) in Asia,
special KidZania treats. strength, enhancing efficiency,
Twenty years of Cebu Pacific expanding to new routes, and
and the 22nd in the
was also marked by another enriching passenger experience. world...
31
Financial Statements
32
SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018
INDEPENDENT AUDITOR’S REPORT
The Stockholders and the Board of Directors

Cebu Air, Inc.
Opinion
We have audited the consolidated financial statements of Cebu Air, Inc. and its Subsidiaries
(the Group), which comprise the consolidated statements of financial position as at December 31, 2016
and 2015, and the consolidated statements of comprehensive income, consolidated statements of changes
in equity and consolidated statements of cash flows for each of the three years in the period ended
December 31, 2016, and notes to the consolidated financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of the Group as at December 31, 2016 and 2015, and their financial performance
and their cash flows for each of the three years in the period ended December 31, 2016 in accordance with
Philippine Financial Reporting Standards (PFRSs).
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the Code of Ethics for Professional Accountants in the Philippines (the Code of Ethics)
together with the ethical requirements that are relevant to our audit of the consolidated financial
statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment of
the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
*SGVFS022041*
33
A member firm of Ernst & Young Global Limited
Recognition of Passenger Service Revenue, Baggage Fees and Other Ancillary Fees
Passenger service revenue is earned when the service has been rendered to the passengers according to
flight schedule. The amount of passenger tickets for which the related transportation service has not yet
been rendered at the end of the reporting period, is recorded as unearned passenger service revenue in the
consolidated statement of financial position. Baggage fees are non-refundable fees which are recognized
upon receipt. Other ancillary fees are recognized when transactions are carried out. Refer to Notes 5 and
21 of the consolidated financial statements.
We considered the recognition of passenger service revenue, baggage fees and other ancillary fees as a
key audit matter because of the materiality of these accounts to the consolidated financial statements and
the high volume of transactions being processed and captured from various distribution channels and
locations. In addition, the determination of the earned and unearned passenger service revenue is highly
dependent on the Group‟s information technology (IT) systems.
Audit response
We included internal specialist in our team to assist us in understanding and testing the controls over the
Group‟s IT systems and passenger revenue recognition process. This includes testing the controls over
the capture and recording of revenue transactions, authorization of rate changes and the input of these
information to the revenue system, and mapping of bookings from unearned to earned passenger service
revenue when passengers are lifted. We assessed the information produced by the Group‟s IT systems
and tested the reports generated by these systems that are used to defer or recognize passenger service
revenue. On a sample basis, we tested the timing of the recording of the transactions near the statement
of financial position date. Also, on a sample basis, we tested journal entries related to these accounts
through inspection of underlying source documentation.
Estimation of Asset Retirement Obligation

As of December 31, 2016, the Group operated thirteen (13) aircraft under operating leases. Under the
terms of the operating lease arrangements, the Group is contractually required to restore leased aircraft to
its original condition and to bear the cost of restoration at the end of the contract period. Refer to Notes
19 and 30 of the consolidated financial statements.
Management estimates the overhaul, restoration and redelivery costs and accrues such costs over the lease
term. The calculation of such costs includes management assumptions and estimates in respect of the
anticipated rate of aircraft utilization. This affects the extent of the restoration work that will be required
and the expected costs of such overhaul, restoration and redelivery at the end of the lease term. Given the
significant amounts of these provisions and the level of management judgment and estimates required, we
considered this area as a key audit matter.
Audit response
We obtained an understanding of the management‟s process over estimating asset retirement obligation
for aircraft held under operating leases and tested the relevant controls. We recalculated the asset
retirement obligation and evaluated the key assumptions adopted by the management in estimating the
asset retirement obligation for each aircraft by discussing with the Group‟s relevant fleet maintenance
engineers the aircraft utilization statistics. In addition, we obtained an understanding of the redelivery
terms of operating leases  comparing the estimated costs and comparable actual costs incurred by the
Group from previous similar restorations.
*SGVFS022041*
34
Recoverability of Goodwill and Intangible Assets
Under PFRSs, the Group is required to annually test the amount of goodwill and intangible assets with
indefinite useful lives for impairment. The recoverability of goodwill and intangible assets, which arose
from the acquisition of a subsidiary in 2014, is considered as a key audit matter as the balances of these
assets are considered material to the consolidated financial statements. In addition, the management‟s
assessment process requires significant judgment and is based on assumptions, specifically future
revenues, profit margins, revenue growth and discount rates. The Group‟s disclosures about goodwill and
intangible assets are included in Notes 15 and 16 of the consolidated financial statements, respectively.
Audit response
We obtained an understanding of the Group‟s impairment assessment process and the related controls.
We involved our internal specialist in evaluating the methodologies and the assumptions used and
performed recalculation of the value-in-use provided. These assumptions include future revenue, profit
margins, revenue growth and discount rates. We compared the key assumptions used against the
historical performance of the subsidiary, industry or market outlook and other relevant external data. We
tested the parameters used in determining the discount rate against market data. We also reviewed the
Group‟s disclosures about the assumptions that have the most significant effect in determining the
recoverable amounts of goodwill and intangible assets.
Reasonableness of Estimated Useful Lives of Aircraft

The Group annually estimates the useful lives of its aircraft based on the period over which the assets are
expected to be available for use. The Group considers external changes to economic conditions, demand,
competition and technology advancement when reassessing the estimate useful lives of its aircraft. We
considered this area as a key audit matter given the material balances of these assets and the significant
judgment required in estimating these assets‟ useful lives. This impacts the carrying values as at
statement of financial position date and the depreciation charges for the year. The Group‟s disclosures
about estimated useful lives are included in Note 5 of the consolidated financial statements.
Audit response
We obtained an understanding of the Group‟s process and controls over estimation of the useful lives of
aircraft. Also, we considered the developments in the airline industry and compared the estimated useful
lives used by the Group with other comparable airline companies.
Other Information
Management is responsible for the other information. The other information comprises the
SEC Form 17-A for the year ended December 31, 2016 but does not include the consolidated financial
statements and our auditor‟s report thereon, which we obtained prior to the date of this auditor‟s report,
and the SEC Form 20-IS (Definitive Information Statement) and Annual Report for the year ended
December 31, 2016, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
*SGVFS022041*
35
If, based
If, based
on on
thethe
workworkwewehavehave
performed
performedon on
thethe
other
other
information
information thatthat
weweobtained
obtained
prior
prior
to the
to the
datedate
of of
thisthis
auditor‟s
auditor‟s
report,
report,
wewe conclude
conclude
thatthat
there
there
is aismaterial
a material
misstatement
misstatement of this
of this
other
other
information,
information,weweareare
required
required
to report
to report
thatthat
fact.
fact.
WeWe
have
havenothing
nothing
to report
to report
in this
in this
regard.
regard.
Responsibilities
Responsibilities
of Management
of Management
andand
Those
Those
Charged
Charged
with
with
Governance
Governance
forfor
thethe
Consolidated
Consolidated
Financial
Financial
Statements
Statements
Management
Management is responsible
is responsible
forfor
thethe
preparation
preparationandand
fairfair
presentation
presentation
of the
of the
consolidated
consolidatedfinancial
financial
statements
statements
in accordance
in accordancewithwith
PFRS,
PFRS,andand
forfor
such
such
internal
internal
control
control
as management
as management determines
determines
is is
necessary
necessary
to enable
to enablethethe
preparation
preparation
of consolidated
of consolidated
financial
financial
statements
statements
thatthat
areare
freefree
from
from
material
material
misstatement,
misstatement,
whether
whether
duedue
to fraud
to fraud
or error.
or error.
In preparing
In preparing
thethe
consolidated
consolidated
financial
financial
statements,
statements,
management
management is responsible
is responsible
forfor
assessing
assessing
thethe
Group‟s
Group‟s
ability
ability
to continue
to continue
as aasgoing
a going
concern,
concern,disclosing,
disclosing,
as applicable,
as applicable,
matters
matters
related
related
to going
to going
concern
concern
andand
using
using
thethe
going
going
concern
concern
basis
basis
of accounting
of accounting unless
unless
management
managementeither
either
intends
intends
to liquidate
to liquidate
thethe
Group
Group
or to
or to
cease
cease
operations,
operations,
or has
or has
no no
realistic
realistic
alternative
alternative
butbut
to do
to do
so. so.
Those
Those
charged
charged
with
with
governance
governance
areare
responsible
responsible
forfor
overseeing
overseeing
thethe
Group‟s
Group‟s
financial
financial
reporting
reporting
process.
process.
Auditor’s
Auditor’s
Responsibilities
Responsibilities
forfor
thethe
Audit
Audit
of the
of the
Consolidated
Consolidated
Financial
Financial
Statements
Statements
OurOurobjectives
objectivesareare
to obtain
to obtain
reasonable
reasonableassurance
assuranceabout
about
whether
whether
thethe
consolidated
consolidated financial
financial
statements
statementsas aas a
whole
whole areare
freefree
from from
material
material
misstatement,
misstatement, whether
whether duedue
to fraud
to fraud
or error,
or error,
andandto issue
to issue
an an
auditor‟s
auditor‟s
report
report
thatthat
includes
includes
ourouropinion.
opinion.Reasonable
Reasonable assurance
assuranceis aishigh
a high
level
level
of assurance,
of assurance,butbut
is not
is not
a guarantee
a guaranteethatthat
an an
audit
audit
conducted
conducted in accordance
in accordancewithwith
PSAsPSAswillwill
always
alwaysdetect
detect
a material
a material
misstatement
misstatement when
when
it exists.
it exists.
Misstatements
Misstatements cancan arise
arise
from
from
fraud
fraud
or error
or error
andand
areareconsidered
considered
material
material
if, individually
if, individuallyor in
or the
in the
aggregate,
aggregate, theythey
could
could
reasonably
reasonablybe be
expected
expectedto influence
to influencethethe
economic
economicdecisions
decisionsof users
of users
taken
taken
on on
thethe
basis
basis
of these
of these
consolidated
financial
statements.
statements.
As As
partpart
of an
of an
audit
audit
in accordance
in accordance
with
with
PSAs,
PSAs,wewe
exercise
exercise
professional
professional
judgment
judgment
andand
maintain
maintain
professional
professional
skepticism
skepticism
throughout
throughout
thethe
audit.
audit.
WeWealso:
also:
 Identify
Identify
andand
assess
assess
thethe
risks
risks
of material
of material
misstatement
misstatement of the
of the
consolidated
financial
statements,
statements,
whether
whether
duedue
to fraud
to fraud
or error,
or error,
design
design
andand
perform
performaudit
audit
procedures
procedures
responsive
responsive
to those
to those
risks,
risks,
andandobtain
obtain
audit
audit
evidence
evidence
thatthat
is sufficient
is sufficient
andandappropriate
appropriate
to provide
to providea basis
a basis
forfor
ourour
opinion.
opinion. TheThe
riskrisk
of not
of not
detecting
detecting
a material
a material
misstatement
misstatement resulting
resulting
from
from
fraud
fraud
is higher
is higher
than
than
forfor
oneone
resulting
resulting
fromfrom
error,
error,
as fraud
as fraud
maymay
involve
involve
collusion,
collusion,forgery,
forgery,
intentional
intentional
omissions,
omissions, misrepresentations,
misrepresentations,or the
or the
override
override
of internal
of internal
control.
control.
 Obtain
Obtainan an
understanding
understanding of internal
of internal
control
control
relevant
relevant
to the
to the
audit
audit
in order
in order
to design
to design
audit
audit
procedures
procedures
thatthat
areare
appropriate
appropriate
in the
in the
circumstances,
circumstances,
butbut
notnot
forfor
thethe
purpose
purpose
of expressing
of expressing
an an
opinion
opinion
on on
thethe
effectiveness
effectivenessof the
of the
Group‟s
Group‟sinternal
internal
control.
control.
 Evaluate
Evaluate
thethe
appropriateness
appropriateness
of accounting
of accounting
policies
policies
used
used
andand
thethe
reasonableness
reasonableness
of accounting
of accounting
estimates
estimates
andand
related
related
disclosures
disclosures
made
made
by by
management.
management.
*SGVFS022041*
36
A member
A member
firm offirm
Ernst
of Ernst
& Young
& Young
Global
Global
Limited
Limited
 Conclude on the appropriateness of management‟s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group‟s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor‟s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor‟s report. However, future events or conditions may cause the Group to cease to continue as a
going concern.
 Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor‟s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
*SGVFS022041*
37
The engagement partner on the audit resulting in this independent auditor‟s report is Narciso T. Torres, Jr.
SYCIP GORRES VELAYO & CO.
Narciso T. Torres, Jr.

Partner
CPA Certificate No. 84208
SEC Accreditation No. 1511-A (Group A),
October 1, 2015, valid until September 30, 2018
Tax Identification No. 102-099-147
BIR Accreditation No. 08-001998-111-2015,
March 4, 2015, valid until March 3, 2018
PTR No. 5908769, January 3, 2017, Makati City
March 21, 2017
*SGVFS022041*
38
CEBU AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
2016 2015
ASSETS
Current Assets
Cash and cash equivalents (Note 8) P
=10,296,242,304 =4,706,090,063
P
Receivables (Note 10) 2,126,793,862 1,737,444,884
Financial assets at fair value through profit or loss (Note 9) 441,773,905 –
Expendable parts, fuel, materials and supplies (Note 11) 1,190,056,987 919,118,043
Other current assets (Note 12) 1,096,270,685 2,400,119,148
Total Current Assets 15,151,137,743 9,762,772,138
Noncurrent Assets
Property and equipment (Notes 13, 18, 30 and 32) 81,890,303,497 72,075,821,013
Investments in joint ventures and in an associate (Notes 14) 805,801,372 525,623,987
Goodwill (Notes 7 and 15) 566,781,533 566,781,533
Deferred tax assets - net (Note 25) 1,073,499,679 876,296,996
Other noncurrent assets (Notes 7 and 16) 1,026,818,459 1,021,286,522
Total Noncurrent Assets 85,363,204,540 75,065,810,051
P
=100,514,342,283 =84,828,582,189
P
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and other accrued liabilities (Note 17) P
=12,583,636,942 =11,602,989,706
P
Unearned transportation revenue 8,141,752,728 6,971,754,698
Current portion of long-term debt (Notes 13 and 18) 7,040,253,460 5,423,699,184
Financial liabilities at fair value through profit or loss (Note 9) – 2,443,495,138
Due to related parties (Note 27) 37,689,554 38,115,803
Income tax payable 24,152,004 20,038,200
Total Current Liabilities 27,827,484,688 26,500,092,729
Noncurrent Liabilities
Long-term debt - net of current portion (Notes 13 and 18) 35,770,184,170 31,165,286,307
Pension liability (Note 24) 568,769,315 546,480,714
Other noncurrent liabilities (Note 19) 2,842,631,591 1,661,527,283
Total Noncurrent Liabilities 39,181,585,076 33,373,294,304
Total Liabilities 67,009,069,764 59,873,387,033
Equity
Common stock (Note 20) 613,236,550 613,236,550
Capital paid in excess of par value (Note 20) 8,405,568,120 8,405,568,120
Treasury stock (Note 20) (529,319,321) (529,319,321)
Remeasurement loss on pension liability (Note 24) (186,025,376) (193,873,203)
Retained earnings (Note 20) 25,201,812,546 16,659,583,010
Total Equity 33,505,272,519 24,955,195,156
P
=100,514,342,283 =84,828,582,189
P
See accompanying Notes to Consolidated Financial Statements.
39
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31

2016 2015 2014
REVENUE
Sale of air transportation services
Passenger P
= 46,592,511,272 =42,681,069,939
P =40,188,445,623
P
Cargo 3,563,752,865 3,461,136,749 3,146,083,310
Ancillary revenues (Note 21) 11,743,014,755 10,359,447,828 8,665,489,377
61,899,278,892 56,501,654,516 52,000,018,310
EXPENSES
Flying operations (Notes 11 and 22) 19,694,348,716 20,916,360,534 26,152,476,007
Aircraft and traffic servicing (Note 22) 6,577,984,803 5,847,099,305 4,805,212,489
Repairs and maintenance (Notes 11 and 22) 6,530,857,486 5,240,478,648 4,432,437,982
Depreciation and amortization (Notes 6 and 13) 5,998,695,417 5,111,543,724 4,281,525,018
Aircraft and engine lease (Note 30) 4,253,724,294 4,024,599,732 3,503,484,521
Reservation and sales (Note 22) 3,211,696,086 2,625,456,497 2,153,987,158
General and administrative (Note 23) 1,813,043,477 1,552,148,933 1,296,817,694
Passenger service 1,567,730,427 1,483,746,337 1,216,740,451
49,648,080,706 46,801,433,710 47,842,681,320
12,251,198,186 9,700,220,806 4,157,336,990
OTHER INCOME (EXPENSES)

Hedging gains (losses) - net (Note 9) 1,587,708,081 (2,931,215,906) (2,314,241,984)
Equity in net income of joint ventures (Note 14) 178,308,842 35,418,498 96,326,091
Interest income (Note 8) 113,672,171 83,006,926 79,927,272
Loss on sale of aircraft (Note 13) (962,608,741) (80,267,191) –
Interest expense (Note 18) (1,170,181,141) (1,073,109,693) (1,013,241,353)
Foreign exchange losses - net (2,281,932,689) (2,205,258,151) (127,471,032)
(2,535,033,477) (6,171,425,517) (3,278,701,006)
INCOME BEFORE INCOME TAX 9,716,164,709 3,528,795,289 878,635,984
PROVISION FOR (BENEFIT FROM)

INCOME TAX (Note 25) (37,971,487) (858,430,586) 25,137,768
NET INCOME 9,754,136,196 4,387,225,875 853,498,216
OTHER COMPREHENSIVE INCOME (LOSS),

NET OF TAX
Other comprehensive income (loss) not to be reclassified
to profit or loss in subsequent periods:
Actuarial gains (losses) on pension liability (Note 24) 11,211,184 (83,002,333) 301,535,342
Provision for (benefit from) income tax (Note 25) 3,363,357 (21,097,422) 91,853,356
7,847,827 (61,904,911) 209,681,986
TOTAL COMPREHENSIVE INCOME P

= 9,761,984,023 =4,325,320,964
P =1,063,180,202
P
Basic/Diluted Earnings Per Share (Note 26) P

= 16.10 =7.24
P =1.41
P
40
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Year Ended December 31, 2016

Capital Paid in Remeasurement
Excess of Par Gain (Loss) on Retained Earnings
Common Stock Value Treasury Stock Pension Liability Appropriated Unappropriated Total
(Note 20) (Note 20) (Note 20) (Note 24) (Note 20) (Note 20) Equity
Balance at January 1, 2016 P= 613,236,550 P
=8,405,568,120 (P
=529,319,321) (P
= 193,873,203) P= 7,916,762,000 P
=8,742,821,010 P = 24,955,195,156
Net income – – – – – 9,754,136,196 9,754,136,196
Other comprehensive income – – – 7,847,827 – – 7,847,827
Total comprehensive income – – – 7,847,827 – 9,754,136,196 9,761,984,023
Appropriation of retained earnings (Note 20) – – – – 6,600,000,000 (6,600,000,000) –
Dividend declaration (Note 20) – – – – – (1,211,906,660) (1,211,906,660)
Balance at December 31, 2016 P= 613,236,550 P
=8,405,568,120 (P
=529,319,321) (P
= 186,025,376) P
=14,516,762,000 P = 10,685,050,546 P= 33,505,272,519

Excess of Par Loss on Pension Retained Earnings
Common Stock Value Treasury Stock Liability Appropriated Unappropriated Total
Balance at January 1, 2015 =613,236,550
P =8,405,568,120
P (P
=529,319,321) (P
=131,968,292) P =6,916,762,000 =6,264,525,130 =
P P21,538,804,187
Net income – – – – – 4,387,225,875 4,387,225,875
Other comprehensive income – – – (61,904,911) – – (61,904,911)
Total comprehensive income – – – (61,904,911) – 4,387,225,875 4,325,320,964
Dividend declaration (Note 20) – – – – – (908,929,995) (908,929,995)
Balance at December 31, 2015 =613,236,550
P =8,405,568,120
P (P
=529,319,321) (P
=193,873,203) P =7,916,762,000 =8,742,821,010 P
P =24,955,195,156
41
42
Excess of Par Gain (Loss) on Retained Earnings
Common Stock Value Treasury Stock Pension Liability Appropriated Unappropriated Total
Balance at January 1, 2014 =613,236,550
P =8,405,568,120
P (P
=529,319,321) (P
=341,650,278) P =3,916,762,000 =9,016,980,244 =
P P21,081,577,315
Net income – – – – – 853,498,216 853,498,216
Other comprehensive loss – – – 209,681,986 – – 209,681,986
Total comprehensive income – – – 209,681,986 – 853,498,216 1,063,180,202
Dividend declaration (Note 20) – – – – – (605,953,330) (605,953,330)
Balance at December 31, 2014 =613,236,550
P =8,405,568,120
P (P
=529,319,321) (P
=131,968,292) P =6,916,762,000 =6,264,525,130 P
P =21,538,804,187
CONSOLIDATED STATEMENTS OF CASH FLOWS

2016 2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P
=9,716,164,709 =3,528,795,289
P =878,635,984
P
Adjustments for:
Depreciation and amortization (Note 13) 5,998,695,417 5,111,543,724 4,281,525,018
Unrealized foreign exchange losses - net 1,672,077,988 1,709,750,714 164,383,293
Hedging losses (gains) - net (Note 9) (1,587,708,081) 2,931,215,906 2,314,241,984
Interest expense (Note 18) 1,170,181,141 1,073,109,693 1,013,241,353
Provision for asset retirement obligation (Note 19) 1,121,100,139 863,960,835 476,017,529
Loss on sale of aircraft (Note 13) 962,608,741 80,267,191 –
Equity in net income of joint ventures (Note 14) (178,308,842) (35,418,498) (96,326,091)
Interest income (Note 8) (113,672,171) (83,006,926) (79,927,272)
Loss on disposal of property and equipment (Note 13) 54,239,864 9,122,533 27,734,209
Operating income before working capital changes 18,815,378,905 15,189,340,461 8,979,526,007
Decrease (increase) in:
Receivables (342,022,523) 143,435,357 405,357,069
Financial assets at fair value through profit or
loss (derivatives) – – 112,774,809
Expendable parts, fuel, materials and supplies (270,938,944) (239,802,973) 31,860,790
Other current assets 1,257,913,940 (430,603,370) (729,957,322)
Increase (decrease) in:
Accounts payable and other accrued liabilities 1,163,682,731 932,068,099 325,208,227
Unearned transportation revenue 1,169,998,030 598,009,959 873,405,279
Pension liability 22,288,601 116,841,632 157,005,125
Amounts of due to related parties (426,249) (1,793,699) (4,743,714)
Other noncurrent liabilities (10,320,610) (108,048,329) (1,609,080,414)
Financial liabilities at fair value through profit or
loss (derivatives) (1,297,560,962) (2,748,280,664) –
Net cash generated from operations 20,507,992,919 13,451,166,473 8,541,355,856
Interest paid (1,184,693,893) (1,078,011,092) (1,004,857,514)
Income tax paid (Note 31) (112,546,224) (60,766,659) (45,043,718)
Interest received 111,505,087 82,638,335 83,919,430
Net cash provided by operating activities 19,322,257,889 12,395,027,057 7,575,374,054
CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of:
Property and equipment (Notes 13 and 31) (19,126,054,236) (13,047,934,091) (13,316,719,856)
Subsidiary (Notes 7 and 31) – – (488,559,147)
Proceeds from sale of property and equipment 2,235,195,623 1,012,448,386 338,060
Investment in shares of stocks in joint ventures and an associate (225,118,923) – –
Dividends received from a joint venture (Note 14) 61,625,190 101,133,997 83,811,058
Decrease (increase) in other noncurrent assets (5,531,937) 129,307,803 115,781,781
Net cash used in investing activities (17,059,884,283) (11,805,043,905) (13,605,348,104)
(Forward)
43
2016 2015 2014
CASH FLOWS FROM FINANCING ACTIVITIES

Long-term debt:
Availments (Notes 18 and 31) P
= 9,534,981,637 P6,466,895,200
= P8,478,040,015
=
Payments of long-term debt (Note 18) (5,256,889,910) (5,518,293,249) (4,176,677,721)
Dividends paid (1,211,906,660) (908,929,995) (605,953,330)
Net cash provided by financing activities 3,066,185,067 39,671,956 3,695,408,964
EFFECTS OF EXCHANGE RATE CHANGES

IN CASH AND CASH EQUIVALENTS 261,593,568 112,522,272 (14,356,033)
NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS 5,590,152,241 742,177,380 (2,348,921,119)
CASH AND CASH EQUIVALENTS ATTRIBUTABLE TO

BUSINESS COMBINATION (Notes 7 and 31) – – 256,721,999
CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 4,706,090,063 3,963,912,683 6,056,111,803
CASH AND CASH EQUIVALENTS

AT END OF YEAR (Note 8) P
= 10,296,242,304 =4,706,090,063
P =3,963,912,683
P
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Cebu Air, Inc. (the Parent Company) was incorporated and organized in the Philippines on
August 26, 1988 to carry on, by means of aircraft of every kind and description, the general
business of a private carrier or charter engaged in the transportation of passengers, mail,
merchandise and freight, and to acquire, purchase, lease, construct, own, maintain, operate and
dispose of airplanes and other aircraft of every kind and description, and also to own, purchase,
construct, lease, operate and dispose of hangars, transportation depots, aircraft service stations and
agencies, and other objects and service of a similar nature which may be necessary, convenient or
useful as an auxiliary to aircraft transportation. The principal place of business of the Parent
Company is at 2nd Floor, Doña Juanita Marquez Lim Building, Osmeña Boulevard, Cebu City.
The Parent Company has twelve special purpose entities (SPE) that it controls, namely: Cebu
Aircraft Leasing Limited (CALL), IBON Leasing Limited (ILL), Boracay Leasing Limited (BLL),
Surigao Leasing Limited (SLL), Sharp Aircraft Leasing Limited (SALL), Vector Aircraft Leasing
Limited (VALL), Panatag One Aircraft Leasing Limited (POALL), Panatag Two Aircraft Leasing
Limited (PTALL), Panatag Three Aircraft Leasing Limited (PTHALL), Summit A Aircraft
Leasing Limited (SAALL), Summit B Aircraft Leasing Limited (SBALL) and Summit C Aircraft
Leasing Limited (SCALL). CALL, ILL, BLL, SLL, SALL, VALL, POALL, PTALL, PTHALL,
SAAL, SBALL and SCALL are SPEs in which the Parent Company does not have equity interest.
CALL, ILL, BLL, SLL, SALL, VALL, POALL, PTALL, PTHALL, SAALL, SBALL and
SCALL acquired the passenger aircraft for lease to the Parent Company under finance lease
arrangements (Notes 13 and 30) and funded the acquisitions through long-term debt (Note 18).
On March 20, 2014, the Parent Company acquired 100% ownership of CEBGO, Inc. (CEBGO)
(Note 7). The Parent Company, its twelve (12) SPEs and CEBGO (collectively known as
the Group) are consolidated for financial reporting purposes (Note 2).
The Parent Company‟s common stock was listed with the Philippine Stock Exchange (PSE) on
October 26, 2010, the Parent Company‟s initial public offering (IPO).
The Parent Company‟s ultimate parent is JG Summit Holdings, Inc. (JGSHI). The Parent
Company is 66.15%-owned by CP Air Holdings, Inc. (CPAHI).
In 1991, pursuant to Republic Act (RA) No. 7151, the Parent Company was granted a franchise to
operate air transportation services, both domestic and international. In August 1997, the Office of
the President of the Philippines gave the Parent Company the status of official Philippine carrier to
operate international services. In September 2001, the Philippine Civil Aeronautics Board (CAB)
issued the permit to operate scheduled international services and a certificate of authority to
operate international charters.
The Parent Company is registered with the Board of Investments (BOI) as a new operator of air
transport on a pioneer and non-pioneer status. Under the terms of the registration and subject to
certain requirements, the Parent Company is entitled to certain fiscal and non-fiscal incentives,
including among others, an income tax holiday (ITH) which extends for a period of four (4) to
six (6) years for each batch of aircraft registered to BOI (Notes 25 and 32).
45
Prior to the grant of the ITH and in accordance with the Parent Company‟s franchise, which
extends up to year 2031:
a. The Parent Company is subject to franchise tax of five percent (5%) of the gross revenue
derived from air transportation operations. For revenue earned from activities other than air
transportation, the Parent Company is subject to corporate income tax and to real property tax.
b. In the event that any competing individual, partnership or corporation received and enjoyed
tax privileges and other favorable terms which tended to place the Parent Company at any
disadvantage, then such privileges shall have been deemed by the fact itself of the Parent
Company‟s tax privileges and shall operate equally in favor of the Parent Company.
On May 24, 2005, the Reformed-Value Added Tax (R-VAT) law was signed as RA No. 9337 or
the R-VAT Act of 2005. The R-VAT law took effect on November 1, 2005 following the
approval on October 19, 2005 of Revenue Regulations (RR) No. 16-2005, which provides for the
implementation of the rules of the R-VAT law. Among the relevant provisions of RA No. 9337
are the following:
a. The franchise tax of the Parent Company is abolished;

b. The Parent Company shall be subject to corporate income tax;
c. The Parent Company shall remain exempt from any taxes, duties, royalties, registration
license, and other fees and charges;
d. Change in corporate income tax rate from 32.00% to 35.00% for the next three years effective
on November 1, 2005, and 30.00% starting on January 1, 2009 and thereafter;
e. 70.00% cap on the input VAT that can be claimed against output VAT; and
f. Increase in the VAT rate imposed on goods and services from 10.00% to 12.00% 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 (BIR) 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.
On December 16, 2008, the Parent Company was registered as a Clark Freeport Zone (CFZ)
enterprise and committed to provide domestic and international air transportation services for
passengers and cargos at the Diosdado Macapagal International Airport.
2. Basis of Preparation
The consolidated financial statements of the Group have been prepared on a historical cost basis,
except for financial assets and financial liabilities at fair value through profit or loss (FVPL) that
have been measured at fair value.
The consolidated financial statements of the Group are presented in Philippine Peso (P
= or Peso),
the Parent Company‟s functional and presentation currency. All amounts are rounded to the
nearest Peso, unless otherwise indicated.
46
Statement of Compliance
The consolidated financial statements of the Group have been prepared in compliance with
Philippine Financial Reporting Standards (PFRSs).
Basis of Consolidation
The consolidated financial statements as of December 31, 2016 and 2015 represent the
consolidated financial statements of the Parent Company, the SPEs that it controls and its wholly
owned subsidiary CEBGO. Consolidation of CEBGO started on March 20, 2014 when the Group
gained control (Note 7).
The Parent Company controls an investee if, and only if, the Parent Company has:
 Power over the investee (that is, existing rights that give it the current ability to direct the
relevant activities of the investee);
 Exposure, or rights, to variable returns from its involvement with the investee; and
 The ability to use its power over the investee to affect the amount of the investor‟s returns.
When the Parent Company has less than a majority of the voting or similar rights of an investee,
the Parent Company considers all relevant facts and circumstances in assessing whether it has
power over an investee, including:
 The contractual arrangement with the other vote holders of the investee;
 Rights arising from other contractual arrangements; and
 The Parent Company‟s voting rights and potential voting rights.
The Parent Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Parent Company obtains control over the subsidiary and ceases when
the Parent Company loses control of the subsidiary. Assets, liabilities, income and expenses of the
subsidiary acquired or disposed of during the year are included in the consolidated financial
statements from the date the Parent Company gains control until the date the Parent Company
ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the
equity holders of the Parent Company of the Group and to the non-controlling interests, even if
this results in the non-controlling interests having a deficit balance. The financial statements of
the subsidiaries are prepared for the same reporting date as the Parent Company, using consistent
accounting policies. All intragroup assets, liabilities, equity, income and expenses and cash flows
relating to transactions between members of the Group are eliminated on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Parent Company loses control over a subsidiary, it derecognizes the
related assets (including goodwill), liabilities, non-controlling interest and other components of
equity, while any resulting gain or loss is recognized in profit or loss. Any investment retained is
recognized at fair value.
47
3. Changes in Accounting Policies and Disclosures
The Group applied for the first time certain pronouncements which are effective beginning on or
after January 1, 2016. Except as otherwise indicated, the adoption of these pronouncements did
not have any significant impact on the Group‟s financial position or performance.
 Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12, Disclosure of

Interests in Other Entities, and Philippine Accounting Standard (PAS) 28, Investments in
Associates and Joint Ventures, Investment Entities: Applying the Consolidation Exception
These amendments clarify that the exemption in PFRS 10 from presenting consolidated
financial statements applies to a parent entity that is a subsidiary of an investment entity that
measures all of its subsidiaries at fair value. These amendments also clarify that only a
subsidiary of an investment entity that is not an investment entity itself and that provides
support services to the investment entity parent is consolidated. These amendments also allow
an investor (that is not an investment entity and has an investment entity associate or joint
venture) to retain the fair value measurement applied by the investment entity associate or
joint venture to its interests in subsidiaries when applying the equity method.
 Amendments to PFRS 11, Joint Arrangements, Accounting for Acquisitions of Interests in

Joint Operations
The amendments to PFRS 11 require a joint operator that is accounting for the acquisition of
an interest in a joint operation, in which the activity of the joint operation constitutes a
business (as defined by PFRS 3), to apply the relevant PFRS 3 principles for business
combinations accounting. These amendments also clarify that a previously held interest in a
joint operation is not remeasured on the acquisition of an additional interest in the same joint
operation while joint control is retained. In addition, a scope exclusion has been added to
PFRS 11 to specify that these amendments do not apply when the parties sharing joint control,
including the reporting entity, are under common control of the same ultimate controlling
party.
These amendments apply to both the acquisition of the initial interest in a joint operation and
the acquisition of any additional interests in the same joint operation.
 PFRS 14, Regulatory Deferral Accounts

PFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-
regulation, to continue applying most of its existing accounting policies for regulatory deferral
account balances upon its first-time adoption of PFRSs. Entities that adopt PFRS 14 must
present the regulatory deferral accounts as separate line items on the statement of financial
position and present movements in these account balances as separate line items in the profit
or loss and OCI. The standard requires disclosures on the nature of, and risks associated with,
the entity‟s rate-regulation and the effects of that rate-regulation on its financial statements.
48
 Amendments to PAS 1, Presentation of Financial Statements, Disclosure Initiative
The amendments are intended to assist entities in applying judgment when meeting the
presentation and disclosure requirements in PFRSs. These amendments clarify the following:
 That entities shall not reduce the understandability of their financial statements by either
obscuring material information with immaterial information; or aggregating material items
that have different natures or functions;
 That specific line items in the profit or loss and OCI and the statement of financial
position may be disaggregated;
 That entities have flexibility as to the order in which they present the notes to financial
statements; and
 That the share of OCI of associates and joint ventures accounted for using the equity
method must be presented in aggregate as a single line item, and classified between those
items that will or will not be subsequently reclassified to profit or loss.
 Amendments to PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets,
Clarification of Acceptable Methods of Depreciation and Amortization
The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of
economic benefits that are generated from operating a business (of which the asset is part)
rather than the economic benefits that are consumed through use of the asset. As a result, a
revenue-based method cannot be used to depreciate property, plant and equipment and may
only be used in very limited circumstances to amortize intangible assets.
 Amendments to PAS 16 and PAS 41, Agriculture: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the
definition of bearer plants. Under these amendments, biological assets that meet the definition
of bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply.
After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost
(before maturity) and using either the cost model or revaluation model (after maturity). These
amendments also require that produce that grows on bearer plants will remain in the scope of
PAS 41 measured at fair value less costs to sell. For government grants related to bearer
plants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistance,
will apply.
 Amendments to PAS 27, Separate Financial Statements, Equity Method in Separate Financial
Statements
The amendments allow entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements. An entity
already applying PFRSs and electing to change to the equity method in its separate financial
statements will have to apply that change retrospectively.
 Annual Improvements to PFRSs 2012 - 2014 Cycle
 Amendment to PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations,
Changes in Methods of Disposal
The amendment is applied prospectively and clarifies that changing from a disposal
through sale to a disposal through distribution to owners and vice-versa should not be
considered to be a new plan of disposal, rather it is a continuation of the original plan.
There is, therefore, no interruption of the application of the requirements in PFRS 5. This
amendment also clarifies that changing the disposal method does not change the date of
classification.
49
 Amendment to PFRS 7, Financial Instruments: Disclosures, Servicing Contracts
PFRS 7 requires an entity to provide disclosures for any continuing involvement in a
transferred asset that is derecognized in its entirety. The amendment clarifies that a
servicing contract that includes a fee can constitute continuing involvement in a financial
asset. An entity must assess the nature of the fee and arrangement against the guidance
for continuing involvement in PFRS 7 to determine whether the disclosures are required.
This amendment is to be applied such that the assessment of which servicing contracts
constitute continuing involvement will need to be done retrospectively. However,
comparative disclosures are not required to be provided for any period beginning before
the annual period in which the entity first applies this amendment.
 Amendment to PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim

Financial Statements
This amendment is applied retrospectively and clarifies that the disclosures on offsetting
of financial assets and financial liabilities are not required in the condensed interim
financial report, unless they provide a significant update to the information reported in the
most recent annual report.
 Amendment to PAS 19, Employee Benefits, Discount Rate: Regional Market Issue
This amendment is applied prospectively and clarifies that market depth of high quality
corporate bonds is assessed based on the currency in which the obligation is denominated,
rather than the country where the obligation is located. When there is no deep market for
high quality corporate bonds in that currency, government bond rates must be used.
 Amendment to PAS 34, Interim Financial Reporting, Disclosure of Information

‘Elsewhere in the Interim Financial Report’
The amendment is applied retrospectively and clarifies that the required interim
disclosures must either be in the interim financial statements or incorporated by cross-
reference between the interim financial statements and wherever they are included within
the greater interim financial report (e.g., in the management commentary or risk report).
4. Summary of Significant Accounting Policies
Current versus Noncurrent Classification

The Group presents assets and liabilities in the consolidated statement of financial position based
on current or noncurrent classification.
An asset is current when it is:
a. Expected to be realized or intended to be sold or consumed in normal operating cycle;

b. Held primarily for the purpose of trading;
c. Expected to be realized within twelve months after the reporting period; or
d. Cash or cash equivalent, unless restricted from being exchanged or used to settle a liability for
at least twelve months after the reporting period.
All other assets are classified as noncurrent.
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A liability is current when:
a. It is expected to be settled in normal operating cycle;

b. It is held primarily for the purpose of trading;
c. It is due to be settled within twelve months after the reporting period; or
d. There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period.
The Group classifies all other liabilities as noncurrent.
Cash and Cash Equivalents

Cash represents 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 placement and that are subject to an insignificant risk of changes in
value. Cash equivalents include short-term investments that can be pre-terminated and readily
convertible to known amount of cash and that are subject to an insignificant risk of changes in
value.
Financial Instruments - Initial Recognition and Subsequent Measurement

Classification of financial instruments
Financial instruments within the scope of PAS 39 are classified as:
a. Financial assets and financial liabilities at FVPL;

b. Loans and receivables;
c. Held-to-maturity investments;
d. Available-for-sale financial assets; and
e. Other financial liabilities.
The classification depends on the purpose for which the investments were acquired and whether
they are quoted in an active market. The Group determines the classification of its financial
instruments at initial recognition and, where allowed and appropriate, re-evaluates at every
reporting period. The financial instruments of the Group as of December 31, 2016 and 2015
consists of loans and receivables, financial assets and liabilities at FVPL and other financial
liabilities.
Date of recognition of financial instruments

Financial instruments are recognized in the consolidated statement of financial position when the
Group becomes a party to the contractual provision of the instrument. Purchases or sales of
financial assets that require delivery of assets within the time frame established by regulation or
convention in the marketplace are recognized using the settlement date accounting. Derivatives
are recognized on the trade date basis.
In case where fair value is determined using data which is not observable, the difference between
the transaction price and model value is only recognized in profit or loss when the inputs become
observable or when the instrument is derecognized. For each transaction, the Group determines
the appropriate method of recognizing the ‘Day 1’ difference amount.
51
Fair Value Measurement
The Group measures derivatives at fair value at each reporting period. Also, for assets and
liabilities which are not measured at fair value in the consolidated statement of financial position
but for which the fair value is disclosed, are included in Note 29.
The fair value is the price that would be received to sell an asset in an ordinary transaction
between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
 In the principal market for the asset or liability; or

 In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Group. The fair value of
an asset or liability is measured using the assumptions that market participants would use when
pricing the asset or liability assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
 Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
 Level 2: Valuation techniques for which the lowest level input that is significant to the
measurement is directly or indirectly observable.
 Level 3: Valuation techniques for the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognized in the consolidated financial statements at fair value
on a recurring basis, the Group determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each reporting period.
Financial assets and financial liabilities at FVPL

Financial assets and financial liabilities at FVPL include financial assets and financial liabilities
held for trading purposes, derivative instruments or those designated upon initial recognition as at
FVPL. Financial assets and financial liabilities are designated by management on initial
recognition when any of the following criteria are met:
 The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them
on a different basis; or
 The assets or liabilities are part of a group of financial assets, financial liabilities or both
which are managed and their performance are 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.
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Financial assets and financial liabilities at FVPL are subsequently measured at fair value.
Changes in fair value of such assets or liabilities are accounted for in profit or loss. The Group
uses commodity swaps and foreign currency forwards to hedge its exposure to fuel price
fluctuations and foreign currency fluctuations, respectively. Such are accounted for as non-hedge
derivatives.
An embedded derivative is separated from the host contract and accounted for as a derivative if all
of the following conditions are met:
 The economic characteristics and risks of the embedded derivative are not closely related to
the economic characteristics of the host contract;
 A separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative; and
 The hybrid or combined instrument is not recognized at FVPL.
The Group assesses whether an embedded derivative is required to be separated from the host
contract when the Group first becomes a party to the contract. Reassessment of embedded
derivatives is only done when there are changes in the contract that significantly modifies the
contractual cash flows.
The Group‟s financial assets and liabilities at FVPL consist of derivative assets and derivative
liabilities as of December 31, 2016 and 2015, respectively.
Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments and
fixed maturities that are not quoted in an active market. Loans and receivables are recognized
initially at fair value, plus transaction costs that are attributable to the acquisition of loans and
receivables.
After initial measurement, loans and receivables are subsequently carried at amortized cost using
the effective interest rate (EIR) method, less allowance for impairment credit losses. Amortized
cost is calculated by taking into account any discount or premium on the acquisition, and fees or
costs that are an integral part of the EIR and transaction costs. Gains and losses are recognized in
profit or loss, when loans and receivables are derecognized or impaired, as well as through the
amortization process.
This accounting policy applies primarily to the Group‟s cash and cash equivalents (excluding cash
on hand), receivables and certain refundable deposits.
Other financial liabilities

This category pertains to financial liabilities that are not held for trading or not designated as at
FVPL upon the inception of the liability. These include liabilities arising from operations and
borrowings.
Other financial liabilities are initially recognized at the fair value of the consideration received,
less directly attributable transaction costs.
After initial measurement, other financial liabilities are measured at amortized cost using the EIR
method. Amortized cost is calculated by taking into account any discount or premium on the
acquisition and fees or costs that are an integral part of the EIR.
53
This accounting policy applies primarily to the Group‟s accounts payable and other accrued
liabilities, long-term debt and other obligations that meet the above definition.
Offsetting of Financial Instruments

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

Financial assets
A financial asset (or, when applicable, a part of a financial asset or part of a group of financial
assets) is derecognized (that is, removed from the Group‟s consolidated statement of financial
position) when:
 The rights to receive cash flows from the asset have expired;
 The Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a
„pass-through‟ arrangements; and either:
 The Group has transferred substantially all the risks and rewards of the asset; or
 The Group 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 rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards
of ownership. When it has neither transferred nor retained substantially all of the risks and
rewards of the asset, nor transferred control of the asset, the Group continues to recognize the
transferred asset to the extent of its continuing involvement. In that case, the Group also
recognizes an associated liability. The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured
at the lowest level of the original carrying amount of the asset and the maximum amount of
consideration the Group could be required pay.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged,
cancelled or 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 an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognized in profit or loss.
Impairment of Financial Assets

The Group assesses, at each reporting date, whether there is objective evidence that a financial
asset or group of financial assets is impaired. An impairment exists if one or more events that has
occurred since the initial recognition of the asset (an incurred „loss event‟), has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be
54
reliably estimated. Evidence of impairment may include indications that the debtors or a group of
debtors is experiencing significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy or other financial
reorganization and observable data indicating that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For financial assets carried at amortized cost, the Group first assesses whether impairment exists
individually for financial assets that are individually significant, or collectively for financial assets
that are not individually significant. If the Group determines that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, it
includes the asset in a group of financial assets with similar credit risk characteristics and
collectively assesses them 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.
The amount of any impairment loss identified is measured as the difference between the asset‟s
carrying amount and the present value of estimated future cash flows that is discounted at the
asset‟s original EIR.
The carrying amount of the asset is reduced through the use of an allowance account and the loss
is recognized in the profit or loss. Receivables, together with the associated allowance are written
off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of
the estimated impairment loss increases or decreases because of an event occurring after the
impairment is recognized, the previously recognized impairment loss is increased or reduced by
adjusting the allowance account. If a write-off is later recovered, the recovery is credited in profit
or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to 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 profit or loss to the extent that the carrying value of the asset does not exceed its
amortized cost at the reversal date.
The Group performs a regular review of the age and status of these accounts, designed to identify
accounts with objective evidence of impairment and provide the appropriate allowance for
impairment loss. The review is accomplished using a combination of specific and collective
assessment approaches, with the impairment loss being determined for each risk grouping
identified by the Group.
Expendable Parts, Fuel, Materials and Supplies

Expendable parts, fuel, materials and supplies are stated at lower of cost and net realizable value
(NRV). Cost of flight equipment expendable parts, materials and supplies are stated at acquisition
cost determined on a moving average cost method. Fuel is stated at cost on a weighted average
cost method. NRV is the estimated selling price in the ordinary course of business less estimated
costs to sell.
Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation and amortization and
accumulated impairment loss, if any. The initial cost of property and equipment comprises its
purchase price, any related capitalizable borrowing costs attributed to progress payments incurred
on account of aircraft acquisition under construction and other directly attributable costs of
bringing the asset to its working condition and location for its intended use.
55
Subsequent costs are capitalized as part of „Property and equipment‟ account only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. Subsequent costs such as actual costs of heavy maintenance
visits for airframe and engine are capitalized and depreciated based on the estimated number of
years or flying hours, whichever is applicable, until the next major overhaul or inspection.
Generally, heavy maintenance visits are required every five to six years for airframe and ten years
or 20,000 flight cycles, whichever comes first, for landing gear. All other repairs and maintenance
expenses are charged to profit or loss as incurred.
Pre-delivery payments for the construction of aircraft are initially recorded as Construction
in-progress when paid to the counterparty. Construction in-progress are transferred to the related
„Property and equipment‟ account when the construction or installation and related activities
necessary to prepare the property and equipment for their intended use are completed, and the
property and equipment are ready for service. Construction in-progress is not depreciated until
such time when the relevant assets are completed and available for use.
Depreciation and amortization of property and equipment commence once the property and
equipment are available for use and are computed using the straight-line method over the
estimated useful lives (EULs) of the assets, regardless of utilization. The EULs of property and
equipment of the Group follow:
Passenger aircraft* 15 years

Engines 15 years
Rotables 15 years
Ground support equipment 5 years
EDP Equipment, mainframe and peripherals 3 years
Transportation equipment 5 years
Furniture, fixtures and office equipment 5 years
Communication equipment 5 years
Special tools 5 years
Maintenance and test equipment 5 years
Other equipment 5 years
*With residual value of 15.00%
Leasehold improvements are amortized over the shorter of their EULs or the corresponding lease
terms.
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is recognized in profit or loss, when the asset is derecognized.
The methods of depreciation and amortization, EUL and residual values of property and
equipment are reviewed annually and adjusted prospectively.
Fully depreciated property and equipment are returned in the account until they are no longer in
use and no further depreciation or amortization is charged to profit or loss in the consolidated
statement of comprehensive income.
56
Borrowing Costs
Borrowing costs are generally expensed as incurred. 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.
The Group had not capitalized any borrowing costs for the years ended December 31, 2016 and
2015 as all borrowing costs from outstanding long-term debt relate to assets that are ready for
intended use.
Business Combination and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred measured at acquisition date fair
value and the amount of any non-controlling interests in the acquiree. For each business
combination, the Group elects whether to measure the non-controlling interests in the acquiree at
fair value or at the proportionate share of the acquiree‟s identifiable net assets. Acquisition-related
costs are expensed as incurred and included under „General and administrative‟ account in the
consolidated statement of comprehensive income.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at
the acquisition date. Contingent consideration classified as an asset or liability that is a financial
instrument and within the scope of PAS 39, Financial Instruments: Recognition and
Measurement, is measured at fair value with changes in fair value recognized either in profit or
loss or as a change to OCI. If the contingent consideration is not within the scope of PAS 39, it is
measured in accordance with the appropriate PFRS. Contingent consideration that is classified as
equity is not remeasured and subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interests, and any previous interest
held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate consideration transferred, the Group reassesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be recognized at the acquisition date. If
the reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost, less any accumulated impairment losses.
Investments in Joint Ventures and an Associate

A joint venture (JV) is a contractual arrangement whereby two or more parties undertake an
economic activity that is subject to joint control. A jointly controlled entity is a JV that involves
the establishment of a separate entity in which each venturer has an interest. An associate is an
entity in which the Parent Company has significant influence and which is neither a subsidiary nor
a joint venture.
57
The Parent Company‟s 60.00%, 49.00% and 35.00% investments in Philippine Academy for
Aviation Training, Inc. (PAAT), Aviation Partnership (Philippines) Corporation (A-plus) and SIA
Engineering (Philippines) Corporation (SIAEP), respectively, are classified as investments in joint
ventures. The Parent Company‟s 15.00% investment in Air Block Box Asia Pacific Pte. Ltd.
(ABB) is classified as an investment in associate. These investments in JV and an associate are
accounted for under the equity method. Under the equity method, the investments in JV and an
associate are carried in the consolidated statement of financial position at cost plus post-
acquisition changes in the Group‟s share of net assets of the JV, less any allowance for impairment
in value. The consolidated statement of comprehensive reflects the Group‟s share in the results of
operations of the JV. Dividends received are treated as a revaluation of the carrying value of the
investment.
The financial statements of the investee companies used in the preparation of the consolidated
financial statements are prepared as of the same date with the Group. The investee companies‟
accounting policies conform to those by the Group for like transactions and events in similar
circumstances.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is their fair value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost, less any accumulated
impairment loss.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment
annually, either individually or at the cash-generating unit (CGU) level. The assessment of
indefinite life is reviewed annually to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite to finite is made on a prospective
basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognized in the
profit or loss when the asset is derecognized.
The intangible asset of the Group has indefinite useful lives.
Impairment of Nonfinancial Assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the
Group estimates the asset‟s recoverable amount. An asset‟s recoverable amount is the higher of
the asset‟s or CGU‟s fair value less costs of disposal (FVLCD) and its value-in-use (VIU). The
recoverable amount is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of assets. When the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In determining FVLCD, recent market transactions are taken into account. If no such transactions
can be identified, an appropriate valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded companies or other available fair value
indicates. In assuming VIU, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset.
58
The Group bases its impairment calculation on detailed budgets and forecast calculations, which
are prepared separately for each of the Group‟s CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally cover a period of five years. A long-term
growth rate is calculated and applied to project future cash flows after the fifth year.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether
there is an indication that previously recognized impairment losses no longer exist or have
decreased. If such indication exist, the Group estimated the asset‟s or CGU‟s recoverable
amount. A previously recognized impairment loss is reversed only if there has been a change in
the assumptions used to determine that asset‟s recoverable amount since the last impairment loss
was recognized. The reversal is limited so that the carrying amount of the asset that does not
exceed its recoverable amount, nor 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 profit or loss.
Goodwill is tested for impairment annually as at December 31 and when circumstances indicate
that the carrying value is impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or
group of CGU) to which the goodwill relates. When the recoverable amount of the CGU is less
than its carrying amount, an impairment loss is recognized. Impairment loss relating to goodwill
cannot be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at December 31
at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be
impaired.
Aircraft Maintenance and Overhaul Cost

The Group recognizes aircraft maintenance and overhaul expenses in accordance with the
contractual terms.
The maintenance contracts are classified into two: (a) those based on time and material basis
(TMB); and (b) power-by-the-hour (PBH) contract. For maintenance contracts under TMB and
PBH, the Group recognizes expenses on an accrual basis.
Asset Retirement Obligation (ARO)

The Group is contractually required under various lease contracts to restore certain leased aircraft
to its original condition and to bear the cost of restoration at the end of the contract period. The
contractual obligation includes regular aircraft maintenance, overhaul and restoration of the leased
aircraft to its original condition. The event that gives rise to the obligation is the actual flying
hours of the asset as used, as the usage determines the timing and nature of the entity completes
the overhaul and restoration. Regular aircraft maintenance is accounted for as expense when
incurred, while overhaul and restoration are accounted on an accrual basis.
59
If there is a commitment related to maintenance of aircraft held under operating lease
arrangements, a provision is made during the lease term for the lease return obligations specified
within those lease agreements. The provision is made based on historical experience,
manufacturers‟ advice and if relevant, contractual obligations, to determine the present value of
the estimated future major airframe inspections cost and engine overhauls.
Advance payment for materials for the restoration of the aircraft is initially recorded under
„Advances to supplier‟ account in the consolidated statements of financial position. This is
recouped when the expenses for restoration of aircraft have been incurred.
The Group regularly assesses the provision for ARO and adjusts the related liability.
Liability Under Lifestyle Rewards Program

The Group operates a lifestyle rewards program called „Getgo.‟ A portion of passenger revenue
attributable to the award of Getgo points, which is estimated based on expected utilization of these
benefits, is deferred until utilized. The fair value of the consideration received in respect of the
initial sale is allocated to the award credits based on its fair value. The fair value of the points
expected to be redeemed is estimated using the applicable fare based on the estimated redemption.
The deferred revenue is included under „Other noncurrent liabilities account‟ in the consolidated
statement of financial position. Any remaining unutilized benefits are recognized as revenue upon
redemption or expiry.
Common Stock
Common stocks are classified as equity and recorded at par. Proceeds in excess of par value are
recorded under „Capital paid in excess of par value‟ account in the consolidated statement of
financial position. Incremental costs directly attributable to the issuance of new shares are shown
in equity as a deduction from the proceeds.
Treasury Stock
Own equity instruments which are acquired (treasury stocks) are recognized at cost and deducted
from equity. No gain or loss is recognized in profit and loss on the purchase, sale, issuance or
cancellation of the Parent Company‟s own equity instruments.
Retained Earnings
Retained earnings represent accumulated earnings of the Group, less dividends declared.
Appropriated retained earnings are set aside for purposes of the Parent Company‟s re-fleeting
program. Dividends on common shares are recognized as a liability and deducted from equity
when approved and declared by the Parent Company‟s Board of Directors (BOD), in the case of
cash dividends; or by the Parent Company‟s BOD and shareholders, in the case of stock dividends.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received, excluding discounts, rebates and other sales taxes or duty. The following
specific recognition criteria must also be met before revenue is recognized:
Sale of air transportation services

Passenger ticket and cargo waybill sales, excluding portion relating to awards under Lifestyle
Rewards Program, are initially recorded under „Unearned transportation revenue‟ account in the
consolidated statement of financial position until earned and recognized under „Revenue‟ account
in the consolidated statement of comprehensive income when carriage is provided or when the
passenger is lifted.
60
Ancillary revenue
Revenue from services incidental to the transportation of passengers, cargo, mail and merchandise
are recognized when transactions are carried out.
Interest income
Interest on cash in banks, short-term cash placements and debt securities classified as financial
assets at FVPL is recognized as the interest accrues using the EIR method.
Expense Recognition
Expenses are recognized when it is probable that decrease in future economic benefits related to a
decrease in an asset or an increase in a liability has occurred and the decrease in economic benefits
can be measured reliably.
The commission related to the sale of air transportation services is recognized as outright expense
upon receipt of the payment from customers, and is included under „Reservation and sales‟
account in the consolidated statement of comprehensive income.
Foreign Currency Transactions

Transactions in foreign currencies are initially recorded in the Parent Company and subsidiaries‟
functional currency using the exchange rates prevailing at the dates of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated at the functional currency
using the Philippine Dealing and Exchange Corp. closing rate prevailing at the reporting date. All
differences are taken to the profit or loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the prevailing closing exchange rate as of
the date of initial transaction.
Pension Costs
The Group maintains defined benefit plans covering substantially all of its employees. The cost of
providing benefits under the defined benefit plans is actuarially determined using the projected
unit credit method. The 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 the option to accelerate when significant
changes to underlying assumptions occur.
Pension expense comprises the following:
a. Service cost; and

b. Net interest on pension liability.
Service costs, which include current service costs, past service costs and gains or losses on non-
routine settlements, are recognized as expense in profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs.
Net interest on pension liability is the change during the period in the pension liability that arises
from the passage of time, which is determined by applying the discount rate based on high quality
corporate bonds to the pension liability. Net interest on pension liability is recognized as expense
or income in profit or loss.
Remeasurements comprising actuarial gains and losses, excess of actual return on plan assets over
interest income and any change in the effect of the asset ceiling (excluding net interest on pension
liability) are recognized immediately in OCI in the period in which they arise. Remeasurements
are not reclassified to profit or loss in subsequent periods.
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The pension liability is the aggregate of the present value of defined benefit obligation at the end
of the reporting period reduced by the fair value of plan assets, adjusted for any effect of limiting a
net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any
economic benefits available in the form of refunds from the plan or reductions in future
contributions to the plan.
Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not
available to the creditors of the Group, nor can they be paid directly to the Group. The fair value
of plan assets is based on market price information. When no market price is available, the fair
value of plan assets is estimated by discounting expected future cash flows using a discount rate
that reflects both the risk associated with the plan assets and the maturity or expected disposal date
of those assets (or, if they have no maturity, the expected period until the settlement of the related
obligations).
The Group‟s right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when
reimbursement is virtually certain.
Income Taxes
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the tax authority. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted as of the reporting date.
Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretations and establishes provisions, when
appropriate.
Deferred tax
Deferred tax is provided using the liability method on all temporary differences, with certain
exceptions, between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax assets are recognized for all deductible temporary differences with certain
exceptions, and carryforward benefits of unused tax credits from excess minimum corporate
income tax (MCIT) over Regular Corporate Income Tax and unused net operating loss carryover
(NOLCO), to the extent that it is probable that sufficient taxable income will be available against
which the deductible temporary differences and carryforward benefits of unused tax credits from
excess MCIT over RCIT and unused NOLCO can be utilized. Deferred tax assets, however, are
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 transaction, affects neither the accounting
income nor taxable profit or loss.
The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient future taxable income will be available to allow
all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed
at each reporting date, and are recognized to the extent that it has become probable that future
taxable income will allow the deferred tax assets to be recovered.
62
Deferred tax liabilities are recognized for all taxable temporary differences, with certain
exceptions. Deferred tax liabilities associated with investments in subsidiaries, branches and
associates, and interests in joint arrangements are not recognized if the Group is able to control the
timing of the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are applicable 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 as of the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transaction either in profit or
loss or OCI.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to
offset current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same tax authority.
Leases
The determination of whether an arrangement is, or contains a lease, is based on the substance of
the arrangement at inception date, and requires an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a
right to use the asset. A reassessment is made after inception of the lease only if one 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 an extension granted, unless that 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 a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for (a), (c) and (d) scenarios 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 benefits 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 and included
under „Property and equipment‟ account with the corresponding liability to the lessor included
under „Long-term debt‟ account in the consolidated statement of financial position. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly to profit or loss.
Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable
certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated
over the shorter of the EUL of the asset and the lease term.
63
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as an expense in profit or
loss on a straight-line basis over the lease term.
Group as lessor
Leases where the Group does not transfer substantially all the risks and benefits 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 the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable (i.e., more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can
be made of the amount of the obligation. Provisions are reviewed at each reporting date and
adjusted to reflect the current best estimate. 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
pre-tax rate that reflects current market assessments of the time value of money and, when
appropriate, the risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognized as an interest expense in profit or loss.
Contingent liabilities are not recognized in the consolidated statement of financial position but are
disclosed in the notes to consolidated financial statements, unless the possibility of an outflow of
resources embodying economic benefits is remote. Contingent assets are not recognized 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.
Earnings (Loss) Per Share (EPS)

Basic EPS is computed by dividing net income applicable to common equity holders by the
weighted average number of common shares issued and outstanding during the year, adjusted for
any subsequent stock dividends declared.
Diluted EPS amounts are calculated by dividing the net profit attributable to common equity
holders of the Group by the weighted average number of common shares outstanding during the
year plus the weighted average number of common shares that would be issued on the conversion
of all the dilutive potential common shares into common shares.
For the years ended December 31, 2016 and 2015, the Group does not have any dilutive potential
ordinary shares.
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
Chief Operating Decision Maker (CODM). The CODM, who is responsible for resource
allocation and assessing performance of the operating segment, has been identified as the
President and Chief Executive Officer (CEO). The nature of the operating segment is set out in
Note 6.
64
Events After the Reporting Date
Post-year-end events that provide additional information about the Group‟s position at the
reporting date (adjusting event) are reflected in the consolidated financial statements. Post-year-
end events that are not adjusting events are disclosed in the consolidated financial statements,
when material.
5. Significant Accounting Judgments and Estimates
In the process of applying the Group‟s accounting policies, management has exercised judgments
and estimates in determining the amounts recognized in the consolidated financial statements.
The most significant uses of judgments and estimates follow:
Judgments
a. Passenger revenue recognition

Passenger sales are recognized as revenue when the obligation of the Parent Company to
provide transportation service ceases when the service has been provided to the passengers
according to flight schedule. The amount of passenger ticket for which the related
transportation service has not yet been rendered at the end of the reporting period, is recorded
under „Unearned transportation revenue‟ account in the consolidated statement of financial
position.
As of December 31, 2016 and 2015, the balances of the Group‟s unearned transportation
revenue amounted to P
=8,141.8 million and P
=6,971.8 million, respectively.
b. Fair values of financial instruments

Where the fair values of certain financial assets and liabilities recorded in the consolidated
statement of financial position cannot be derived from active markets, they are determined
using valuation techniques, including the discounted cash flow model. The inputs to these
models are taken from observable market data where possible, but where this is not feasible,
estimates are used in establishing fair values. The judgments include considerations of
liquidity risk, credit risk and volatility. Changes in assumptions about these factors could
affect the reported fair value of financial instruments. For derivatives, the Group generally
relies on the agent‟s valuation.
The fair values of the Group‟s financial instruments are presented in Note 29.
c. Classification of leases
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 capitalized.
The Group also has lease agreements where it has determined that the risks and rewards
related to the leased assets are retained with the lessors (e.g., no bargain purchase option and
transfer of ownership at the end of the lease term). The Group determined that it has no risks
relating to changing economic conditions since the Group does not own the leased aircraft.
Where the lease agreement does not transfer substantially all the risks and rewards incidental
to ownership, such leases are accounted for as operating leases (Note 30).
65
d. Consolidation of SPEs
The Group periodically undertakes transactions that may involve obtaining the rights to
variable returns from its involvement with the SPEs. These transactions include the purchase
of aircraft and assumption of certain liabilities. In all such cases, management makes an
assessment as to whether the Group has: (a) power over the SPEs; (b) the right over the
returns of its SPEs; and (c) the ability to use power over the SPEs to affect the amount of the
Parent Company‟s return, and based on these assessments, the SPEs are consolidated as a
subsidiary or associated company. In making these assessments, management considers the
underlying economic substance of the transaction and not only the contractual terms. The
Group has assessed that it will benefit from the economic benefits of the SPEs‟ activities and
it will affect the returns for the Group. The Group is directly exposed to the risks and returns
from its involvement with the SPEs. Such rights and risks associated with the benefits and
returns are indicators of control. Accordingly, the SPEs are consolidated.
e. Determination of functional currency

PAS 21 requires management to use its judgment in determining the entity‟s functional
currency such that it most faithfully represents the economic effects of the underlying
transactions, events and conditions that are relevant to the entity. In making this judgment,
each entity in the Group considers the following:
1. The currency that mainly influences sales prices for financial instruments and services
(this will often be the currency in which sales prices for its financial instruments and
services are denominated and settled);
2. The currency in which funds from financing activities are generated; and
3. The currency in which receipts from operating activities are usually retained.
Management determined that Philippine peso (P =) is the functional currency for each entity in
the Group, after considering the criteria stated in PAS 21.
f. Contingencies
The Group is currently involved in certain legal proceedings. The estimate of the probable
costs for the resolution of these claims has been developed in consultation with outside
counsel handling the defense in these matters and is based upon an analysis of potential
results. The Group currently does not believe that these will have a material adverse effect on
the Group‟s financial position and financial performance. It is possible, however, that future
financial performance could be materially affected by changes in the estimates or in the
effectiveness of the strategies relating to these proceedings (Note 30).
g. Allocation of revenue, costs and expenses for registered and non-registered activities
Revenue, costs and expenses are classified as exclusive and common. Exclusive revenue, cost
and expenses such as passenger revenue, cargo revenue, baggage revenue, insurance
surcharge, fuel and oil expense, hull/war/risk insurance, maintenance expense, depreciation
(for aircraft under finance lease), lease expense (for aircraft under operating lease) and interest
expense based on the related long-term debt are specifically identified per aircraft based on an
actual basis. For revenue, cost and expense accounts that are not identifiable per aircraft, the
Group provides allocation based on activity factors that closely relate to the earning process of
the revenue.
h. Classification of joint arrangements

The Group‟s investments in JVs (Note 14) are structured in separate incorporated entities.
Even though the Group holds various percentage of ownership interest on these arrangements,
their respective joint arrangement agreements requires unanimous consent from all parties to
66
the agreement for the relevant activities identified. The Group and the parties to the
agreement only have rights to the net assets of the JV through the terms of the contractual
arrangements.
i. Assessment of intangible assets with indefinite useful lives

The Group has intangible assets representing costs to establish brand and market opportunities
under the strategic alliance with CEBGO (Note 7). Management assessed that these assets
have indefinite useful lives because there is no foreseeable limit to the period over which these
assets are expected to generate net cash inflows to the Group.
Estimates and Assumptions

The key assumptions concerning the future and other sources of estimation uncertainty at the
reporting date that have significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next year are discussed below:
a. Estimation of Asset Retirement Obligation (ARO)

The Group is contractually required under certain lease contracts to restore certain leased
passenger aircraft to stipulated return condition and to bear the costs of restoration at the end
of the contract period. Since the first operating lease entered by the Group in 2001, these
costs are accrued based on an internal estimate which includes estimates of certain redelivery
costs at the end of the operating aircraft lease. The contractual obligation includes regular
aircraft maintenance, overhaul and restoration of the leased aircraft to its original condition.
Regular aircraft maintenance is accounted for as expense when incurred, while overhaul and
restoration are accounted on an accrual basis.
Assumptions used to compute ARO are reviewed and updated annually by the Group. As of
December 31, 2016 and 2015, the cost of restoration is computed based on the Group‟s
assessment on expected future aircraft utilization.
The amount and timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. The recognition of ARO would
increase other noncurrent liabilities and repairs and maintenance expense.
As of December 31, 2016 and 2015, the Group‟s ARO liability (included under „Other
noncurrent liabilities‟ account in the consolidated statements of financial position) has a
carrying value of P=2,465.7 million and P=1,344.6 million, respectively (Note 19). The related
repairs and maintenance expense for the years ended December 31, 2016, 2015 and 2014
amounted to P=1,121.1 million, P =864.0 million and P=476.0 million, respectively (Notes 19
and 22).
b. Impairment of goodwill and intangible assets

The Group determines whether goodwill and intangibles with indefinite useful lives are
impaired at least on an annual basis. The impairment testing is performed annually as at
December 31 and when circumstances indicate that the carrying amount is impaired. The
impairment testing also requires an estimation of the recoverable amounts, which is the
FVLCD or VIU of the CGU whichever is higher, to which the goodwill and intangibles with
indefinite useful lives are located.
In determining the recoverable amount of these assets, the management estimates the VIU of
the CGU to which goodwill and intangible assets are allocated. Estimating the VIU requires
management to make an estimate of the expected future cash flows from the asset or CGUs
and choose a suitable discount rate in order to calculate the present value of those cash flows.
67
As of December 31, 2016 and 2015, the Group has determined that goodwill and intangibles with
indefinite useful lives are recoverable based on VIU. Goodwill amounted to P =566.8 million as of
December 31, 2016 and 2015 (Notes 7 and 15). Brand and market opportunities, which are recorded
under „Other noncurrent assets‟ account amounted to P =852.2 million as of December 31, 2016 and
2015 (Note 7 and 16).
c. Estimation of useful lives of property and equipment

The Group estimates the useful lives of its property and equipment based on the period over
which the assets are expected to be available for use. The Group reviews annually the EULs
and of property and equipment based on factors that include physical wear and tear, technical
and commercial obsolescence and other limits on the use of the assets. It is possible that
future results of operations could be materially affected by changes in these estimates brought
about by changes in the factors mentioned. A reduction in the EUL of property and
equipment would increase the recorded depreciation and amortization expense and decrease
noncurrent assets.
As of December 31, 2016 and 2015, the carrying values of the Group‟s property and
equipment amounted to P =81,890.3 million and P=72,075.8 million, respectively (Note 13).
The Group‟s depreciation and amortization expense amounted to P =5,998.7 million,
P =4,281.5 million for the years ended December 31, 2016, 2015 and
2014, respectively (Note 13).
d. Estimation of allowance for credit losses on receivables

The Group maintains allowance for credit losses at a level considered adequate to provide for
potential uncollectible receivables. The level of this allowance is evaluated by management
on the basis of factors that affect the collectability of the accounts. These factors include, but
are not limited to, the length of the Group‟s relationship with the agents, customers and other
counterparties, the payment behavior of agents and customers, other counterparties and other
known market factors. The Group reviews the age and status of receivables, and identifies
accounts that are to be provided with allowances on a continuous basis.
The balances of receivables and allowance for credit losses as of December 31, 2016 and 2015
are disclosed in Note 10.
e. Determination of NRV of expendable parts, fuel, materials and supplies

The Group‟s estimates of the NRV of expendable parts, fuel, materials and supplies are based
on the most reliable evidence available at the time the estimates are made, of the amount that
the expendable parts, fuel, materials and supplies are expected to be realized. In determining
the NRV, the Group considers any adjustment necessary for obsolescence, which is generally
providing 100.00% for nonmoving items for more than one year. A new assessment is made
of NRV 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 NRV because of a 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 NRV.
The related balances as of December 31, 2016 and 2015 are discussed in Note 11.
68
f. Estimation of liability under the Lifestyle Rewards Program
A portion of passenger revenue attributable to the award of lifestyle reward program points,
estimated based on expected utilization on these benefits, is deferred until utilized. The points
expected to be redeemed are measured at fair value which is estimated using the Peso value of
the points. Deferred revenue included as part of „Other noncurrent liabilities‟ account
amounted to P =377.0 million and P=92.5 million as of December 31, 2016 and 2015,
respectively (Note 19). The rewards program started in 2015. Any remaining unredeemed
points are recognized as revenue upon expiration.
g. Estimation of pension and other employee benefit costs

The determination of the obligation and cost of pension and other employee benefits is
dependent on the selection of certain assumptions used in calculating such amounts. Those
assumptions include, among others, discount rates and salary increase rates (Note 24).
While the Group believes that the assumptions are reasonable and appropriate, significant
differences between actual experiences and assumptions may materially affect the cost of
employee benefits and related obligations.
The Group‟s pension liability amounted to P =568.8 million and P
=546.5 million as of December
31, 2016 and 2015, respectively (Note 24).
The Group also estimates other employee benefit obligations and expense, including the cost
of paid leaves based on historical leave availments of employees, subject to the Group‟s
policy. These estimates may vary depending on the future changes in salaries and actual
experiences during the year.
h. Recognition of deferred tax assets

The Group assesses the carrying amounts of deferred income taxes at each reporting period
and reduces deferred tax assets to the extent that it is no longer probable that sufficient taxable
income will be available to allow all or part of the deferred tax assets to be utilized.
Significant management judgment is required to determine the amount of deferred tax assets
that can be recognized, based upon the likely timing and level of future taxable profits
together with future tax planning strategies.
As of December 31, 2016 and 2015, the Group had certain gross deductible and taxable
temporary differences which are expected to expire or reverse within the ITH period, and for
which deferred tax assets and deferred tax liabilities were not set up on account of the Group‟s
ITH.
As of December 31, 2016 and 2015, the Group has deferred tax assets amounting to
P =3,574.4 million, respectively. Unrecognized deferred tax assets as of
December 31, 2016 and 2015 amounted to nil and P =1,033.8 million, respectively
(Note 25).
69
6. 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 CODM, who is responsible for allocating resources,
assessing performance and making operating decisions. The CODM is the President and CEO of
the Parent Company.
The revenue of the operating segment was mainly derived from rendering transportation services.
Transfer prices between operating segments are on an arm‟s length basis in a manner similar to
transactions with third parties.
The amount of segment assets and liabilities are based on the measurement principles that are
similar with those used in measuring the assets and liabilities in the consolidated statements of
financial position, which is in accordance with PFRSs.
Segment information for the reportable segment is shown in the following table:
2016 2015 2014

Revenue P
=63,778,967,986 =56,620,079,940
P =52,176,271,673
P
Earnings before interest, taxes,
depreciation, amortization, and
rent (EBITDAR) 23,624,718,036 19,700,325,097 12,418,364,058
Depreciation and amortization 5,998,695,417 5,111,543,724 4,281,525,018
Interest expense 1,170,181,141 1,073,109,693 1,013,241,353
Interest income 113,672,171 83,006,926 79,927,272
Earnings before interest and taxes
(EBIT) 12,251,198,186 9,700,220,806 4,157,336,990
Pre-tax core net income 11,372,998,058 8,745,536,537 3,320,349,000
Net income 9,754,136,196 4,387,225,875 853,498,216
Capital expenditures 19,126,054,236 13,047,934,091 13,316,719,856
Hedging gains (losses) – net 1,587,708,081 (2,931,215,906) (2,314,241,984)
Share in net income of JV 178,308,842 35,418,498 96,326,091
Income tax expense (benefit) (37,971,487) (858,430,586) 25,137,768
Pre-tax core net income and EBITDAR are considered as non-PFRS measures.
Pre-tax core net income is the operating income after deducting net interest expense and adding
equity income/loss of joint venture.
EBITDAR is the operating income after adding depreciation and amortization, provision for ARO
and aircraft and engine lease expenses.
Capital expenditure is the total paid acquisition of property and equipment for the period.
70
The reconciliation of total revenue reported by reportable operating segment to revenue in the
consolidated statements of comprehensive income is presented in the following table:
2016 2015 2014

Total segment revenue of reportable
operating segment P
=61,899,278,892 =56,501,654,516
P =52,000,018,310
P
Nontransport revenue and
other income 1,879,689,094 118,425,424 176,253,363
Total revenue P
=63,778,967,986 =56,620,079,940
P =52,176,271,673
P
Nontransport revenue and other income include interest income, share in net income of JV and
fuel hedging gains.
The reconciliation of total income reported by reportable operating segment to total

comprehensive income in the consolidated statements of comprehensive income is presented in
the following table:
2016 2015 2014

Total segment income of
reportable segment P
=12,251,198,186 =9,700,220,806
P =4,157,336,990
P
Add (deduct) unallocated items:
Nontransport revenue and
other income 1,879,689,094 118,425,424 176,253,363
Nontransport expenses and
other charges (4,414,722,571) (6,289,850,941) (3,454,954,369)
Benefit from (provision for)
income tax 37,971,487 858,430,586 (25,137,768)
Net income 9,754,136,196 4,387,225,875 853,498,216
Other comprehensive gain (loss), net
of tax 7,847,827 (61,904,911) 209,681,986
Total comprehensive income P
=9,761,984,023 =4,325,320,964
P =1,063,180,202
P
The Group‟s major revenue-producing assets are the aircraft owned by the Group, which are
employed across its route network (Note 13).
The Group has no significant customer which contributes 10.00% or more to the revenues of the
Group.
7. Business Combination
On February 10, 2014, the Parent Company signed a Sale and Purchase Agreement (SPA) to
acquire 100% shares of CEBGO, as part of the strategic alliance between the Parent Company and
Tiger Airways Holding Limited (TAH). Under the terms of the SPA, the closing of the
transaction is subject to the satisfaction or waiver of each of the conditions contained in the SPA.
On March 20, 2014, all the conditions precedent have been satisfactorily completed. The Parent
Company has paid the purchase price covering the transfer of shares from TAH. Consequently,
the Parent Company gained control of CEBGO on the same date. The total consideration for the
transaction, at post-closing settlement date, amounted to P =265.1 million.
71
The fair values of the identifiable assets and liabilities of CEBGO at the date of acquisition follow:
Amount
Total cash, receivables and other assets =1,234,084,305
P
Total accounts payable, accrued expenses and unearned income 1,535,756,691
Net liabilities (301,672,386)
Goodwill 566,781,533
Acquisition cost at post-closing settlement date =265,109,147
P
The goodwill arising from this business combination amounted to P =566.8 million (Note 15). The
Parent Company also identified intangible assets representing costs to establish brand and market
opportunities under the strategic alliance with TAH (Note 16). The related deferred tax liability
on this business combination amounted to P =185.6 million (Note 25). The total purchase price after
closing settlement date amounted to P =488.6 million.
8. Cash and Cash Equivalents
This account consists of:
2016 2015
Cash on hand P
=32,366,174 P30,790,719
=
Cash in banks 2,582,114,836 1,078,023,124
Short-term placements 7,681,761,294 3,597,276,220
P
=10,296,242,304 =4,706,090,063
P
Cash in banks earns interest at the respective bank deposit rates. Short-term placements, which
represent money market placements, are made for varying periods depending on the immediate
cash requirements of the Group. Short-term placements denominated in Peso earn an average
annual interest of 2.35%, 2.35% and 3.07% in 2016, 2015 and 2014, respectively. Moreover,
short-term placements in US dollar (USD) earn interest on an average annual interest rate of
1.31%, 0.77% and 0.92% in 2016, 2015 and 2014, respectively.
Interest income earned on cash in banks and short-term placements, presented in the consolidated
statements of comprehensive income, amounted to P =113.7 million, P
=83.0 million and
=79.9 million in 2016, 2015 and 2014, respectively.
P
9. Investment and Trading Securities
This account consists of derivative financial assets and liabilities in 2016 and 2015 that are not
designated as accounting hedges. Derivative assets amounted to P =441.8 million as of
December 31, 2016 and derivative liabilities amounted to P =2,443.5 million as of December 31,
2015.
As of December 31, 2016 and 2015, this account consists of commodity swaps.
72
Commodity Swaps
The Group enters into fuel derivatives to manage its exposure to fuel price fluctuations. Such fuel
derivatives are not designated as accounting hedges. The gains or losses on these instruments are
accounted for directly as a charge against or credit to profit or loss. As of December 31, 2016 and
2015, the Group has outstanding fuel hedging transactions. The notional quantity is the amount of
the derivatives‟ underlying asset or liability, reference rate or index and is the basis upon which
changes in the value of derivatives are measured. The swaps can be exercised at various
calculation dates with specified quantities on each calculation date. The swaps have various
maturity dates through December 31, 2018.
As of December 31, 2016 and 2015, the Group recognized net changes in fair value of derivatives
amounting to P
=1,581.0 million gain and P =2,945.8 million loss, respectively. These are recognized
in „Hedging gains (losses) - net‟ account under the consolidated statements of comprehensive
income.
Foreign Currency Forwards

In 2014, the Group entered into foreign currency hedging arrangements with various
counterparties to manage its exposure to foreign currency fluctuations. Such derivatives are not
designated as accounting hedges. The gains or losses on these instruments are accounted for
directly as a charge against or credit to profit or loss. In 2015, the Group pre-terminated all
foreign currency derivative contracts, where the Group recognized realized gain of P =14.6 million.
For the year ended December 31, 2015, such realized gain is recognized in „Hedging gains (losses)
- net‟ account under the consolidated statements of comprehensive income. In 2016, the Parent
Company entered into foreign currency forward contracts which were pre-terminated in the same
year, where the Parent Company recognized realized gain of P =6.7 million.
Fair value changes on derivatives

The changes in fair value of all derivative financial instruments not designated as accounting
hedges follow:
2016 2015
Balance at beginning of year
Derivative assets P
=– =–
P
Derivative liabilities 2,443,495,138 2,260,559,896
(2,443,495,138) (2,260,559,896)
Net changes in fair value of derivatives 1,587,708,081 (2,931,215,906)
(855,787,057) (5,191,775,802)
Fair value of settled instruments 1,297,560,962 2,748,280,664
Balance at end of year =441,773,905 (P
P =2,443,495,138)
Attributable to:
Derivative assets P
=758,876,862 P–
=
Derivative liabilities P
=317,102,957 =2,443,495,138
P
The net changes in fair value of derivatives is inclusive of the realized gains on foreign currency
forwards amounting to P =6.7 million, P
=14.6 million and P =109.8 million in 2016, 2015 and 2014,
respectively.
73
10. Receivables
2016 2015
Trade receivables P
=1,667,078,389 =1,398,342,106
P
Due from related parties 124,270,740 125,623,460
Interest receivable 3,544,120 1,377,036
Others 663,230,536 528,512,366
2,458,123,785 2,053,854,968
Less allowance for credit losses 331,329,923 316,410,084
P
=2,126,793,862 =1,737,444,884
P
Trade receivables are noninterest-bearing and generally have 30 to 90 days terms.
Interest receivable pertains to accrual of interest income from short-term placements.
Others include receivable from insurance, employees, an fuel hedge counterparties.
The changes in the allowance for credit losses on receivables follow:
2016
Trade
Receivables Others Total
Balance at beginning of year P
=8,438,558 P
=307,971,526 P
=316,410,084
Unrealized foreign exchange gain on
allowance for credit losses 72,636 14,847,203 14,919,839
Balance at end of year P
=8,511,194 P
=322,818,729 P
=331,329,923
2015
Trade
Receivables Others Total
Balance at beginning of year =8,372,701
P =298,458,862
P =306,831,563
P
Unrealized foreign exchange gain on
allowance for credit losses 65,857 9,512,664 9,578,521
Balance at end of year =8,438,558
P =307,971,526
P =316,410,084
P
11. Expendable Parts, Fuel, Materials and Supplies
2016 2015
At NRV:
Expendable parts P
=823,992,795 =670,424,438
P
At cost:
Fuel 299,341,207 171,346,803
Materials and supplies 66,722,985 77,346,802
366,064,192 248,693,605
P
=1,190,056,987 =919,118,043
P
74
The cost of expendable and consumable parts, and materials and supplies recognized as expense
(included under „Repairs and maintenance‟ account in the consolidated statements of
comprehensive income) for the years ended December 31, 2016, 2015 and 2014 amounted to
=419.9 million, P
P =374.4 million and P
=365.2 million, respectively. The cost of fuel reported as
expense under „Flying operations‟ account amounted to P=15,821.3 million, P
=17,659.1 million and
=23,210.3 million in 2016, 2015 and 2014, respectively (Note 22).
P
The cost of expendable parts amounted to P

=844.5 million and P=690.9 million as of December 31,
2016 and 2015, respectively. The allowance for inventory write down amounted to P =20.5 million
as of December 31, 2016 and 2015. There are no additional provisions for inventory write down
in 2016 and 2015. No expendable parts, fuel, material and supplies are pledged as security for
liabilities.
12. Other Current Assets
2016 2015
Advances to suppliers P
=651,602,385 =829,605,886
P
Prepaid rent 343,971,042 324,260,018
Prepaid insurance 7,092,843 45,784,015
Deposit to counterparties 5,516,247 1,124,551,325
Others 88,088,168 75,917,904
P
=1,096,270,685 =2,400,119,148
P
Advances to suppliers include advances made for the purchase of various aircraft parts, service
maintenance for regular maintenance and restoration costs of the aircraft. Advances for regular
maintenance are recouped from progress billings, which occurs within one year from the date the
advances arose, whereas, advance payment for restoration costs is recouped when the expenses for
restoration of aircraft have been incurred. These advances are unsecured and noninterest-bearing
(Note 30).
Prepaid rent pertains to advance rental on aircraft under operating lease and on office spaces in
airports (Note 30).
Prepaid insurance consist of aviation insurance, which represents insurance of hull, war, and risk,
passenger and cargo insurance for the aircraft during flights and non-aviation insurance represents
insurance payments for all employees‟ health and medical benefits, commission, casualty and
marine insurance, as well as car/motor insurance.
Deposit to counterparties pertains to collateral deposits provided to counterparties for fuel hedging
transactions.
Others include housing allowance and prepayments to other suppliers.
75
76
13. Property and Equipment
The composition and movements in this account follow:
2016
EDP
Passenger Ground Equipment,
Aircraft Support Mainframe and Leasehold Transportation
(Notes 18 and 32) Engines Rotables Equipment Peripherals Improvements Equipment Sub-total
Cost
=70,180,391,031 P
=8,800,954,427 P
=3,224,302,949 P
=515,338,948 P
=865,940,227 P
=1,030,008,118 P
=231,795,064 P
=84,848,730,764
Additions 8,093,523,876 1,574,616,146 553,091,249 137,361,635 52,875,536 – 39,686,360 10,451,154,802
Reclassification 4,351,607,461 – – – (1,240,000) 295,997,691 – 4,646,365,152
Disposals/others (6,731,514,648) (905,884,607) (126,834,671) (3,435,189) (43,800,751) – – (7,811,469,866)
Balance at end of year 75,894,007,720 9,469,685,966 3,650,559,527 649,265,394 873,775,012 1,326,005,809 271,481,424 92,134,780,852
Accumulated Depreciation
and Amortization
Balance at beginning of year 18,918,279,072 2,271,191,035 668,272,255 391,633,417 688,136,458 327,657,757 168,712,193 23,433,882,187
Depreciation and amortization 4,197,295,780 1,108,933,677 284,567,783 60,885,023 94,619,501 196,797,075 23,812,004 5,966,910,843
Reclassification – – – – (1,240,000) – – (1,240,000)
Disposals/others (3,919,771,057) (440,884,843) (90,855,604) (3,384,416) (43,768,739) – – (4,498,664,659)
Balance at end of year 19,195,803,795 2,939,239,869 861,984,434 449,134,024 737,747,220 524,454,832 192,524,197 24,900,888,371
Net Book Value P
=56,698,203,925 P
=6,530,446,097 P
=2,788,575,093 P
=200,131,370 P
=136,027,792 P
=801,550,977 P
=78,957,227 P
=67,233,892,481
2016
Furniture,
Fixtures and Maintenance
Office Communication Special and Test Other Construction
Equipment Equipment Tools Equipment Equipment In-progress Total
Cost
=158,892,556 P
=15,023,503 P
=14,213,796 P
=6,681,631 P
=99,147,611 P
=10,576,116,375 P
=95,718,806,236
Additions 34,976,928 11,303,157 594,216 32,589 6,966,369 8,621,026,175 19,126,054,236
Reclassification – – – – 1,240,000 (4,647,605,152) –
Disposals/others (1,126,698) – – (176,103) (2,467,460) – (7,815,240,127)
Balance at end of year 192,742,786 26,326,660 14,808,012 6,538,117 104,886,520 14,549,537,398 107,029,620,345
(Forward)
Furniture,
Accumulated Depreciation and Amortization
=100,290,381 P
=10,686,314 P
=12,645,419 P
=6,590,325 P
=78,890,597 P
=– P
=23,642,985,223
Depreciation and amortization 21,635,398 2,674,955 429,938 57,720 6,986,563 – 5,998,695,417
Reclassification – – – – 1,240,000 – –
Disposals/others (1,151,040) 79,224 – (176,103) (2,451,214) – (4,502,363,792)
Balance at end of year 120,774,739 13,440,493 13,075,357 6,471,942 84,665,946 – 25,139,316,848
Net Book Value P
=71,968,047 P
=12,886,167 P
=1,732,655 P
=66,175 P
=20,220,574 P
=14,549,537,398 P
=81,890,303,497
2015
EDP
Passenger Ground Equipment,
Aircraft Support Mainframe and Leasehold Transportation
(Notes 18 and 32) Engines Rotables Equipment Peripherals Improvements Equipment Sub-total
Cost
Balance at beginning of year =65,630,899,798
P =6,155,955,141
P =2,662,189,267
P =475,209,294
P =766,702,015
P =963,115,054
P =209,909,946
P =76,863,980,515
P
Additions 5,981,525,274 2,644,999,286 574,778,528 40,689,115 113,054,208 104,300 23,385,118 9,378,535,829
Reclassification 2,118,681,561 – – – – 66,788,764 – 2,185,470,325
Disposals/others (3,550,715,602) – (12,664,846) (559,461) (13,815,996) – (1,500,000) (3,579,255,905)
Balance at end of year 70,180,391,031 8,800,954,427 3,224,302,949 515,338,948 865,940,227 1,030,008,118 231,795,064 84,848,730,764
Accumulated Depreciation
and Amortization
Balance at beginning of year 16,984,521,548 1,560,099,494 473,914,125 343,494,842 618,926,054 230,738,057 150,300,178 20,361,994,298
Depreciation and amortization 3,916,430,206 711,091,541 205,371,623 48,698,036 83,020,533 96,919,700 19,912,015 5,081,443,654
Reclassification – – (28,506) – – – – (28,506)
Disposals/others (1,982,672,682) – (10,984,987) (559,461) (13,810,129) – (1,500,000) (2,009,527,259)
Balance at end of year 18,918,279,072 2,271,191,035 668,272,255 391,633,417 688,136,458 327,657,757 168,712,193 23,433,882,187
Net Book Value =51,262,111,959
P =6,529,763,392
P =2,556,030,694
P =123,705,531
P =177,803,769
P =702,350,361
P =63,082,871
P =61,414,848,577
P
77
78
2015
Furniture,
Cost
P =12,736,501
P =14,105,321
P =6,681,631
P =90,524,829
P =8,629,008,939
P =85,769,654,285
P
Additions 7,645,062 2,297,716 108,475 – 8,803,172 4,132,577,761 13,529,968,015
Reclassification – – – – – (2,185,470,325) –
Disposals/others (1,369,055) (10,714) – – (180,390) – (3,580,816,064)
Balance at end of year 158,892,556 15,023,503 14,213,796 6,681,631 99,147,611 10,576,116,375 95,718,806,236
Accumulated Depreciation and Amortization
Balance at beginning of year 81,009,265 9,257,432 12,219,370 6,498,213 71,550,339 – 20,542,528,917
Depreciation and amortization 20,650,716 1,411,090 426,049 92,112 7,520,103 – 5,111,543,724
Reclassification (545) 28,506 – – 545 – –
Disposals/others (1,369,055) (10,714) – – (180,390) – (2,011,087,418)
Balance at end of year 100,290,381 10,686,314 12,645,419 6,590,325 78,890,597 – 23,642,985,223
Net Book Value =58,602,175
P =4,337,189
P P1,568,377
= =91,306
P =20,257,014
P =10,576,116,375
P =72,075,821,013
P
Passenger Aircraft and Engines Held as Securing Assets Under Various Loans
The Group entered into various Export Credit Agency (ECA) and commercial loan facilities to
finance the purchase of its aircraft and engines. As of December 31, 2016, the Group‟s passenger
aircraft and engines held as securing assets under various loans are as follows:
ECA Loans Commercial Loans

Airbus A320 10 19
ATR 72-500 7 –
Airbus A319 4 –
ATR 72-600 ‒ 2
Airbus A330 ‒ 1
Engines ‒ 5
21 27
Under the terms of the ECA loan and commercial loan facilities (Note 18), upon the event of
default, the outstanding amount of loan (including accrued interest) will be payable by CALL or
ILL or BLL or SLL or SALL or VALL or POALL or PTALL or PTHALL, or SAALL or SBALL
or SCALL or by the guarantors, which are CPAHI and JGSHI. CPAHI and JGSHI are guarantors
to loans entered into by CALL, ILL, BLL, SLL and SALL. Failure to pay the obligation will
allow the respective lenders to foreclose the securing assets.
As of December 31, 2016 and 2015, the carrying amounts of the securing assets (included under
the „Property and equipment‟ account in the consolidated statements of financial position)
amounted to P=56.9 billion and P
=53.0 billion, respectively.
Forward Sale Agreement

On February 23, 2015, the Group signed a forward sale agreement with Sunrise Asset
Management, a subsidiary of Allegiant Travel Company (collectively known as “Allegiant”),
covering the Group‟s sale of six Airbus A319 aircraft. The aircraft are scheduled for delivery on
various dates in 2015 until 2016.
In 2015, the Parent Company delivered the first two out of six Airbus A319 aircraft to Allegiant
and recognized P=80.3 million loss on sale in the 2015 consolidated statements of comprehensive
income.
In 2016, the Parent Company delivered the remaining four out of six airbus A319 aircraft to
Allegiant and recognized P
=962.6 million loss on sale in the 2016 consolidated statements of
comprehensive income.
In 2016, the Parent Company signed another forward sale agreement with Allegiant covering the
last remaining four A319 aircraft. The aircraft are scheduled for delivery on various dates in
2017 and 2018.
79
Operating Fleet
As of December 31, 2016 and 2015, the Group‟s operating fleet follows:
2016 2015
Owned (Note 18):
Airbus A320 29 26
Airbus A319 4 8
Airbus A330 1 –
ATR 72-500 8 8
ATR 72-600 2 –
Under operating lease (Note 30):
Airbus A320 7 7
Airbus A330 6 6
57 55
Construction in-progress represents the cost of airframe and engine construction 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. As of December 31, 2016 and 2015, the Group‟s capitalized pre-delivery payments as
construction in-progress amounted to P =14,466.6 million and P
=10,418.8 million, respectively
(Note 30).
As of December 31, 2016 and 2015, the gross amount of fully depreciated property and equipment
which are still in use by the Group amounted to P
=1,194.4 million,
respectively.
As of December 31, 2016 and 2015, there are no temporarily idle property and equipment.
14. Investments in Joint Ventures and in an Associate
Investments in Joint Ventures

The Parent Company has numerous investments in joint arrangements that are accounted for as
joint ventures. These represent the 60.00%, 49.00% and 35.00% interests in PAAT, A-plus and
SIAEP, respectively.
Investment in PAAT pertains to the Parent Company‟s 60.00% investment in shares of the joint
venture. However, the joint venture agreement between the Parent Company and CAE
International Holdings Limited (CAE) states that the Parent Company is entitled to 50% share on
the net income/loss of PAAT. As such, the Parent Company recognizes 50% share in net income
and net assets of the joint venture.
PAAT was created to address the Group‟s training requirements and to pursue business
opportunities for training third parties in the commercial fixed wing aviation industry, including
other local and international airline companies. PAAT was formally incorporated in the
Philippines on January 27, 2012 and started commercial operations in December 2012.
A-plus and SIAEP were established for the purpose of providing line, light and heavy maintenance
services to foreign and local airlines, utilizing the facilities and services at airports in the country,
as well as aircraft maintenance and repair organizations.
80
A-plus was incorporated in the Philippines on May 24, 2005 and started commercial operations on
July 1, 2005 while SIAEP was incorporated on July 27, 2008 and started commercial operations
on August 17, 2009.
Investment in an Associate
In May 2016, the Parent Company entered into Value Alliance Agreement with other low cost
carriers (LCCs), namely, Scoot Pte. Ltd, Nok Airlines Public Company Limited, CEBGO, and
Vanilla Air Inc. The alliance aims to increase passenger traffic by creating interline partnerships
and parties involved have agreed to create joint sales and support operations to expand services
and products available to passengers. This is achieved through LCCs‟ investment in ABB.
In November 2016, the Parent Company acquired shares of stock in ABB amounting to
=43.7 million. ABB is an entity incorporated in Singapore in 2016 to manage the ABB settlement
P
system, which facilitates the settlement of sales proceeds between the issuing and carrying
airlines, and of the transaction fee due to ABB. The investment in ABB is accounted under equity
method.
The investment gave the Parent Company a 15% shareholding proportion to ABB which is
classified as an investment in an associate and is accounted for at equity method. However, since
ABB is still non-operational as of December 31 2016, the investment is recognized at cost and is
subject to any remeasurement within the measurement period.
The movements in the carrying values of the Group‟s investments in joint ventures in A-plus,
SIAEP, and PAAT and ABB follow:
2016
A-plus SIAEP PAAT Total
Cost
=87,012,572 P
= 304,763,900 P
= 134,873,645 P
= 526,650,117
Investment made during the year ‒ 181,405,000 ‒ 181,405,000
Balance at end of year 87,012,572 486,168,900 134,873,645 708,055,117
Accumulated Equity in
Net Income (Loss)
Balance at beginning of year 120,336,602 (123,621,797) 2,259,065 (1,026,130)
Equity in net income during the year 146,530,942 2,769,782 29,008,118 178,308,842
Dividends declared (123,250,380) ‒ ‒ (123,250,380)
Balance at end of year 143,617,164 (120,852,015) 31,267,183 54,032,332
Net Carrying Value P
= 230,629,736 P
= 365,316,885 P
= 166,140,828 P
= 762,087,449
2015
A-plus SIAEP PAAT Total
Cost
P =304,763,900
P =134,873,645
P =526,650,117
P
Accumulated Equity in
Net Income (Loss)
Balance at beginning of year 104,840,802 (59,053,072) 18,901,639 64,689,369
Equity in net income (loss) during
the year 116,629,797 (64,568,725) (16,642,574) 35,418,498
Dividends declared (101,133,997) – – (101,133,997)
Balance at end of year 120,336,602 (123,621,797) 2,259,065 (1,026,130)
Net Carrying Value =207,349,174
P =181,142,103
P =137,132,710
P =525,623,987
P
81
Selected financial information of A-plus, SIAEP and PAAT as of December 31 follow:
2016
A-plus SIAEP PAAT
Total current assets P
=795,460,819 P
=698,461,242 P
=286,174,849
Noncurrent assets 155,159,767 1,664,971,439 804,157,578
Current liabilities (479,947,656) (384,081,485) (78,688,833)
Noncurrent liabilities ‒ (935,588,667) (679,361,939)
Equity 470,672,930 1,043,762,529 332,281,655
Proportion of the Group‟s ownership 49% 35% 50%
Carrying amount of the investments P
=230,629,736 P
=365,316,885 P
=166,140,828
2015
A-plus SIAEP PAAT
Total current assets =650,452,860
P P483,125,816
= =266,000,656
P
Noncurrent assets 261,601,217 1,569,590,695 757,860,538
Current liabilities (388,851,643) (604,693,999) (30,994,557)
Noncurrent liabilities (100,040,854) (930,473,645) (718,601,218)
Equity 423,161,580 517,548,867 274,265,419
Proportion of the Group‟s ownership 49% 35% 50%
Carrying amount of the investments =207,349,174
P =181,142,103
P =137,132,710
P
Summary of statements of comprehensive income of A-plus, SIAEP and PAAT for the twelve
month period ended December 31 follow:
2016
A-plus SIAEP PAAT
Revenue P
=987,094,549 P
=969,132,649 P
=305,467,453
Expenses (653,807,786) (937,444,460) (193,942,399)
Other income (expenses) 62,291,042 (18,573,663) (46,126,617)
Income before tax 395,577,805 13,114,526 65,398,437
Income tax expense 96,535,066 5,200,863 7,382,199
Net income P
=299,042,739 P
=7,913,663 P
=58,016,238
Group‟s share of profit for the year P
=146,530,942 P
=2,769,782 P
=29,008,119
2015
A-plus SIAEP PAAT
Revenue =905,813,968
P =387,432,455
P P157,878,689
=
Expenses (603,475,105) (562,632,105) (149,404,852)
Other income (expenses) 8,283,751 (9,236,769) (40,522,812)
Income (loss) before tax 310,622,614 (184,436,419) (32,048,975)
Income tax expense 72,602,620 45,652 1,236,173
Net income (loss) =238,019,994
P (P
=184,482,071) (P
=33,285,148)
Group‟s share of profit for the year =116,629,797
P (P
=64,568,725) (P
=16,642,574)
82
2014
A-plus SIAEP PAAT
Revenue =831,652,059
P =749,982,173
P P227,958,105
=
Expenses (537,954,937) (847,033,722) (164,004,339)
Other income (expenses) 22,550,458 (79,043) (16,239,773)
Income before tax 316,247,580 (97,130,592) 47,713,993
Income tax expense 94,657,252 2,142,521 2,729,153
Net income (loss) =221,590,328
P (P
=99,273,113) =44,984,840
P
Share of profit for the year =108,579,261
P (P
=34,745,590) =22,492,420
P
The fiscal year-end of A-plus and SIAEP is every March 31 while the year-end of PAAT is every
December 31.
The share of the Parent Company in the net income of A-plus included in the consolidated
retained earnings amounted to P=143.6 million and P =120.3 million as of December 31, 2016 and
2015, respectively, which is not currently available for dividend distribution unless declared by
A-plus.
The share of the Parent Company in the net income of PAAT included in the consolidated retained
earnings amounted to P =31.3 million and P=2.3 million as of December 31, 2016 and 2015,
respectively, which is not currently available for dividend distribution unless declared by PAAT.
As of December 31, 2016 and 2015, SIAEP‟s accumulated losses amounted to P

=120.9 million and
=123.6 million, respectively.
P
15. Goodwill
This account, which has a balance of P=566.8 million as of December 31, 2016 and 2015,
represents the goodwill arising from the acquisition of CEBGO (Note 7). Goodwill is attributed to
the following:
Achievement of Economies of Scale

Using the Parent Company‟s network of suppliers and other partners to improve cost and
efficiency of CEBGO, thus, improving CEBGO‟s overall profit, given its existing market share.
Defensive Strategy
Acquiring a competitor enables the Parent Company to manage overcapacity in certain
geographical areas/markets.
Impairment testing of Goodwill and Intangible Assets with Indefinite Useful Lives
For purposes of impairment testing of these assets, CEBGO was considered as the CGU.
In 2016, 2015 and 2014, management assessed that no impairment losses should be recognized for
these intangible assets with indefinite useful lives. These intangible assets pertain to to establish
brand and market opportunities under the strategic alliance with CEBGO (Note 16).
Key assumptions used in the VIU calculation

As of December 31, 2016 and 2015, the recoverable amount of the CGU has been determined
based on a VIU calculation using five-year cash flow projections. Key assumptions in the VIU
calculation of the CGU are most sensitive to the following:
83
 Future revenues, profit margins and revenue growth rates: These assumptions are based on the
past performance of CEBGO, market developments and expectations in the industry.
 Discount rates: The discount rate used for the computation of the net present value is the
weighted average cost of equity and was determined by reference to comparable entities.
Sensitivity to changes in assumptions

Management believes that no reasonably possible change in any of the above key assumptions
would cause the carrying values of goodwill and intangible assets arising from the acquisition of
CEBGO to materially exceed their recoverable amounts.
16. Other Noncurrent Assets
This account includes security deposits provided to lessors and maintenance providers and other
refundable deposits to be applied against payments for future aircraft deliveries. It also includes
intangible assets representing costs to establish brand and market opportunities under the strategic
alliance with CEBGO amounting to P =852.2 million as of December 31, 2016 and 2015 (Note 7).
Refer to Note 15 for the impairment test of these intangible assets with indefinite useful lives.
17. Accounts Payable and Other Accrued Liabilities
2016 2015
Accrued expenses =5,104,775,244 P
P =5,157,226,549
Accounts payable (Notes 27 and 30) 3,980,459,969 3,773,396,965
Airport and other related fees payable 2,434,975,393 1,709,712,692
Advances from agents and others 676,600,363 594,568,902
Accrued interest payable (Note 18) 187,706,795 202,219,547
Other payables 199,119,178 165,865,051
=12,583,636,942 =
P P11,602,989,706
Accrued Expenses
The Group‟s accrued expenses include accruals for:
2016 2015
Compensation and benefits P
=1,265,980,747 =1,087,156,297
P
Maintenance (Note 30) 1,154,037,951 1,244,725,569
Advertising and promotion 674,203,129 617,181,652
Navigational charges 530,636,176 571,133,449
Repairs and services 322,682,258 370,928,260
Landing and take-off fees 282,123,740 332,074,021
Training costs 219,131,480 232,894,451
Ground handling charges 195,330,532 90,081,351
Fuel 176,846,265 191,519,501
Aircraft insurance 59,144,684 65,216,676
(Forward)
84
2016 2015
Rent (Note 30) P
=45,019,497 =67,155,690
P
Catering supplies 30,789,342 44,222,872
Reservation costs 28,232,840 –
Professional fees 4,679,765 102,348,155
Others 115,936,838 140,588,605
P
=5,104,775,244 =5,157,226,549
P
Others represent accrual of security, utilities, insurance and other expenses.
Accounts Payable
Accounts payable consists mostly of payables related to the purchase of inventories, are
noninterest-bearing and are normally settled on a 60-day term. These inventories are necessary for
the daily operations and maintenance of the aircraft, which include aviation fuel, expendables
parts, equipment and in-flight supplies. It also includes other nontrade payables.
Airport and Other Related Fees Payable

Airport and other related fees payable are amounts payable to the Philippine Tourism Authority,
Air Transportation Office, Mactan-Cebu International Airport and Manila International Airport
Authority arising from aviation security, terminal fees and travel taxes.
Advances from Agents and Others

Advances from agents and others represent cash bonds required from major sales and ticket
offices or agents. These also include commitment fees received for the sale and purchase
agreement of four A319 aircraft amounting P =198.9 million (US$4.0 million) and P=188.2 million
(US$4.0 million) as of December 31, 2016 and 2015, respectively. Commitment fees applied for
the delivery of four aircraft in 2016 and two aircraft in 2015 amounted to P
=194.0 million
(US$4.0 million) and P =93.8 million (US$2.0 million), respectively.
Accrued Interest Payable

Accrued interest payable pertains to accrual of interest expense, which is related to long-term debt
and normally settled quarterly throughout the year.
Other Payables
Other payables are noninterest-bearing and have an average term of two months. This account
includes commissions payable, refunds payable and other tax liabilities such as withholding taxes
and output VAT.
85
18. Long-term Debt
2016
Annual Interest Rates Range Philippine Peso
(Note 28) Maturities US Dollar Equivalent
ECA loans 2.00% to 6.00% Various dates US$131,595,704 P
=6,542,938,380
through 2024
1.00% to 2.00%
(US Dollar LIBOR) 117,841,373 5,859,073,088
249,437,077 12,402,011,468
US Dollar 3.00% to 6.00% Various dates

commercial loans through 2025 122,813,513 6,106,287,889
1.00% to 2.00%
(US Dollar LIBOR) 376,581,824 18,723,648,273
Philippine Peso 2.00% to 3.00% 2016 through
commercial loans (PDST-R2) 2026 ‒ 5,578,490,000
499,395,337 30,408,426,162
US$748,832,414 P
=42,810,437,630
2015
Annual Interest Rates Range Philippine Peso
(Note 28) Maturities US Dollar Equivalent
ECA loans 2.00% to 6.00% Various dates US$188,082,868 =8,851,179,775
P
through 2024
1.00% to 2.00%
(US Dollar LIBOR) 133,887,484 6,300,745,013
321,970,352 15,151,924,788
US Dollar 3.00% to 6.00% Various dates 146,684,784 6,902,985,959

commercial loans through 2024
1.00% to 2.00%
(US Dollar LIBOR) 308,841,368 14,534,074,744
455,526,152 21,437,060,703
US$777,496,504 =36,588,985,491
P
The following current and noncurrent portion of long-term debt follow:
2016
Philippine Peso
US Dollar Equivalent
Current
US Dollar loans US$130,378,207 P
=6,482,404,460
Philippine Peso loans ‒ 557,849,000
130,378,207 7,040,253,460
Noncurrent
US Dollar loans 618,454,207 30,749,543,170
Philippine Peso loans ‒ 5,020,641,000
618,454,207 35,770,184,170
US$748,832,414 P
=42,810,437,630
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2015
Philippine Peso
Current US Dollar loans US$115,250,726 =5,423,699,184
P
Noncurrent US Dollar loans 662,245,778 31,165,286,307
US$777,496,504 =36,588,985,491
P
ECA Loans
On various dates from 2005 to 2012, the Parent Company entered into ECA-backed loan facilities
to partially finance the purchases of ten (10) Airbus A319 aircraft, seven (7) ATR 72-500
turboprop aircraft and ten (10) Airbus A320 aircraft. The security trustee of these ECA loans
established SPEs, namely CALL, BLL, SLL, SALL, VALL and POALL, which purchased the
aircraft from the supplier and leases such aircraft to the Parent Company pursuant to (a) ten-year
finance lease arrangement for the ATR 72-500 turboprop aircraft and (b) twelve-year finance lease
arrangement for the Airbus A319 and A320 aircraft. The quarterly and semi-annual payments
made by the Parent Company to these SPEs correspond to the principal and interest payments
made by the SPEs to the ECA-backed lenders. The quarterly and semi-annual lease rentals to the
SPEs are guaranteed by CPAHI and JGSHI. The Parent Company has the option to purchase the
aircraft for a nominal amount at the end of such leases.
In 2016 and 2015, the Parent Company exercised the option to purchase four and two of the ten
Airbus A319 aircraft, respectively, which were subsequently sold to a third party as part of a
forward sale arrangement (Note 13). The purchase required the prepayment of the balance of the
loan facility attributed to the sold Airbus A319 aircraft. The total amount of loans paid amounted
to P
=870.5 million and P =534.5 million in 2016 and 2015, respectively. The breakage cost for the
related loan prepayments amounted to P =45.6 million and P
=26.7 million in 2016 and 2015,
respectively.
The terms of the ECA-backed facilities, which are the same for each of the ten Airbus
A319 aircraft, seven ATR 72-500 turboprop aircraft and ten Airbus A320 aircraft, follow:
 Term of 12 years starting from the delivery date of each Airbus A319 aircraft and Airbus
A320, and ten years for each ATR 72-500 turboprop aircraft.
 Annuity style principal repayments for the first four Airbus A319 aircraft, eight ATR 72-500
turboprop aircraft and seven Airbus A320 aircraft, and equal principal repayments for the last
six Airbus A319 aircraft and last three Airbus A320 aircraft. Principal repayments shall be
made on a semi-annual basis for ATR 72-500 turboprop aircraft. Principal repayments shall
be made on a quarterly basis for Airbus A319 and A320 aircraft.
 Interest on loans from the ECA lenders are a mix of fixed and variable rates. Fixed annual
interest rates ranges from 2.00% to 6.00% and variable rates are based on US dollar LIBOR
plus margin.
 As provided under the ECA-backed facility, CALL, BLL, SLL, SALL, VALL and POALL
cannot create or allow to exist any security interest, other than what is permitted by the
transaction documents or the ECA administrative parties. CALL, BLL, SLL, SALL, VALL
and POALL must not allow impairment of first priority nature of the lenders‟ security
interests.
 The ECA-backed facilities also provide for the following events of default: (a) nonpayment of
the loan principal or interest or any other amount payable on the due date, (b) breach of
negative pledge, covenant on preservation of transaction documents, (c) misrepresentation,
(d) commencement of insolvency proceedings against CALL or BLL or SLL or SALL or
VALL or POALL becomes insolvent, (e) failure to discharge any attachment or sequestration
order against CALL‟s, BLL‟s, SLL‟s, SALL‟s VALL‟s and POALL‟s assets, (f) entering into
87
an undervalued transaction, obtaining preference or giving preference to any person, contrary
to the laws of the Cayman Islands, (g) sale of any aircraft under ECA financing prior to
discharge date, (h) cessation of business, (i) revocation or repudiation by CALL or BLL or
SLL or SALL or VALL or POALL, the Group, JGSHI or CPAHI of any transaction document
or security interest, and (j) occurrence of an event of default under the lease agreement with
the Parent Company.
 Upon default, the outstanding amount of loan will be payable, including interest accrued.
Also, the ECA lenders will foreclose on secured assets, namely the aircraft (Note 13).
 An event of default under any ECA loan agreement will occur if an event of default as
enumerated above occurs under any other ECA loan agreement.
As of December 31, 2016 and 2015, the total outstanding balance of the ECA loans amounted to
=12,402.0 million (US$249.4 million) and P
P =15,151.9 million (US$322.0 million), respectively.
Interest expense amounted to P
=401.0 million, P
=487.7 million and P
=551.5 million in 2016, 2015
and 2014, respectively.
US Dollar Commercial Loans

On various dates from 2007 to 2016, the Group entered into a commercial loan facility to partially
finance the purchase of 19 Airbus A320 aircraft, one CFM 565B4/P engine, two CFM 565B5/P
engines and one QEC Kit. The security trustee of the commercial loan facility established SPEs,
namely ILL, PTALL, PTHALL, SAALL, SBALL and SCALL, which purchased the aircraft from
the Parent Company pursuant to (a) ten-year finance lease arrangement for the Airbus
A320 aircraft, (b) six-year finance lease arrangement for the engines and (c) five-year finance
lease arrangement for the QEC Kit. The quarterly and semi-annual payments made by the Parent
Company to these SPEs correspond to the principal and interest payments made by the SPEs to the
ECA-backed lenders. The Parent Company has the option to purchase the aircraft, the engines and
the QEC Kit for a nominal amount at the end of such leases.
The terms of the commercial loans follow:
 Term of ten years starting from the delivery date of each aircraft.
 Combination of annuity style and equal principal repayments made on a quarterly and semi-
annual basis for the two aircraft, engines and the QEC Kit.
 Interests on loans are a mix of fixed and variable rates. Interest rates ranges from 1.00% to
6.00%.
 The facilities provide for material breach as an event of default, upon which, the outstanding
amount of loan will be payable, including interest accrued. The lenders will foreclose on
secured assets, namely the aircraft.
As of December 31, 2016 and 2015, the total outstanding balance of the US dollar commercial
loans amounted to P
=24,829.9 million (US$499.4 million) and P=21,437.1 million
(US$455.5 million), respectively. Interest expense amounted to P
=751.9 million, P
=585.4 million
and P
=461.7 million in 2016, 2015 and 2014, respectively.
Philippine Peso Commercial Loans

In 2016, the Group entered into a Philippine peso commercial loan facility to partially finance the
acquisition of two ATR 72-600 aircraft and one Airbus A330 aircraft.
88
The terms of the commercial loans follow:
 Term of ten years starting from the delivery date of each aircraft.
 Forty equal consecutive principal repayments made on a quarterly basis.
 Interests on loans are variable rates. Interest rates ranges from 2.00% to 3.00%.
 The facilities provide that, upon event of default, the outstanding amount of loan will be
payable, including interest accrued. The lenders will foreclose mortgaged assets, namely the
aircraft.
As of December 31, 2016, the total outstanding balance of Peso commercial loans amounted to
=5,578.5 million with current and noncurrent obligations amounting to P
P =557.8 million and
=5,020.6 million, respectively. Interest expense amounted to P
P =17.3 million.
The Group is not in breach of any terms on the ECA and commercial loans.
19. Other Noncurrent Liabilities
2016 2015
Asset Retirement Obligation (ARO) P
=2,465,671,139 =1,344,571,000
P
Deferred revenue on rewards program 376,960,452 92,542,820
Accrued maintenance – 224,413,463
P
=2,842,631,591 =1,661,527,283
P
ARO
The Group is legally required under certain lease contracts to restore certain leased passenger
aircraft to stipulated return conditions and to bear the costs of restoration at the end of the contract
period. These costs are accrued based on estimates made by the Group‟s engineers, which include
estimates of certain redelivery costs at the end of the operating aircraft lease.
The rollforward analysis of the Group‟s ARO follow:
2016 2015
=1,344,571,000 =586,069,196
P
Provision for ARO 1,121,100,139 863,960,835
Payment of ARO during the year ‒ (105,459,031)
=2,465,671,139 =1,344,571,000
P
In 2016, 2015 and 2014, ARO expenses included as part of repairs and maintenance amounted to
=1,121.1 million, P
P =864.0 million and P =476.0 million, respectively (Note 22). In 2014, the Group
returned four aircraft under its operating lease agreements.
Deferred Revenue on Rewards Program

This account pertains to estimated liability under the Getgo lifestyle rewards program.
89
Accrued Maintenance
This account pertains to accrual of maintenance costs of aircraft based on the number of flying
hours or cycles but will be settled beyond one year based on management‟s assessment.
20. Equity
The details of the number of common shares and the movements thereon follow:
2016 2015
Authorized - at P
=1 par value 1,340,000,000 1,340,000,000
Beginning of year 605,953,330 605,953,330
Issued and outstanding 605,953,330 605,953,330
Common Shares of Stock

On October 26, 2010, the Parent Company listed with the PSE its common stock, by way of
primary and secondary share offerings, wherein it offered 212,419,700 shares to the public at
=125.00 per share. Of the total shares sold, 30,661,800 shares are newly issued shares with total
P
proceeds amounting P =3,800.0 million. The Parent Company‟s share in the total transaction costs
incurred incidental to the IPO amounting P =100.4 million, which is charged against „Capital paid in
excess of par value‟ in the consolidated statements of financial position. The registration
statement was approved on October 11, 2010. After its listing with the PSE, there have been no
subsequent offerings of common stock. The Group has 95 and 96 existing certified shareholders
as of December 31, 2016 and 2015, respectively.
Treasury Stock
On February 28, 2011, the BOD of the Parent Company approved the creation and implementation
of a share buyback program (SBP) up to P=2,000.0 million worth of the Parent Company‟s
common shares. The SBP shall commence upon approval and shall end upon utilization of the
said amount, or as may be otherwise determined by the BOD.
The Parent Company has 7,283,220 shares held on treasury costing P

=529.3 million as of
December 31, 2016 and 2015, restricting the Parent Company from declaring an equivalent
amount from unappropriated retained earnings as dividends.
Appropriation of Retained Earnings

On November 10, 2016, December 3, 2015 and November 27, 2014, the Parent Company‟s BOD
appropriated P
=6.6 billion, P
=1.0 billion and P
=3.0 billion, respectively, from its unrestricted retained
earnings as of December 31, 2016 for purposes of the Group‟s re-fleeting program. The
appropriated amount will be used for the settlement of pre-delivery payments and aircraft lease
commitments (Notes 18, 30 and 31). As of December 31, 2016 and 2015, the Group has
appropriated retained earnings totaling P=14,516.8 million and P=7,916.8 million, respectively.
90
Expected Receipt
Project name BOD approval Date
Re-fleeting program
2016 November 10, 2016 2017-2021
2015 December 3, 2015 2016-2021
2014 November 27, 2014 2016-2021
Unappropriated Retained Earnings

The income of the subsidiaries and JVs that are recognized in the consolidated statements of
comprehensive income are not available for dividend declaration unless these are declared by the
subsidiaries and JV (Note 14). Likewise, retained earnings are restricted for the payment of
dividends to the extent of the cost of common shares held in treasury amounting to P=529.3 million.
On May 20, 2016, the Parent Company‟s BOD approved the declaration of a regular cash dividend
in the amount of P=606.0 million or P=1.00 per share and a special cash dividend in the amount of
=605.9 million or P
P =1.00 per share from the unrestricted retained earnings of the Parent Company
to all stockholders of record as of June 9, 2016 and payable on July 5, 2016. Total dividends
declared amounted to P =1,211.9 million as of December 31, 2016.
On June 24, 2015, the Parent Company‟s BOD approved the declaration of a regular cash dividend
in the amount of P=606.0 million or P=1.00 per share and a special cash dividend in the amount of
=302.9 million or P
P =0.50 per share from the unrestricted retained earnings of the Parent Company
to all stockholders of record as of July 16, 2015 and payable on August 11, 2015. Total dividends
declared amounted to P =908.9 million as of December 31, 2015.
On June 26, 2014, the Parent Company‟s BOD approved the declaration of a regular cash dividend
in the amount of P
=606.0 million or P
=1.00 per share from the unrestricted retained earnings of the
Parent Company to all stockholders of record as of July 16, 2014 and payable on August 11, 2014.
Total dividends declared and paid amounted to P=606.0 million as of December 31, 2014.
After reconciling items which include fair value adjustments on financial instruments, unrealized
foreign exchange loss, recognized deferred tax assets and others, and cost of common stocks held
in treasury, the amount of retained earnings that is available for dividend declaration as of
December 31, 2016 amounted to P =1,673.7 million.
Capital Management
The primary objective of the Group‟s capital management is to ensure that it maintains healthy
capital ratios in order to support its business and maximize shareholder value. The Group
manages its capital structure, which composed of paid-up capital and retained earnings, and makes
adjustments to these ratios in light of changes in economic conditions and the risk characteristics
of its activities. In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividend payment to shareholders, return capital structure or issue capital securities.
No changes have been made in the objective, policies and processes as they have been applied in
previous years.
The Group‟s ultimate parent monitors the use of capital structure using a debt-to-equity ratio,
which is gross debt divided by total capital. JGSHI includes within gross debt all interest-bearing
loans and borrowings, while capital represents total equity.
91
The Group‟s debt-to-capital ratios follow:
2016 2015
(a) Long-term debt (Note 18) =42,810,437,630 =
P P36,588,985,491
(b) Equity 33,505,272,519 24,955,195,156
(c) Debt-to-equity ratio (a/b) 1.3:1 1.5:1
The JGSHI Group‟s policy is to keep the debt-to-equity ratio at the 2:1 level as of
December 31, 2016 and 2015. Such ratio is currently being managed on a group level by the
Group‟s ultimate parent.
21. Ancillary Revenues
Ancillary revenues consist of:
2016 2015 2014

Baggage fees P
=5,496,894,601 =4,955,384,497
P =4,116,640,154
P
Rebooking, refunds, cancellation
fees, etc. 3,961,855,541 3,338,921,090 2,920,343,253
Others 2,284,264,613 2,065,142,241 1,628,505,970
=11,743,014,755 P
P =10,359,447,828 =8,665,489,377
P
Others pertain to revenues from in-flight sales, advanced seat selection fees, reservation booking
fees and others (Note 27).
22. Operating Expenses
Flying Operations
2016 2015 2014

Aviation fuel expense (Note 11) P
=15,821,328,265 =
P17,659,066,443 P
=23,210,305,406
Flight deck 3,310,321,766 2,797,680,638 2,406,983,028
Aviation insurance 196,129,796 255,071,777 292,982,743
Others 366,568,889 204,541,676 242,204,830
=19,694,348,716 P
P =20,916,360,534 =
P26,152,476,007
Aircraft and Traffic Servicing

2016 2015 2014

Airport charges P
=3,931,733,367 =3,508,816,000
P =2,843,602,317
P
Ground handling 2,105,087,686 1,887,062,871 1,518,884,645
Others 541,163,750 451,220,434 442,725,527
P
=6,577,984,803 =5,847,099,305
P =4,805,212,489
P
Others pertain to staff expenses incurred by the Group such as basic pay, employee training cost
and allowances.
92
Repairs and Maintenance
Repairs and maintenance expenses relate to the cost of maintaining, repairing and overhauling of
all aircraft and engines, technical handling fees on pre-flight inspections and cost of aircraft spare
parts and other related equipment. The account includes related costs of other contractual
obligations under aircraft operating lease agreements (Note 30). These amounted to
=1,121.1 million, P
P =864.0 million and P=476.0 million in 2016, 2015 and 2014, respectively
(Note 19).
Reservation and Sales

Reservation and sales relate to the cost to sell or distribute airline tickets and other ancillaries
provided to passengers such as costs to maintain the Group‟s web-based booking channel,
reservation ticketing office costs and advertising expenses. These amounted to P =3,211.7 million,
P =2,154.0 million in 2016, 2015 and 2014, respectively.
23. General and Administrative Expenses
2016 2015 2014

Staff cost P
=642,010,384 =512,655,998
P =458,971,856
P
Security and professional fees 498,893,458 487,854,049 318,235,374
Utilities 133,315,208 145,433,281 124,694,997
Rent expenses 85,337,118 89,687,818 54,056,070
Travel and transportation 32,378,068 24,674,634 30,807,870
Others 421,109,241 291,843,153 310,051,527
P
=1,813,043,477 =1,552,148,933
P =1,296,817,694
P
Others include membership dues, annual listing maintenance fees, supplies, bank charges and
others.
24. Employee Benefits
Employee Benefit Cost

Total personnel expenses, consisting of salaries, expense related to defined benefit plans and other
employee benefits, are included in flying operations, aircraft and traffic servicing, repairs and
maintenance, reservation and sales, general and administrative, and passenger service.
Defined Benefit Plans

The Group has funded, noncontributory, defined benefit plans covering substantially all of its
regular employees. The benefits are based on years of service and compensation on the last year
of employment.
The range of assumptions used to determine pension benefits of the Group in 2016, 2015 and 2014
are as follows:
2016 2015 2014

Average remaining working life 11 - 18 years 8 - 12 years 12 years
Discount rate 5.44% - 5.60% 5.00% - 5.13% 4.59%
Salary rate increase 5.50% - 5.50% 5.00% - 5.70% 5.50%
93
As of December 31, 2016 and 2015, the discount rate used in determining the pension liability is
determined by reference to market yields at the reporting date on Philippine government bonds.
The amounts recognized as pension liability follow:
2016 2015
Present value of defined benefit obligation P
=1,011,183,379 P897,284,330
=
Fair value of plan assets (442,414,064) (350,803,616)
P
=568,769,315 =546,480,714
P
Remeasurement gains (losses) recognized in OCI follow:
2016 2015
Actuarial gains (losses) from benefit obligation P
=26,153,078 (P
=78,455,711)
Return on plan assets, excluding amount included in
net interest cost (14,941,894) (4,546,622)
Amount to be recognized in OCI P
=11,211,184 (P
=83,002,333)
Movements in the fair value of plan assets follow:
2016 2015
=350,803,616 =339,755,463
P
Actual contribution during the year 90,523,372 ‒
Interest income included in net interest cost 16,028,970 15,594,775
Return on plan assets, excluding amount included in
net interest cost (14,941,894) (4,546,622)
=442,414,064 =350,803,616
P
The plan assets consist of:
2016 % 2015 %
Cash P
=308,307,900 70% =
P220,210,013 63%
Investment in debt securities 132,884,688 30% 129,658,904 37%
Receivables 1,259,576 – 964,910 –
442,452,164 350,833,827
Liabilities (38,100) – (30,211) –
=442,414,064 100% P
P =350,803,616 100%
The Group expects to contribute about P=100.0 million into the pension fund for the year ending
2017. The actual returns on plan assets amounted to P
=1.1 million in 2016 and P=11.0 million in
2015.
94
Changes in present value of the defined benefit obligation follow:
2016 2015
=897,284,330 =725,420,912
P
Current service cost 111,059,054 99,123,882
Interest cost 43,351,629 33,312,525
Benefits paid (14,358,556) (39,028,700)
Actuarial loss/gain due to:
Experience adjustments 14,942,532 130,890,864
Changes in financial assumption (50,652,461) (43,207,906)
Changes in demographical assumption 9,556,851 (9,227,247)
=1,011,183,379 =897,284,330
P
Movements in pension liability follow:
2016 2015
=546,480,714 =385,665,449
P
Pension expense during year 138,381,713 116,841,632
Recognized in OCI (11,211,184) 83,002,333
Benefits paid during year (14,358,556) (39,028,700)
Actual contribution during the year (90,523,372) ‒
=568,769,315 =546,480,714
P
The benefits paid during 2016 and 2015 were paid out of Parent Company‟s operating funds.
Components of pension expense included in the Group‟s consolidated statements of

comprehensive income follow:
2016 2015 2014

Current service cost P
=111,059,054 =99,123,882
P =129,329,209
P
Interest cost 27,322,659 17,717,750 29,275,183
Total pension expense P
=138,381,713 =116,841,632
P =158,604,392
P
Shown below are the sensitivity analyses that has been determined based on reasonably possible
changes of the assumption occurring as of the end of the reporting period, assuming if all other
assumptions were held constant.
2016
PVO
Discount rates 6.44% (+1.00%) P
=876,336,520
4.44% (-1.00%) 1,084,771,639
Salary increase rates 6.50% (+1.00%) 1,089,891,204

4.50% (-1.00%) 870,361,689
95
2015
PVO
Discount rates 6.07% (+1.00%) P805,004,689
=
4.07% (-1.00%) 1,007,319,468
Salary increase 6.25% (+1.00%) 1,011,435,017

4.25% (-1.00%) 799,914,451
Each year, an Asset-Liability Matching Study (ALM) is performed with the result being analyzed
in terms of risk-and-return profiles. As of December 31, 2016, the Parent Company‟s investment
consists of 30% of debt instruments and 70% for cash and receivables. The principal technique of
the Parent Company‟s ALM is to ensure the expected return on assets to be sufficient to support
the desired level of funding arising from the defined benefit plans.
Shown below is the maturity profile of the undiscounted benefit payments of the Parent Company
as of December 31, 2016 and 2015:
2016
Normal Other Normal
Plan Year Retirement Retirement Total
Less than one year P
=76,544,468 P
=18,337,349 P
=94,881,817
One to less than five years 104,783,952 117,513,603 222,297,555
Five to less than 10 years 377,296,385 250,693,933 627,990,318
10 to less than 15 years 524,841,500 310,748,389 835,589,889
20 years and above 3,062,076,773 791,217,401 3,853,294,174
2015
Normal Other Normal
Plan Year Retirement Retirement Total
Less than one year =44,962,186
P =15,486,233
P =60,448,419
P
One to less than five years 96,657,822 94,977,649 191,635,471
Five to less than 10 years 286,609,848 218,291,737 504,901,585
20 years and above 2,598,202,480 668,230,299 3,266,432,779
The average duration of the expected benefit payments as of December 31, 2016 and 2015 is
20.73 years and 20.72 years, respectively.
96
25. Income Taxes
Provision for (benefit from) income tax consists of:
2016 2015 2014

Current:
MCIT P
=162,594,552 P125,929,367
= P61,319,704
=
Deferred (200,566,039) (984,359,953) (36,181,936)
(P
=37,971,487) (P
=858,430,586) =25,137,768
P
Income taxes include corporate income tax, as discussed below, and final taxes paid at the rate of
20.00% and 7.50% on peso-denominated and foreign currency-denominated short-term
placements and cash in banks, respectively, which are final withholding taxes on gross interest
income.
The NIRC of 1997 also provides for rules on the imposition of a 2.00% MCIT on the gross income
as of the end of the taxable year beginning on the fourth taxable year immediately following the
taxable year in which the Parent Company commenced its business operations. Any excess MCIT
over the RCIT can be carried forward on an annual basis and credited against the RCIT for the
three immediately succeeding taxable years.
In addition, under Section 11 of RA No. 7151 (Parent Company‟s Congressional Franchise) and
under Section 15 of RA No. 9517 (CEBGO‟s Congressional Franchise) known as the “ipso facto
clause” and the “equality clause”, respectively, the Group is allowed to benefit from the tax
privileges being enjoyed by competing airlines. The Group‟s major competitor, by virtue of
PD No. 1590, is enjoying tax exemptions which are likewise being claimed by the Group, if
applicable, including but not limited to the following:
a. To depreciate its assets to the extent of not more than twice as fast the normal rate of
depreciation; and
b. To carry over as a deduction from taxable income any NOLCO incurred in any year up to five
years following the year of such loss.
The components of the Group‟s deferred tax assets and liabilities follow:
2016 2015
Deferred tax assets on:
NOLCO P
=1,388,753,996 =1,372,727,074
P
Unrealized foreign exchange losses - net 1,154,300,719 597,768,972
ARO - liability 739,701,342 420,073,060
MCIT 349,843,622 224,135,377
Pension liability 170,630,795 151,876,449
Deferred revenue - Customer Loyalty Program 113,088,136 –
Allowance for credit losses 99,398,977 74,742,533
Unrealized loss on net derivative liabilities – 733,048,541
4,015,717,587 3,574,372,006
(Forward)
97
2016 2015
Deferred tax liabilities on:
Double declining depreciation P
=2,624,040,175 =2,512,429,449
P
Business combination (Note 7) 185,645,561 185,645,561
Unrealized gain on net derivative assets 132,532,172 –
2,942,217,908 2,698,075,010
Net deferred tax assets P
=1,073,499,679 =876,296,996
P
The Group‟s recognized deferred tax assets and deferred tax liabilities are expected to be reversed
more than twelve months after the reporting date.
Movement in accrued retirement cost amounted to P =3.4 million and P

=21.1 million in 2016 and
2015, respectively, is presented under other comprehensive income.
Parent Company
Details of the NOLCO and MCIT are as follows:
NOLCO
Year Incurred Amount Expired/Applied Balance Expiry Year

2012 =1,301,721,876
P (P
=1,301,721,876) =–
P 2017
2013 956,965,884 (956,965,884) – 2018
2014 1,361,594,609 (333,410,350) 1,028,184,259 2019
2015 955,474,545 – 955,474,545 2020
=4,575,756,914
P (P
=2,592,098,110) =1,983,658,804
P
MCIT
2013 =45,518,668
P (P
=45,518,668) =–
P 2016
2014 61,319,704 – 61,319,704 2017
2015 117,297,005 – 117,297,005 2018
2016 148,442,253 – 148,442,253 2019
=372,577,630
P (P
=45,518,668) =327,058,962
P
The Parent Company has outstanding registrations with the BOI as a new operator of air transport
on a pioneer and non-pioneer status under the Omnibus Investments Code of 1987 (Executive
Order 226) (Note 32).
On 20 out of 24 registrations, the Parent Company can avail of bonus years in certain specified
cases but the aggregate ITH availments (basic and bonus years) shall not exceed eight years.
As of December 31, 2016 and 2015, the Parent Company has complied with externally imposed
capital requirements set by the BOI in order to avail the ITH incentives for aircraft of registered
activity (Note 32).
98
CEBGO
Details of NOLCO and MCIT are as follows:
NOLCO

2011 P461,346,433
= (P
=461,346,433) =–
P 2016
2012 1,305,854,856 (199,411,786) 1,106,443,070 2017
2013 853,571,166 – 853,571,166 2018
2014 685,506,938 – 685,506,938 2019
=3,306,279,393
P (P
=660,758,219) =2,645,521,174
P
MCIT

2015 P8,632,361
= =–
P P8,632,361
= 2018
2016 14,152,299 – 14,152,299 2019
=22,784,660
P =–
P =22,784,660
P
As of December 31, 2016, CEBGO has recognized its previously unrecognized deferred tax assets
arising from deductible temporary differences, NOLCO and MCIT. Details follow:
Amount
NOLCO =3,306,279,393
P
Allowance for credit losses 67,268,308
Pension liability 40,225,883
MCIT 8,632,361
Customer loyalty program 3,554,623
=3,425,960,568
P
A reconciliation of the statutory income tax rate to the effective income tax rate follows:
2016 2015 2014

Statutory income tax rate 30.00% 30.00% 30.00%
Adjustments resulting from:
Nondeductible items 0.09 0.19 0.87
Interest income subjected to
final tax (0.33) (0.63) (2.69)
Others (0.55) (1.29) (2.94)
Income subject to ITH (29.60) (52.60) (22.38)
Effective income tax rate (0.39%) (24.33%) 2.86%
Entertainment, Amusement and Recreation (EAR) Expenses

Current tax regulations define expenses to be classified as EAR expenses and set a limit for the
amount that is deductible for tax purposes. EAR expenses are limited to 0.50% of net sales for
sellers of goods or properties or 1.00% of net revenue for sellers of services. For sellers of both
goods or properties and services, an apportionment formula is used in determining the ceiling on
such expenses. The Group recognized EAR expenses (allocated under different expense accounts
in the consolidated statements of comprehensive income) amounting P =4.0 million, P
=3.3 million
and P=6.5 million in 2016, 2015 and 2014, respectively.
99
26. Earnings Per Share
The following reflects the income and share data used in the basic/diluted EPS computations:
2016 2015 2014

(a) Net income attributable to
common shareholders P
=9,754,136,196 =4,387,225,875
P =853,498,216
P
(b) Weighted average number of
common shares for basic EPS 605,953,330 605,953,330 605,953,330
(c) Basic/diluted earnings per share P
=16.10 =7.24
P =1.41
P
The Group has no dilutive potential common shares in 2016, 2015 and 2014.
27. Related Party Transaction
Transactions between related parties are based on terms similar to those offered to nonrelated
parties. Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial
and operating decisions or the parties are subject to common control or common significant
influence. Related parties may be individuals or corporate entities.
The Group has entered into transactions with its ultimate parent, its JV and affiliates principally
consisting of advances, sale of passenger tickets, reimbursement of expenses, regular banking
transactions, maintenance and administrative service agreements. In addition to the related
information disclosed elsewhere in the consolidated financial statements, the following are the
year-end balances in respect of transactions with related parties, which were carried out in the
normal course of business on terms agreed with related parties during the year.
100
The significant transactions and outstanding balances of the Group with the related parties follow:
2016
Amount/ Outstanding
Related Party Volume Balance Terms Conditions
Ultimate parent company
(1) JGSHI
Unsecured,
Due from related parties P
=‒ P
=‒ Non-interest bearing No impairment
Parent company
(2) CPAHI
Unsecured,
Due from related parties ‒ 65,800 Non-interest bearing No impairment
JV in which the Company is a venture

(3) A-plus
Unsecured,
Due from related parties 36,759,598 25,361,011 Non-interest bearing No impairment
Unsecured,
Trade receivables 61,625,182 61,625,182 Non-interest bearing No impairment
Unsecured,
Trade payables 1,008,951,483 (37,183,124) Non-interest bearing No impairment
(4) SIAEP
Unsecured,
Unsecured,
Trade payables 67,351,578 (2,894,088) Non-interest bearing No impairment
(5) PAAT, Inc.
Due from related parties

Unsecured,
Loans 5,960,066 90,977,300 2% interest per annum No impairment
Unsecured,
Sublease agreement 32,530,938 5,012,599 Payable monthly No impairment
Unsecured,
Others 70,246 130,407 Non-interest bearing No impairment
Unsecured,
Trade payables 141,115,807 ‒ Non-interest bearing No impairment
Entities under common control

(6) Robinsons Bank Corporation (RBC)
Unsecured,
Cash and cash equivalents 112,512,140,676 20,612,039,521 Non-interest bearing No impairment
Unsecured,
Due to related parties 67,165,661 (1,183,359) Non-interest bearing No impairment
Unsecured,
Trade receivables 3,745,476 258,643 Non-interest bearing No impairment
Unsecured,
(7) Universal Robina Corporation (URC)
Unsecured,
Unsecured,
Due to related parties 73,047 (36,121,604) Non-interest bearing No impairment
Unsecured,
(8) Robinsons Land Corporation (RLC)
Unsecured,
Trade receivables 29,396,331 3,015,177 Interest bearing No impairment
Unsecured,
(Forward)
101
2016
Amount/ Outstanding
(9) Robinsons Handyman, Inc.
Unsecured,
Trade payables P
=3,332,363 (P
=253,778) Non-interest bearing No impairment
(10) Summit Publishing Inc. (SPI)
Unsecured,
Unsecured,
Trade payables 18,618,073 (516,610) Non-interest bearing No impairment
(11) JG Petrochemical Corporation
(JGPC)
Unsecured,
Trade receivables 845,291 172,357 Non-interest bearing No impairment
(12) Robinsons Inc.
Unsecured,
Due to related parties 8,074,862 (384,591) Non-interest bearing No impairment
Unsecured,
Unsecured,
Trade payables 31,731,414 – Non-interest bearing No impairment
(13) Jobstreet.com Phils., Inc.
Unsecured,
Unsecured,
Trade payables 1,205,600 ‒ Non-interest bearing No impairment
2015
Amount/ Outstanding
Ultimate parent company
(1) JGSHI
Unsecured,
Due from related parties =4,405,758
P =194,920
P Non-interest bearing No impairment
Parent company
(2) CPAHI
Unsecured,
Due from related parties – 65,800 Non-interest bearing No impairment
JV in which the Company is a venture

(3) A-plus
Unsecured,
Unsecured,
(4) SIAEP
Unsecured,
Unsecured,
(5) PAAT, Inc.
Due from related parties
Unsecured,
Loans 5,960,066 90,977,300 2% interest per annum No impairment
Unsecured,
Sublease agreement 31,880,370 8,925,181 Payable monthly No impairment
Unsecured,
Others 82,732 121,262 Non-interest bearing No impairment
Unsecured,
(Forward)
102
2015
Amount/ Outstanding
(6) Robinsons Bank Corporation (RBC)
Unsecured,
Cash and cash equivalents =103,480,442,308
P =298,083,980
P Non-interest bearing No impairment
Unsecured,
Unsecured,
Unsecured,
(7) Universal Robina Corporation
(URC)
Unsecured,
Unsecured,
Unsecured,
(8) Robinsons Land Corporation (RLC)
Unsecured,
Trade receivables 19,174,493 3,087,041 Interest bearing No impairment
Unsecured,
(9) Robinsons Handyman, Inc.
Unsecured,
(10) Summit Publishing Inc. (SPI)
Unsecured,
Unsecured,
(11) JG Petrochemical Corporation
(JGPC)
Unsecured,
(12) Robinsons, Inc.
Unsecured,
Due to related parties 329,962 (819,486) Non-interest bearing No impairment
Unsecured,
Unsecured,
Trade payables 31,272,028 – Non-interest bearing No impairment
(13) Jobstreet.com Phils., Inc.
Unsecured,
Unsecured,
Trade payables 404,800 (404,800) Non-interest bearing No impairment
Consolidated Statement of Comprehensive Income

Sale of Air Interest Ancillary Repairs and
Year Transportation Service Income Revenues Maintenance
JV in which the Parent
Company is a venturer 2016 P
=– P
=– P
=– P
=701,792,101
A-plus 2015 =–
P =–
P =–
P =84,698,669
P
2014 =–
P =–
P =–
P =605,056,538
P
SIAEP 2016 677,614 – – 196,800,152

2015 439,483 – – –
2014 – – – 116,413,193
PAAT 2016 – – 32,530,938 –

2015 – – 37,663,884 –
2014 – – 26,104,946 –
(Forward)
103
Consolidated Statement of Comprehensive Income
Sale of Air Interest Ancillary Repairs and
Year Transportation Service Income Revenues Maintenance
RSB 2016 P
=3,369,060 P
=– P
=– P
=–
2015 =2,472,792
P =–
P =–
P =–
P
2014 =2,620,575
P =–
P =–
P =–
P
URC 2016 44,137,335 – – –

2015 40,768,879 – – –
2014 41,337,092 – – –
RLC 2016 29,396,331 – – –

2015 19,174,493 – – –
2014 13,928,598 – – –
SPI 2016 2,721,457 – – –

2015 3,498,402 – – –
2014 5,183,283 – – –
JGPC 2016 845,291 – – –

2015 921,695 – – –
2014 958,570 – – –
Robinsons Inc. 2016 33,749,652 – – –

2015 29,549,943 – – –
2014 26,231,941 – – –
Jobstreet.com Phils, Inc. 2016 582,450 – – –

2015 682,300 – – –
2014 624,615 – – –
Total 2016 P
=115,479,190 – P
=32,530,938 P
=898,592,253
2015 =97,507,987
P – =37,663,884
P =84,698,669
P
2014 =90,884,674
P – =26,104,946
P =721,469,731
P
Terms and conditions of transactions with related parties

Outstanding balances at year-end are unsecured, interest-free and settlement occurs in cash. Also,
these transactions are short-term in nature. There have been no guarantees provided or received
for any related party receivables or payables. The Group has not recognized any impairment
losses on amounts due from related parties for the years ended December 31, 2016, 2015 and
2014. This assessment is undertaken each financial year through a review of the financial position
of the related party and the market in which the related party operates.
The Group‟s significant transactions with related parties follow:
1. Expenses advanced by the Group on behalf of CPAHI. The said expenses are subject to
reimbursement and are recorded under „Receivables‟ account in the consolidated statements of
financial position.
2. The Group entered into a Shared Services Agreement with A-plus. Under the aforementioned
agreement, the Group will render certain administrative services to A-plus, which include
payroll processing and certain information technology-related functions. The Group also
entered into a Ground Support Equipment (GSE) Maintenance Services Agreement with
A-plus. Under the GSE Maintenance Services Agreement, the Group shall render routine
preventive maintenance services on certain ground support equipment used by A-plus in
providing technical GSE to airline operators in major airports in the Philippines. The Group
also performs repair or rectification of deficiencies noted and supply replacement components.
3. For the aircraft maintenance program, the Group engaged SIAEC to render line maintenance,
light aircraft checks and technical ramp handling services at various domestic and
104
international airports which were performed by A-plus, and to maintain and provide aircraft
heavy maintenance services which was performed by SIAEP. Cost of services are recorded as
„Repairs and maintenance‟ account in the consolidated statements of comprehensive income
and any unpaid amount as of reporting date as trade payable under „Accounts payable and
other accrued liabilities‟ account.
4. The Group maintains deposit accounts and short-term investments with RSB which is reported
under „Cash and cash equivalents‟ account. The Group also incurs liabilities to RSB for loan
payments of its employees and to URC primarily for the rendering of payroll service to the
Group which are recorded under „Due to related parties‟ account.
5. The Group provides air transportation services to certain related parties, for which unpaid
amounts are recorded as trade receivables under „Receivables‟ account in the consolidated
statements of financial position.
The Group also purchases goods from URC for in-flight sales and recorded as trade payable, if
unpaid, in the consolidated statements of financial position. Total amount of purchases in
2016, 2015 and 2014 amounted to P =37.2 million, P
=44.8 million and P=34.1 million,
respectively.
6. In 2012, the Group entered into a sub-lease agreement with PAAT for its office space.
The lease agreement is for a period of 15 years from November 29, 2012 until
November 19, 2027.
7. In 2013 and 2012, under the shareholder loan agreement, the Group provided a loans to PAAT
to finance the purchase of its Full Flight Simulator, other equipment and other working capital
requirements. Aggregate loans provided by the Group amounted to =P155.4 million
(US$3.5 million). The loans are subject two percent (2%) interest per annum. In 2014, the
Group collected P=41.7 million (US$0.9 million) from PAAT as partial payment of the loan. As
of December 31, 2016 and 2015, loan to PAAT amounted to P =91.0 million
(US$2.3 million).
8. In 2014, the Parent Company entered into sublease agreements with CEBGO for the lease of
its five (5) A320 Airbus aircraft. The sublease period for each aircraft is for two years, but
was pre-terminated in 2015.
9. In 2015, the Parent Company entered into sublease arrangements with CEBGO for the lease of
its eight (8) ATR 72-500 aircraft. The sublease period for each aircraft is for two years.
10. In 2016, the Parent Company entered into sublease arrangements with CEBGO for the lease of
its two (2) ATR 72-600 aircraft. The sublease period for each aircraft is for six years.
The compensation of the Group‟s key management personnel by benefit type follows:
2016 2015 2014

Short-term employee benefits P
=137,740,617 =135,392,431
P =150,010,391
P
Post-employment benefits 2,690,640 3,560,866 10,011,731
P
=140,431,257 =138,953,297
P =160,022,122
P
There are no agreements between the Group and any of its directors and key officers providing for
benefits upon termination of employment, except for such benefits to which they may be entitled
under the Group‟s pension plans.
105
28. Financial Risk Management Objectives and Policies
The Group‟s principal financial instruments, other than derivatives, comprise cash and cash
equivalents, financial assets at FVPL, receivables, payables and interest-bearing borrowings.
The main purpose of these financial instruments is to finance the Group‟s operations and capital
expenditures. The Group has various other financial assets and liabilities, such as trade
receivables and trade payables, which arise directly from its operations. The Group also enters
into fuel derivatives to manage its exposure to fuel price fluctuations.
The Group‟s BOD reviews and approves policies for managing each of these risks and these are
summarized in the succeeding paragraphs, together with the related risk management structure.
Risk Management Structure

The Group‟s risk management structure is closely aligned with that of JGSHI. The Group has its
own BOD, which is ultimately responsible for the oversight of the Group‟s risk management
process, and is involved in identifying, measuring, analyzing, monitoring and controlling risks.
The risk management framework encompasses environmental scanning, the identification and
assessment of business risks, development of risk management strategies, design and
implementation of risk management capabilities and appropriate responses, monitoring risks and
risk management performance, and identification of areas and opportunities for improvement in
the risk management process.
The Group and the ultimate parent together with its other subsidiaries (JGSHI Group), created the
following separate board-level independent committees with explicit authority and responsibility
for managing and monitoring risks.
Each BOD has created the board-level Audit Committee to spearhead the managing and
monitoring of risks.
Audit Committee
The Group‟s Audit Committee assists the Group‟s BOD in its fiduciary responsibility for the
over-all effectiveness of risk management systems, and the internal audit functions of the Group.
Furthermore, it is also the Audit Committee‟s purpose to lead in the general evaluation and to
provide assistance in the continuous improvements of risk management, control and governance
processes.
The Audit Committee also aims to ensure that:
a. Financial reports comply with established internal policies and procedures, pertinent
accounting and auditing standards and other regulatory requirements;
b. Risks are properly identified, evaluated and managed, specifically in the areas of managing
credit, market, liquidity, operational, legal and other risks, and crisis management;
c. Audit activities of internal and external auditors are done based on plan, and deviations are
explained through the performance of direct interface functions with the internal and external
auditors; and
d. The Group‟s BOD is properly assisted in the development of policies that would enhance the
risk management and control systems.
106
Enterprise Risk Management Group (ERMG)
The fulfillment of the risk management functions of the Group‟s BOD is delegated to the ERMG.
The ERMG is primarily responsible for the execution of the Enterprise Risk Management (ERM)
framework. The ERMG‟s main concerns include:
 Formulation of risk policies, strategies, principles, framework and limits;

 Management of the fundamental risk issues and monitoring of relevant risk decisions;
 Support to management in implementing the risk policies and strategies; and
 Development of a risk awareness program.
Corporate Governance Compliance Officer

Compliance with the principles of good corporate governance is one of the objectives of the
Group‟s BOD. To assist the Group‟s BOD in achieving this purpose, the Group‟s BOD has
designated a Compliance Officer who shall be responsible for monitoring the actual compliance of
the Group with the provisions and requirements of good corporate governance, identifying and
monitoring control compliance risks, determining violations, and recommending penalties for such
infringements for further review and approval of the Group‟s BOD, among others.
Day-to-day risk management functions

At the business unit or company level, the day-to-day risk management functions are handled by
four different groups, namely:
1. Risk-taking personnel - This group includes line personnel who initiate and are directly
accountable for all risks taken.
2. Risk control and compliance - This group includes middle management personnel who
perform the day-to-day compliance check to approved risk policies and risks mitigation
decisions.
3. Support - This group includes back office personnel who support the line personnel.
4. Risk management - This group pertains to the Group‟s Management Committee which makes
risk mitigating decisions within the enterprise-wide risk management framework.
ERM framework
The Group‟s BOD is also responsible for establishing and maintaining a sound risk management
framework and is accountable for risks taken by the Group. The Group‟s BOD also shares the
responsibility with the ERMG in promoting the risk awareness program enterprise-wide.
The ERM framework revolves around the following seven interrelated risk management
approaches:
1. Internal Environmental Scanning - It involves the review of the overall prevailing risk profile
of the business unit to determine how risks are viewed and addressed by management. This is
presented during the strategic planning, annual budgeting and mid-year performance reviews
of the business unit.
2. Objective Setting - The Group‟s BOD mandates the Group‟s management to set the overall
annual targets through strategic planning activities, in order to ensure that management has a
process in place to set objectives which are aligned with the Group‟s goals.
3. Risk Assessment - The identified risks are analyzed relative to the probability and severity of
potential loss which serves as a basis for determining how the risks should be managed. The
risks are further assessed as to which risks are controllable and uncontrollable, risks that
require management‟s attention, and risks which may materially weaken the Group‟s earnings
and capital.
4. Risk Response - The Group‟s BOD, through the oversight role of the ERMG, approves the
Group‟s responses to mitigate risks, either to avoid, self-insure, reduce, transfer or share risk.
107
5. Control Activities - Policies and procedures are established and approved by the Group‟s
BOD and implemented to ensure that the risk responses are effectively carried out enterprise-
wide.
6. Information and Communication - Relevant risk management information are identified,
captured and communicated in form and substance that enable all personnel to perform their
risk management roles.
7. Monitoring - The ERMG, Internal Audit Group, Compliance Office and Business Assessment
Team constantly monitor the management of risks through risk limits, audit reviews,
compliance checks, revalidation of risk strategies and performance reviews.
Risk management support groups

The Group‟s BOD created the following departments within the Group to support the risk
management activities of the Group and the other business units:
1. Corporate Security and Safety Board (CSSB) - Under the supervision of ERMG, the CSSB
administers enterprise-wide policies affecting physical security of assets exposed to various
forms of risks.
2. Corporate Supplier Accreditation Team (CORPSAT) - Under the supervision of ERMG, the
CORPSAT administers enterprise-wide procurement policies to ensure availability of supplies
and services of high quality and standards to all business units.
3. Corporate Management Services (CMS) - The CMS is responsible for the formulation of
enterprise-wide policies and procedures.
4. Corporate Planning and Legal Affairs (CORPLAN) - The CORPLAN is responsible for the
administration of strategic planning, budgeting and performance review processes of the
business units.
5. Corporate Insurance Department (CID) - The CID is responsible for the administration of the
insurance program of business units concerning property, public liability, business
interruption, money and fidelity, and employer compensation insurances, as well as in the
procurement of performance bonds.
Risk Management Policies

The main risks arising from the use of financial instruments are credit risk, liquidity risk and
market risk, namely foreign currency risk, commodity price risk and interest rate risk. The
Group‟s policies for managing the aforementioned risks are summarized below.
Credit risk
Credit risk is defined as the risk of loss due to uncertainty in a third party‟s ability to meet its
obligation to the Group. The Group trades only with recognized, creditworthy third parties. It is
the Group‟s policy that all customers who wish to trade on credit terms are being subjected to
credit verification procedures. In addition, receivable balances are monitored on a continuous
basis resulting in an insignificant exposure in bad debts.
With respect to credit risk arising from the other financial assets of the Group, which comprise
cash in banks and cash equivalents and certain derivative instruments, the Group‟s exposure to
credit risk arises from default of the counterparty with a maximum exposure equal to the carrying
amount of these instruments.
108
Maximum exposure to credit risk without taking account of any credit enhancement
The table below shows the gross maximum exposure to credit risk (including derivative assets) of
the Group as of December 31, 2016 and 2015, without considering the effects of collaterals and
other credit risk mitigation techniques.
2016 2015
Cash and cash equivalents* P
=10,263,876,130 =4,675,299,344
P
Receivables
Trade receivables 1,667,078,389 1,398,342,106
Due from related parties 124,270,740 125,623,460
Interest receivable 3,544,120 1,377,036
Others** 663,230,536 528,512,366
2,458,123,785 2,053,854,968
Refundable deposits*** 29,182,000 27,135,401
P
=12,751,181,915 =6,756,289,713
P
* Excluding cash on hand
** Include nontrade receivables from insurance, employees and counterparties
***Included under ‘Other noncurrent assets’ account in the consolidated statements of financial position
Risk concentrations of the maximum exposure to credit risk

Concentrations arise when a number of counterparties are engaged in similar business activities, or
activities in the same geographic region or have similar economic features that would cause their
ability to meet contractual obligations to be similarly affected by changes in economic, political or
other conditions. Concentrations indicate the relative sensitivity of the Group‟s performance to
developments affecting a particular industry or geographical location. Such credit risk
concentrations, if not properly managed, may cause significant losses that could threaten the
Group‟s financial strength and undermine public confidence. In order to avoid excessive
concentrations of risk, identified concentrations of credit risks are controlled and managed
accordingly.
The Group‟s credit risk exposures, before taking into account any collateral held or other credit
enhancements are categorized by geographic location as follows:
2016
Asia
(excluding
Philippines Philippines) Europe Others Total
=8,639,055,061 P
=1,050,673,161 P
=574,147,908 P
=– P
=10,263,876,130
Receivables
Trade receivables 1,184,733,983 462,199,939 ‒ 20,144,467 1,667,078,389
Due from related parties 124,270,740 ‒ ‒ ‒ 124,270,740
Interest receivable 3,544,120 ‒ ‒ ‒ 3,544,120
Others** 332,399,980 234,255,648 ‒ 96,574,908 663,230,536
Refundable deposits*** ‒ 29,182,000 ‒ ‒ 29,182,000
P
=10,284,003,884 P
=1,776,310,748 P
=574,147,908 P
=116,719,375 P
=12,751,181,915
***Excluding cash on hand
***Include nontrade receivables from insurance, employees and counterparties
109
2015
Asia
(excluding
Philippines Philippines) Europe Others Total
Cash and cash equivalents* =3,928,723,397
P =726,099,935
P =20,476,012
P =–
P =4,675,299,344
P
Receivables
Trade receivables 1,141,591,909 237,602,342 19,147,855 – 1,398,342,106
Due from related parties 125,623,460 – – – 125,623,460
Interest receivable 1,377,036 – – – 1,377,036
Others** 228,982,224 57,032,291 242,497,851 – 528,512,366
Refundable deposits*** – – 27,135,401 – 27,135,401
=5,426,298,026
P =1,020,734,568
P =309,257,119
P =–
P =6,756,289,713
P
The Group has no concentration of risk with regard to various industry sectors. The major
industry relevant to the Group is the transportation sector and financial intermediaries.
Credit quality per class of financial assets

The Group rates its financial assets based on an internal and external credit rating system.
The table below shows the credit quality by class of financial assets based on internal credit rating
of the Group (gross of allowance for impairment losses) as of December 31, 2016 and 2015:
2016
Neither Past Due Nor Specifically Impaired Past Due
High Standard Substandard or Individually
Grade Grade Grade Impaired Total
=10,263,876,130 P
=– P
=– P
=– P
=10,263,876,130
Receivables
Trade receivables 1,658,567,195 ‒ ‒ 8,511,194 1,667,078,389
Due from related parties 124,270,740 ‒ ‒ ‒ 124,270,740
Interest receivable 3,544,120 ‒ ‒ ‒ 3,544,120
Others** 335,395,724 5,016,083 ‒ 322,818,729 663,230,536
Refundable deposits*** 29,182,000 ‒ ‒ ‒ 29,182,000
P
=12,414,835,909 P
=5,016,083 P
=‒ P
=331,329,923 P
=12,751,181,915
2015
Neither Past Due Nor Specifically Impaired Past Due
High Standard Substandard or Individually
Grade Grade Grade Impaired Total
Cash and cash equivalents* =4,675,299,344
P =–
P =–
P =–
P =4,675,299,344
P
Receivables
Trade receivables 1,375,625,887 14,277,661 – 8,438,558 1,398,342,106
Due from related parties 125,623,460 – – – 125,623,460
Interest receivable 1,377,036 – – – 1,377,036
Others** 190,565,126 29,975,692 – 307,971,548 528,512,366
Refundable deposits*** 27,135,401 – – – 27,135,401
=6,395,626,254
P =44,253,353
P =–
P =316,410,106
P =6,756,289,713
P
High grade cash and cash equivalents are short-term placements and working cash fund placed,
invested, or deposited in foreign and local banks belonging to the top ten banks in terms of
resources and profitability.
110
High grade accounts are accounts considered to be of high value. The counterparties have a very
remote likelihood of default and have consistently exhibited good paying habits.
Standard grade accounts are active accounts with propensity of deteriorating to mid-range age
buckets. These accounts are typically not impaired as the counterparties generally respond to
credit actions and update their payments accordingly.
Substandard grade accounts are accounts which have probability of impairment based on historical
trend. These accounts show propensity to default in payment despite regular follow-up actions
and extended payment terms.
The following tables show the aging analysis of the Group‟s receivables:
2016
Neither Past Past Due But Not Impaired Past
Due Nor Over Due and
Impaired 31-60 Days 61-90 Days 91-180 Days 180 Days Impaired Total
Trade receivables P
= 1,658,567,195 P
=– P
=– P
=– P
=– P
= 8,511,194 P
= 1,667,078,389
Due from related parties 124,270,740 ‒ ‒ ‒ ‒ ‒ 124,270,740
Interest receivable 3,544,120 ‒ ‒ ‒ ‒ ‒ 3,544,120
Others* 340,411,807 ‒ ‒ ‒ ‒ 322,818,729 663,230,536
P
= 2,126,793,862 P
=– P
=– P
=– P
=– P
= 331,329,923 P
= 2,458,123,785
*Include nontrade receivables from insurance, employees and counterparties
2015
Neither Past Past Due But Not Impaired Past
Due Nor Over Due and
Impaired 31-60 Days 61-90 Days 91-180 Days 180 Days Impaired Total
Trade receivables =1,389,903,548
P =–
P =–
P =–
P =–
P =8,438,558
P =1,398,342,106
P
Due from related parties 125,623,460 – – – – – 125,623,460
Interest receivable 1,377,036 – – – – – 1,377,036
Others* 199,754,607 – – – 20,786,211 307,971,548 528,512,366
=1,716,658,651
P =–
P =–
P =–
P =20,786,211
P =316,410,106
P =2,053,854,968
P
*Include nontrade receivables from insurance, employees and counterparties
Past due or individually impaired accounts consist of past due but not impaired receivables
amounted to nil and P=20.8 million as of December 31, 2016 and 2015, respectively, and past due
and impaired receivables amounting to P =331.3 million and P=316.4 million as of December 31,
2016 and 2015, respectively. Past due but not impaired receivables are secured by cash bonds
from major sales and ticket offices recorded under „Accounts payable and other accrued liabilities‟
account in the consolidated statements of financial position. For the past due and impaired
receivables, specific allowance for impairment losses amounted to P =331.3 million and
=316.4 million as of December 31, 2016 and 2015, respectively (Note 10).
P
Collateral or credit enhancements

As collateral against trade receivables from sales ticket offices or agents, the Group requires cash
bonds from major sales ticket offices or agents ranging from = P50,000 to P=2.1 million depending
on the Group‟s assessment of sales ticket offices and agents‟ credit standing and volume of
transactions. As of December 31, 2016 and 2015, outstanding cash bonds (included under
„Accounts payable and other accrued liabilities‟ account in the consolidated statements of
financial position) amounted to P=329.5 million and P =214.7 million, respectively (Note 17).
There are no collaterals for impaired receivables.
Impairment assessment
The Group recognizes impairment losses based on the results of its specific/individual and
collective assessment of its credit exposures. Impairment has taken place when there is a presence
of known difficulties in the servicing of cash flows by counterparties, infringement of the original
terms of the contract has happened, or when there is an inability to pay principal overdue beyond a
111
certain threshold. These and the other factors, either singly or in tandem, constitute observable
events and/or data that meet the definition of an objective evidence of impairment.
The two methodologies applied by the Group in assessing and measuring impairment include:
(1) specific/individual assessment; and (2) collective assessment.
Under specific/individual assessment, the Group assesses each individually significant credit
exposure for any objective evidence of impairment, and where such evidence exists, accordingly
calculates the required impairment. Among the items and factors considered by the Group when
assessing and measuring specific impairment allowances are: (a) the timing of the expected cash
flows; (b) the projected receipts or expected cash flows; (c) the going concern of the
counterparty‟s business; (d) the ability of the counterparty to repay its obligations during financial
crises; (e) the availability of other sources of financial support; and (f) the existing realizable value
of collateral. The impairment allowances, if any, are evaluated as the need arises, in view of
favorable or unfavorable developments.
With regard to the collective assessment of impairment, allowances are assessed collectively for
losses on receivables that are not individually significant and for individually significant
receivables when there is no apparent nor objective evidence of individual impairment yet.
A particular portfolio is reviewed on a periodic basis in order to determine its corresponding
appropriate allowances. The collective assessment evaluates and estimates the impairment of the
portfolio in its entirety even though there is no objective evidence of impairment yet on an
individual assessment. Impairment losses are estimated by taking into consideration the following
deterministic information: (a) historical losses/write-offs; (b) losses which are likely to occur but
have not yet occurred; and (c) the expected receipts and recoveries once impaired.
Liquidity risk
Liquidity is generally defined as the current and prospective risk to earnings or capital arising
from the Group‟s inability to meet its obligations when they become due without recurring
unacceptable losses or costs.
The Group‟s liquidity management involves maintaining funding capacity to finance capital
expenditures and service maturing debts, and to accommodate any fluctuations in asset and
liability levels due to changes in the Group‟s business operations or unanticipated events created
by customer behavior or capital market conditions. The Group maintains a level of cash and cash
equivalents deemed sufficient to finance operations. As part of its liquidity risk management, the
Group regularly evaluates its projected and actual cash flows. It also continuously assesses
conditions in the financial markets for opportunities to pursue fund raising activities. Fund raising
activities may include obtaining bank loans and availing of export credit agency facilities.
Financial assets
The analysis of financial assets held for liquidity purposes into relevant maturity grouping is based
on the remaining period at the reporting date to the contractual maturity date or, if earlier, the
expected date the assets will be realized.
Financial liabilities
The relevant maturity grouping is based on the remaining period at the reporting date to the
contractual maturity date. When counterparty has a choice of when the amount is paid, the
liability is allocated to the earliest period in which the Group can be required to pay. When an
entity is committed to make amounts available in installments, each installment is allocated to the
earliest period in which the entity can be required to pay.
112
The tables below summarize the maturity profile of financial instruments based on remaining
contractual undiscounted cash flows as of December 31, 2016 and 2015:
2016
Less than one 1 to 3 3 to 12 1 to 5 More than
month months months years 5 years Total
Financial Assets
Cash and cash equivalents P
= 10,183,729,447 P
= 112,512,857 P
=– P
=– P
=– P
= 10,296,242,304
Receivables:
Trade receivables 1,659,477,487 ‒ ‒ 1,357,704 6,243,198 1,667,078,389
Due from related
parties* 22,093,143 3,464,762 98,712,835 ‒ ‒ 124,270,740
Interest receivable 3,544,120 – – – – 3,544,120
Others ** 260,701,554 69,269,857 10,440,396 67,152,373 255,666,356 663,230,536
Derivative financial
instruments not
designated as accounting
hedges ‒ ‒ ‒ 441,773,905 ‒ 441,773,905
Refundable deposits ‒ ‒ ‒ 29,182,000 ‒ 29,182,000
P
= 12,129,545,751 P
= 185,247,476 P
= 109,153,231 P
= 539,465,982 P
= 261,909,554 P
= 13,225,321,994
Financial Liabilities
On-balance sheet
Accounts payable and other
accrued liabilities*** P
= 5,943,237,435 P
= 1,555,438,691 P
= 5,009,729,087 P
= 5,064,849 P
=‒ P
= 12,513,470,062
Due to related parties* 38,618,547 ‒ ‒ ‒ ‒ 38,618,547
Long-term debt ‒ ‒ ‒ 7,123,567,004 35,686,870,626 42,810,437,630
P
= 5,981,855,982 P
= 1,555,438,691 P
= 5,009,729,087 P
= 7,128,631,853 P
= 35,686,870,626 P
= 55,362,526,239
***Receivable and payable on demand
***Excluding government-related payables
2015
Less than one 1 to 3 3 to 12 1 to 5 More than
month months months years 5 years Total
Financial Assets
P =77,731,496
P =–
P =–
P =–
P =4,706,090,063
P
Receivables:
Trade receivables 1,389,696,872 – 2,780,182 – 5,865,052 1,398,342,106
Interest receivable 125,623,460 – – – – 125,623,460
Due from related
parties* 1,377,036 – – – – 1,377,036
Others ** 207,781,957 2,157,740 75,372,740 1,211,644 241,988,285 528,512,366
Refundable deposits – – – 27,135,401 – 27,135,401
=6,352,837,892
P =79,889,236
P =78,152,922
P =28,347,045
P =247,853,337
P =6,787,080,432
P
On-balance sheet
instruments not
designated as accounting
hedges =–
P =–
P =–
P =1,671,213,914
P =772,281,224
P =2,443,495,138
P
accrued liabilities*** 5,833,676,569 1,051,834,620 1,862,805,953 1,066,516,117 250,776 9,815,084,035
Due to related parties* 38,115,803 – – – – 38,115,803
Long-term debt – – 5,419,595,530 22,249,673,135 8,919,716,826 36,588,985,491
=5,871,792,372
P =1,051,834,620
P =7,282,401,483
P =24,987,403,166
P =9,692,248,826
P =48,885,680,467
P
***Receivable and payable on demand
***Excluding government-related payables
Market risk
Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may
result from changes in the price of a financial instrument. The value of a financial instrument may
change as a result of changes in foreign currency exchange rates, interest rates, commodity prices
or other market changes. The Group‟s market risk originates from its holding of foreign exchange
instruments, interest-bearing instruments and derivatives.
113
Foreign currency risk
Foreign currency risk arises on financial instruments that are denominated in a foreign currency
other than the functional currency in which they are measured. It is the risk that the value of a
financial instrument will fluctuate due to changes in foreign exchange rates.
The Group has transactional currency exposures. Such exposures arise from sales and purchases
in currencies other than the Parent Company‟s functional currency. During the years ended
December 31, 2016, 2015 and 2014, approximately 32.0%, 31.0% and 29.0%, respectively, of the
Group‟s total sales are denominated in currencies other than the functional currency. Furthermore,
the Group‟s capital expenditures are substantially denominated in USD. As of
December 31, 2016, 2015 and 2014, 67.0 %, 67.4% and 67.2%, respectively, of the Group‟s
financial liabilities were denominated in USD.
The Group does not have any foreign currency hedging arrangements as of December 31, 2016
and 2015.
The tables below summarize the Group‟s exposure to foreign currency risk. Included in the tables
are the Group‟s financial assets and liabilities at carrying amounts, categorized by currency.
2016
Hong Kong Singaporean Other
US Dollar Dollar Dollar Currencies* Total
Financial Assets
Cash and cash equivalents P
=4,912,681,176 P
=54,676,207 P
=55,960,921 P
=723,197,429 P
=5,746,515,733
Receivables 781,078,986 36,162,127 15,390,372 468,403,780 1,301,035,265
Financial assets at FVPL 441,773,905 ‒ ‒ ‒ 441,773,905
Refundable deposits** 29,182,000 ‒ ‒ ‒ 29,182,000
P
=6,164,716,067 P
=90,838,334 P
=71,351,293 P=1,191,601,209 P
=7,518,506,903
Financial Liabilities at FVPL
accrued liabilities*** P
=570,793,915 P
=29,556,483 P
=42,767,198 P =3,329,850,478 P
=3,972,968,074
Long-term debt 37,231,947,630 ‒ ‒ ‒ 37,231,947,630
Others**** 224,413,504 ‒ ‒ ‒ 224,413,504
P
=38,027,155,049 P
=29,556,483 P
=42,767,198 P =3,329,850,478 P
=41,429,329,208
****Other currencies include Malaysian ringgit, Korean won, New Taiwan dollar, Japanese yen, Australian dollar and Euro
****Included under ‘Other noncurrent assets’ account in the consolidated statements of financial position
****Excluding government-related payables
****Included under ‘Other noncurrent liabilities’ in the consolidated statements of financial position
2015
Hong Kong Singaporean Other
US Dollar Dollar Dollar Currencies* Total
Financial Assets
P =28,618,072
P =23,598,454
P =550,734,832
P =2,760,944,235
P
Receivables 319,932,610 27,987,568 23,597,364 268,906,696 640,424,238
Refundable deposits** 27,135,401 – – – 27,135,401
=2,505,060,888
P =56,605,640
P =47,195,818
P =819,641,528
P =3,428,503,874
P
Financial Liabilities at FVPL
instruments not designated
as accounting hedges =2,443,495,138
P =–
P =–
P =–
P =2,443,495,138
P
accrued liabilities*** 4,136,229,873 43,755,668 54,483,493 248,494,675 4,482,963,709
Long-term debt 36,588,985,491 – – – 36,588,985,491
Others**** 224,413,504 – – – 224,413,504
=43,393,124,006
P =43,755,668
P =54,483,493
P =248,494,675
P =43,739,857,842
P
****Other currencies include Malaysian ringgit, Korean won, New Taiwan dollar, Japanese yen, Australian dollar and Euro
****Included under ‘Other noncurrent assets’ account in the consolidated statements of financial position
****Excluding government-related payables
****Included under ‘Other noncurrent liabilities’ in the consolidated statements of financial position
114
The exchange rates used to restate the Group‟s foreign currency-denominated assets and liabilities
as of December 31, 2016 and 2015 follow:
2016 2015
US dollar P
=49.720 to USD1.00 P47.060 to USD1.00
=
Singapore dollar P
=34.354 to SGD1.00 =33.517 to SGD1.00
P
Hong Kong dollar P
=6.421 to HKD1.00 =6.086 to HKD1.00
P
The following table sets forth the impact of the range of reasonably possible changes in the
USD - Peso exchange value on the Group‟s pre-tax income for the years ended December 31,
2016, 2015 and 2014 (in thousands).
2016 2015 2014
Changes in foreign exchange value P
=2 (P
=2) P2
= (P
=2) P2
= (P
=2)
Change in pre-tax income (P
=1,315,342) P
=1,315,342 (P
=1,737,699) =1,737,699
P (P
=1,687,711) =1,687,711
P
Other than the potential impact on the Group‟s pre-tax income, there is no other effect on equity.
The Group does not expect the impact of the volatility on other currencies to be material.
Commodity price risk

The Group enters into commodity derivatives to manage its price risks on fuel purchases.
Commodity hedging allows stability in prices, thus, offsetting the risk of volatile market
fluctuations. Depending on the economic hedge cover, the price changes on the commodity
derivative positions are offset by higher or lower purchase costs on fuel. A change in price by
US$10.00 per barrel of jet fuel affects the Group‟s fuel costs in pre-tax income by
=2,326.5 million, P
P =2,132.7 million and P =1,778.5 million for the years December 31, 2016, 2015
and 2014, respectively, in each of the covered periods, assuming no change in volume of fuel is
consumed.
Interest rate risk

Interest rate risk arises on interest-bearing financial instruments recognized in the consolidated
statements of financial position and on some financial instruments not recognized in the
consolidated statements of financial position (i.e., some loan commitments, if any). The Group‟s
policy is to manage its interest cost using a mix of fixed and variable rate debt (Note 18).
115
116
The following tables show information about the Group‟s long-term debt that are exposed to interest rate risk and are presented by maturity profile (Note 18):
December 31, 2016

Total
Total (in Philippine
<1 year >1-2 years >2-3 years >3-4 years >4-5 years >5 years (In US Dollar) Peso) Fair Value
ECA-backed loans from banks(Note 18)
Floating rate
US Dollar London Interbank Offering
Rate (LIBOR) US$16,295,558 US$16,531,413 US$16,002,466 US$15,151,894 US$15,330,362 US$38,529,680 US$117,841,373 P
=5,859,073,080 P
=5,860,658,097
Commercial loans from banks (Note 18)
Floating rate 44,763,630 43,819,261 44,531,884 45,249,977 46,007,719 152,209,353 376,581,824 18,723,648,282 18,969,392,037
US$61,059,188 US$60,350,674 US$60,534,350 US$60,401,871 US$61,338,081 US$190,739,033 US$494,423,197 P
=24,582,721,362 P
=24,830,050,134
December 31, 2015

Total
Total (in Philippine
<1 year >1-2 years >2-3 years >3-4 years >4-5 years >5 years (In US Dollar) Peso) Fair Value
ECA-backed loans from banks (Note 18)
Floating rate
US Dollar LIBOR US$15,982,346 US$16,140,463 US$16,362,447 US$16,130,052 US$15,030,481 US$54,241,695 US$133,887,484 =6,300,745,013
P =6,280,226,991
P
Commercial loans from banks (Note 18)
Floating rate 32,797,061 33,258,070 33,734,931 34,223,316 34,716,386 140,111,604 308,841,368 14,534,074,745 14,869,925,168
US$48,779,407 US$49,398,533 US$50,097,378 US$50,353,368 US$49,746,867 US$194,353,299 US$442,728,852 =20,834,819,758
P =21,150,152,159
P
The following table sets forth the impact of the range of reasonably possible changes in interest
rates on the Group‟s pre-tax income for the years ended December 31, 2016, 2015 and 2014.
2016 2015 2014

Changes in interest rates 1.50% (1.50%) 1.50% (1.50%) 1.50% (1.50%)
Changes in pre-tax income (P
=392,086,223) P =392,086,223 (P
=274,842,903) P =274,842,903 (P
=183,855,223) P =183,855,223
Fair value interest rate risk

Fair value interest rate risk is the risk that the value/future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Group‟s exposure to interest rate risk
relates primarily to the Group‟s financial assets at fair value through profit or loss.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant, of the Group‟s income before tax and the relative impact on
the Group‟s net assets as of December 31, 2016 and 2015:
Change in Basis Effect on Profit

Points Before Tax
2016 +100% P
=5,915,843
-100% (5,915,843)
2015 +100% =10,278,994
P
-100% (10,278,994)
29. Fair Value Measurement
The carrying amounts approximate fair values for the Group‟s financial assets and liabilities due
to its short-term maturities, except for the following financial assets and other financial liabilities
as of December 31, 2016 and 2015:
2016 2015
Carrying Value Fair Value Carrying Value Fair Value
Financial Assets
Refundable deposits*
(Note 16) P
=29,182,000 P
=34,248,959 =27,135,401
P =30,107,952
P
Other financial liability
Long-term debt**
(Note 18) P
= 42,810,437,630 P
=42,744,359,043 =36,588,985,491
P =37,501,137,327
P
**Included under ‘Other noncurrent assets’ account in the consolidated statements of financial position.
**Including current portion.
The methods and assumptions used by the Group in estimating the fair value of financial assets
and other financial liabilities are:
Noninterest - bearing refundable deposits

The fair values are determined based on the present value of estimated future cash flows using
prevailing market rates. The Group used discount rates of 3% to 4% in 2016 and 2015.
Long-term debt
The fair value of long-term debt is determined using the discounted cash flow methodology, with
reference to the Group‟s current incremental lending rates for similar types of loans. The discount
rates used range from 2% to 6% as of December 31, 2016 and 2015.
117
The Group uses the following hierarchy for determining and disclosing the fair value of financial
assets and liabilities designated at FVPL and derivative financial instruments by valuation
techniques:
(a) Level 1: quoted (unadjusted) prices in an active market 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 table below shows the Group‟s financial instruments carried at fair value hierarchy
classification:
2016
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at
fair value:
Financial assets (liabilities) at
FVPL (Note 9) P
=441,773,905 P
=− P
=– P
=441,773,905
Assets and liabilities for which
fair values are disclosed:
Refundable deposits P
=− P
=− P
=34,248,959 P
=34,248,959
Long-term debt − (42,744,359,043) − (P
=42,744,359,043)
2015
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at
fair value:
Financial assets (liabilities) at
FVPL (Note 9) (P
=2,443,495,138) =−
P =– (P
P =2,443,495,129)
Assets and liabilities for which
fair values are disclosed:
Refundable deposits =−
P =−
P =30,107,952
P =30,107,952
P
Long-term debt − (37,501,137,327) − (37,501,137,327)
There were no transfers within any hierarchy level of fair value measurements for the years ended
December 31, 2016 and 2015, respectively.
30. Commitments and Contingencies
Operating Aircraft Lease Commitments

The Group entered into operating lease agreements with certain leasing companies, which cover
the following aircraft:
118
A320 aircraft
The following table summarizes the specific lease agreements on the Group‟s Airbus A320
aircraft:
Date of Lease Agreement Lessors No. of Units Lease Expiry

April 2007 Inishcrean Leasing Limited 1 October 2019
(Inishcrean)
March 2008 GY Aviation Lease 0905 Co. Limited 2 January 2019
March 2008 APTREE Aviation Trading 2 Co. Ltd 1 October 2019
Wells Fargo Bank Northwest 1 October 2019
National Assoc.
July 2011 SMBC Aviation Capital Limited 2 February 2018
Note: The lease agreements were amended, when applicable, to effect the novation of lease rights by the original lessors
to new lessors as allowed under the lease agreements.
In 2007, the Group entered into operating lease agreement with Inishcrean for the lease of
one (1) Airbus A320, which was delivered in 2007, and with CIT Aerospace International for the
lease of four (4) Airbus A320 aircraft, which were delivered in 2008. In 2015, the Group
extended the lease agreement with Inishcrean for another three years.
In March 2008, the Parent Company entered into operating lease agreements with GY Aviation
Lease 0905 Co. Limited (GY Aviation) for the lease of two (2) Airbus A320 aircraft, which were
delivered in 2009, and two Airbus A320 aircraft with two other lessors, which were received in
2012. In November 2010, the Parent Company signed an amendment to the operating lease
agreements, advancing the delivery of the two (2) Airbus A320 aircraft to 2011 from 2012.
In 2016, the Group extended the lease agreement with GY Aviation Lease 0905 Co. Limited for
another two years pursuant to a letter of intent (LOI) signed in the first quarter of the same year.
In July 2011, the Group entered into an operating lease agreement with RBS Aerospace Ltd.
(RBS) for the lease of two (2) Airbus A320 aircraft, which were delivered in March 2012.
The lease agreement with RBS was amended to effect the novation of lease rights by the original
lessors to new lessors as allowed under the existing lease agreements.
A330 aircraft
The following table summarizes the specific lease agreements on the Group‟s Airbus A330
aircraft:
Date of Lease Agreement Lessors No. of Units Lease Term

February 2012 CIT Aerospace International 4 12 years with pre-termination
option
July 2013 A330 MSN 1552 Limited and A330 2 12 years with pre-termination
MSN 1602 Limited* option
*New lessors per Deed of Novation and Amendment signed on August 2014 and March 2015
On February 21, 2012, the Group entered into a lease agreement with CIT Aerospace International
for four (4) Airbus A330-300 aircraft. The lease term of the aircraft is 12 years with an early
pre-termination option.
On July 19, 2013, the Group entered into an aircraft operating lease agreements with Intrepid
Aviation for the lease of two (2) Airbus A330-300 aircraft, which were delivered in
September 2014 and March 2015.
119
As of December 31, 2016, the Group has six (6) Airbus A330 aircraft under operating lease
(Note 13), wherein one (1) Airbus was delivered in 2015.
The first two (2) A330 aircraft were delivered in June 2013 and September 2013. Three (3) A330
aircraft were delivered in February 2014, May 2014 and September 2014. One (1) A330 aircraft
was delivered in March 2015.
Lease expenses relating to aircraft leases (included in „Aircraft and engine lease‟ account in the
consolidated statements of comprehensive income) amounted to P =4,253.7 million,
P =3,503.5 million in 2016, 2015 and 2014, respectively.
Future minimum lease payments under the above-indicated operating aircraft leases follow:
2016 2015 2014
Philippine peso Philippine Peso Philippine Peso
US Dollar Equivalent US Dollar Equivalent US Dollar Equivalent
Within one year US$88,821,146 P
= 4,416,187,364 US$90,260,208 =4,247,645,406
P US$88,551,265 =3,960,012,577
P
After one year but not more
than five years 345,847,247 17,195,525,129 309,193,470 14,550,644,708 314,017,649 14,042,869,274
Over five years 206,018,543 10,243,241,938 332,977,141 15,669,904,258 395,380,828 17,681,430,645
US$640,686,936 P
= 31,854,954,431 US$732,430,819 =34,468,194,372
P US$797,949,742 =35,684,312,496
P
Operating Non-Aircraft Lease Commitments

The Group has entered into various lease agreements for its hangar, office spaces, ticketing
stations and certain equipment. These leases have remaining lease terms ranging from one to ten
years. Certain leases include a clause to enable upward revision of the annual rental charge
ranging from 5.00% to 10.00%.
Future minimum lease payments under these noncancellable operating leases follow:
2016 2015 2014

Within one year P
=167,226,528 =135,299,739
P =127,970,825
P
After one year but not more than
five years 710,187,772 564,977,120 539,700,300
Over five years 3,477,917,440 2,433,712,858 2,065,948,495
P
=4,355,331,740 =3,133,989,717
P =2,733,619,620
P
Lease expenses relating to both cancellable and noncancellable non-aircraft leases (allocated under
different expense accounts in the consolidated statements of comprehensive income) amounted to
=625.8 million, P
P =488.6 million and P=337.1 million in 2016, 2015 and 2014, respectively.
Service Maintenance Commitments

On June 21, 2012, the Parent Company has entered into a 10-year charge per aircraft landing
(CPAL) agreement with Messier-Bugatti-Dowty (Safran group) to purchase wheels and brakes for
its fleet of Airbus A319 and A320 aircraft. The contract covers the current fleet, as well as future
aircraft to be acquired.
On June 22, 2012, the Parent Company has entered into service contract with Rolls-Royce Total
Care Services Limited (Rolls-Royce) for service support for the engines of the A330 aircraft.
Rolls-Royce will provide long-term Total Care service support for the Trent 700 engines on up to
eight A330 aircraft. Contract term shall be from delivery of the first A330 until the redelivery of
the last A330.
120
On July 12, 2012, the Parent Company has entered into a maintenance service contract with
SIAEC for the maintenance, repair and overhaul services of its A319 and A320 aircraft.
Specific services from SIAEC are Base Maintenance, Fleet Technical Management (FTM),
Inventory Technical Management (ITM) and C&E for Line Maintenance Services for the A319
and A320. These agreements remained in effect as of December 31, 2016.
Aircraft and Spare Engine Purchase Commitments

In August 2011, the Group entered in a commitment with Airbus S.A.S to purchase firm orders of
thirty new A321 NEO aircraft and ten addition option orders. These aircraft are scheduled to be
delivered from 2017 to 2021.
On June 28, 2012, the Group has entered into an agreement with United Technologies
International Corporation Pratt & Whitney Division to purchase new PurePower® PW1100G-JM
engines for its 30 firm and ten options A321 NEO aircraft to be delivered beginning 2017.
The agreement also includes an engine maintenance services program for a period of ten years
from the date of entry into service of each engine.
On October 20, 2015, the Group entered into a Sale and Purchase Contract with Avions Transport
Regional G.I.E. to purchase 16 firm ATR 72-600 aircraft and up to 10 additional option ATR
72-600 aircraft. These aircraft are scheduled to be delivered from 2016 to 2020. Two ATR72-600
were received during 2016.
As of December 31, 2016, the Group will take delivery of 30 Airbus A321 NEO aircraft and
14 ATR 72-600.
The above-indicated commitments relate to the Group‟s re-fleeting and expansion programs.
These agreements remained in effect as of December 31, 2016.
Capital Expenditure Commitments
The Group‟s capital expenditure commitments relate principally to the acquisition of aircraft fleet,
aggregating to P
=93,797.6 million as of December 31, 2016 and 2015,
respectively.
2016
Philippine Peso
Within one year US$483,178,223 P

=24,023,621,236
five years 1,886,172,565 93,780,499,949
US$2,369,350,788 P
=117,804,121,185
2015
Philippine Peso
Within one year US$294,434,836 =13,856,103,384
P
five years 1,698,714,532 79,941,505,899
US$1,993,149,368 =93,797,609,283
P
121
Contingencies
The Group has pending suits, claims and contingencies which are either pending decisions by the
courts or being contested or under evaluation, the outcome of which are not presently
determinable. The information required by PAS 37, Provisions, Contingent Liabilities and
Contingent Assets, is not disclosed until final settlement, on the ground that it might prejudice the
Group‟s position (Note 17).
31. Supplemental Disclosures to the Consolidated Statements of Cash Flows
The principal noncash investing activities of the Group were as follows:
a. On December 31, 2015 the Group recognized a liability based on the schedule of pre-delivery
payments amounting P =482.0 million. These incurred costs are recognized under the
„Construction in progress‟ account. The liability was paid in the following year.
b. The Parent Company paid P =488.6 million for the acquisition of CEBGO (Note 7).
Cash flows used to acquire CEBGO, after the cash attributable to the business combination of
=256.7 million, amounted to P
P =231.8 million.
c. The Group applied creditable withholding taxes against income tax payable and these
amounted to P =45.9 million, P
=51.0 million and P
=21.0 million in 2016, 2015 and 2014,
respectively.
32. Registration with the BOI
The Parent Company is registered with the BOI as a new operator of air transport on a pioneer
status on eleven (11) A320 and non-pioneer status for eleven (11) Airbus A320 aircraft and
two (2) Airbus A330 aircraft. Under the terms of the registration and subject to certain
requirements, the Parent Company is entitled to the following fiscal and non-fiscal incentives
(Notes 1, 13 and 25):
Date of Registration Registration Number ITH Period
November 3, 2010 2010-180 Jan 2011 - Dec 2016
November 16, 2011 2011-241 Nov 2011 - Nov 2017
January 17, 2012 2012-013 Mar 2012 - Feb 2016
January 17, 2012 2012-014 Mar 2012 - Feb 2016
December 6, 2012 2012-262 Dec 2012 - Dec 2018
February 11,2013 2013-045 Feb 2013 - Feb 2019
April 11, 2013 2013-089 Apr 2013 - Apr 2019
July 29, 2013 2013-166 July 2013 - July 2017
September 13, 2013 2013-185 Sept 2013 - Sept 2019
September 13, 2013 2013-186 Sept 2013 - Sept 2019
October 3, 2013 2013-201 Oct 2013 - Oct 2017
January 17, 2014 2014-012 Jan 2014 - Jan 2020
February 19, 2014 2014-037 Feb 2014 - Feb 2020
May 21, 2014 2014-080 May 2014 - May 2018
May 21, 2014 2014-081 May 2014 - May 2018
January 22, 2015 2015-011 Jan 2015 - Jan 2019
January 22,2015 2015-012 Jan 2015 - Jan 2019
February 17, 2015 2015-039 Feb 2015 - Feb 2019
March 9, 2015 2015-061 Mar 2015 - Mar 2019
October 22, 2015 2015-225 Oct 2015 - Oct 2019
November 4, 2015 2015-238 Nov 2015 - Nov 2019
(Forward)
122
Date of Registration Registration Number ITH Period
February 23, 2016 2016-040 Feb 2016 - Feb 2020
March 2, 2016 2016-045 Mar 2016 - Mar 2020
May 26, 2016 2016-100 May 2016 - May 2020
a. An ITH for a period of four (4) years for non-pioneer status and six (6) years for pioneer
status.
b. Employment of foreign nationals. This may be allowed in supervisory, technical or advisory
positions for five (5) years from date of registration.
c. Importation of capital equipment, spare parts and accessories at zero (0%) duty from date of
effectivity of Executive Order (E.O.) No. 70 and its Implementing Rules and Regulations for a
period of five (5) years reckoned from the date of its registration or until the expiration of
E.O. 70, whichever is earlier.
d. Avail of a bonus year in each of the following cases but the aggregated ITH availments
(regular and bonus years) shall not exceed eight (8) years.
 The ratio of total of imported and domestic capital equipment to the number of workers
for the project does not exceed the ratio set by the BOI.
 The net foreign exchange savings or earnings amount to at least US$500,000 annually
during the first three (3) years of operation.
 The indigenous raw materials used in the manufacture of the registered product must at
least be fifty percent (50%) of the total cost of raw materials for the preceding years prior
to the extension unless the BOI prescribes a higher percentage.
e. Additional deduction from taxable income of fifty percent (50%) of the wages corresponding
to the increment in number of direct labor for skilled and unskilled workers in the year of
availments as against the previous year, if the project meets the prescribed ratio of capital
equipment to the number of workers set by the BOI. This may be availed of for the first
five (5) years from date of registration but not simultaneously with ITH.
f. Tax credit equivalent to the national internal revenue taxes and duties paid on raw materials
and supplies and semi-manufactured products used in producing its export product and
forming part thereof for a ten (10) years from start of commercial operations. Request for
amendment of the date of start of commercial operation for purposes of determining the
reckoning date of the ten-year period, shall be filed within one (1) year from date of
committed start of commercial operation.
g. Simplification of customs procedures for the importation of equipment, spare parts, raw
materials and suppliers.
h. Access to Customs Bonded Manufacturing Warehouse (CBMW) subject to the customs rules
and regulations provided the Parent Company exports at least 70% of production output.
i. Exemption from wharfage dues, any export tax, duties, imports and fees for a ten-year period.
j. Importation of consigned equipment for a period of ten (10) years from date of registration
subject to posting of re-export bond.
123
k. Exemption from taxes and duties on imported spare parts and consumable supplies for export
producers with CBMW exporting at least 100% of production.
The Parent Company shall submit to the BOI a semestral report on the actual investments,
employment and sales pertaining to the registered project. The report shall be due 15 days after
the end of each semester.
As of December 31, 2016 and 2015, the Parent Company has complied with externally imposed
capital requirements set by the BOI in order to avail the ITH incentives for aircraft of registered
activity.
33. Approval of the Consolidated Financial Statements
The consolidated financial statements were approved and authorized for issue by the BOD on
March 21, 2017.
34. Standards issued but not yet Effective
Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the
Group does not expect that the future adoption of the said pronouncements to have a significant
impact on its consolidated financial statements. The Group intends to adopt the following
pronouncements when these becomes effective.
Effective beginning on or after January 1, 2017
 Amendments to PFRS 12, Clarification of the Scope of the Standard (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle)
The amendments clarify that the disclosure requirements in PFRS 12, other than those relating
to summarized financial information, apply to an entity‟s interest in a subsidiary, a joint
venture or an associate (or a portion of its interest in a joint venture or an associate) that is
classified (or included in a disposal group that is classified) as held for sale.
 Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative

The amendments to PAS 7 require an entity to provide disclosures that enable users of
financial statements to evaluate changes in liabilities arising from financing activities,
including both changes arising from cash flows and non-cash changes (such as foreign
exchange gains or losses). On initial application of the amendments, entities are not required
to provide comparative information for preceding periods. Early application of the
amendments is permitted.
Application of amendments will result in additional disclosures in the 2017 consolidated

financial statements of the Group.
 Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized
Losses
The amendments clarify that an entity needs to consider whether tax law restricts the sources
of taxable profits against which it may make deductions on the reversal of that deductible
temporary difference. Furthermore, these amendments provide guidance on how an entity
124
should determine future taxable profits and explain the circumstances in which taxable profit
may include the recovery of some assets for more than their carrying amount.
Entities are required to apply the amendments retrospectively. However, on initial application
of the amendments, the change in the opening equity of the earliest comparative period may
be recognized in opening retained earnings (or in another component of equity, as
appropriate), without allocating the change between opening retained earnings and other
components of equity. Entities applying this relief must disclose that fact. Early application
of the amendments is permitted.
 Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-

based Payment Transactions
The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification of a
share-based payment transaction with net settlement features for withholding tax obligations;
and the accounting where a modification to the terms and conditions of a share-based payment
transaction changes its classification from cash settled to equity settled.
On adoption, entities are required to apply these amendments without restating prior periods,
but retrospective application is permitted if elected for all three amendments and if other
criteria are met. Early application of the amendments is permitted.
 Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with

PFRS 4
The amendments address concerns arising from implementing PFRS 9, the new financial
instruments standard, before implementing the forthcoming insurance contracts standard.
These amendments allow entities to choose between the overlay approach and the deferral
approach to deal with the transitional challenges. The overlay approach gives all entities that
issue insurance contracts the option to recognize in OCI, rather than profit or loss, the
volatility that could arise when PFRS 9 is applied before the new insurance contracts standard
is issued. On the other hand, the deferral approach gives entities whose activities are
predominantly connected with insurance an optional temporary exemption from applying
PFRS 9 until the earlier of application of the forthcoming insurance contracts standard or
January 1, 2021.
The overlay approach and the deferral approach will only be available to an entity if it has not
previously applied PFRS 9.
 PFRS 15, Revenue from Contracts with Customers

PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts
with customers. Under PFRS 15, revenue is recognized at an amount that reflects the
consideration to which an entity expects to be entitled in exchange for transferring goods or
services to a customer. The principles in PFRS 15 provide a more structured approach to
measuring and recognizing revenue.
The new revenue standard is applicable to all entities and will supersede all current revenue
recognition requirements under PFRSs. Either a full or modified retrospective application is
required for annual periods beginning on or after January 1, 2018.
125
During 2016, the Group performed a preliminary assessment of PFRS 15, which is subject to
changes arising from a more detailed ongoing analysis. Furthermore, the Group is considering
the clarifications issued by International Accounting Standards Board (IASB) in April 2016
and will monitor any further developments.
 PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial
Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The
standard introduces new requirements for classification and measurement, impairment, and
hedge accounting. This new standard should be applied retrospectively, but providing
comparative information is not compulsory. For hedge accounting, the requirements are
generally applied prospectively, with some limited exceptions.
The adoption of PFRS 9 will have an effect on the classification and measurement of the
Group‟s financial assets and impairment methodology for financial assets, but will have no
impact on the classification and measurement of the Group‟s financial liabilities. The Group
is currently assessing the impact of adopting this standard.
 Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value

(Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)
The amendments clarify that an entity that is a venture capital organization, or other
qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to
measure its investments in associates and joint ventures at FVPL. These amendments also
clarify that if an entity that is not itself an investment entity has an interest in an associate or
joint venture that is an investment entity, the entity may, when applying the equity method,
elect to retain the fair value measurement applied by that investment entity associate or joint
venture to the investment entity associate‟s or joint venture‟s interests in subsidiaries.
This election is made separately for each investment entity associate or joint venture, at the
later of the date on which (a) the investment entity associate or joint venture is initially
recognized; (b) the associate or joint venture becomes an investment entity; and (c) the
investment entity associate or joint venture first becomes a parent. These amendments should
be applied retrospectively, with earlier application permitted.
 Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property under
construction or development into, or out of investment property. These amendments state that
a change in use occurs when the property meets, or ceases to meet, the definition of
investment property and there is evidence of the change in use. A mere change in
management‟s intentions for the use of a property does not provide evidence of a change in
use. These amendments should be applied prospectively to changes in use that occur on or
after the beginning of the annual reporting period in which the entity first applies the
amendments. Retrospective application is only permitted if this is possible without the use of
hindsight.
 Philippine Interpretation International Financial Reporting Interpretation‟s Committee

(IFRIC)-22, Foreign Currency Transactions and Advance Consideration
The interpretation clarifies that in determining the spot exchange rate to use on initial
recognition of the related asset, expense or income (or part of it) on the derecognition of a
non-monetary asset or nonmonetary liability relating to advance consideration, the date of the
transaction is the date on which an entity initially recognizes the nonmonetary asset or
nonmonetary liability arising from the advance consideration. If there are multiple payments
126
or receipts in advance, then the entity must determine a date of the transaction for each
payment or receipt of advance consideration. The interpretation may be applied on a fully
retrospective basis. Entities may apply the interpretation prospectively to all assets, expenses
and income in its scope that are initially recognized on or after the beginning of the reporting
period in which the entity first applies the interpretation or the beginning of a prior reporting
period presented as comparative information in the financial statements of the reporting period
in which the entity first applies the interpretation.
 PFRS 16, Leases

Under the new standard, lessees will no longer classify their leases as either operating or
finance leases in accordance with PAS 17, Leases. Rather, lessees will apply the single-asset
model. Under this model, lessees will recognize the assets and related liabilities for most
leases on their statements of financial position, and subsequently, will depreciate the lease
assets and recognize interest on the lease liabilities in their profit or loss. Leases with a term
of 12 months or less or for which the underlying asset is of low value are exempted from these
requirements. The accounting by lessors is substantially unchanged as the new standard
carries forward the principles of lessor accounting under PAS 17. Lessors, however, will be
required to disclose more information in their financial statements, particularly on the risk
exposure to residual value.
Entities may early adopt PFRS 16 but only if they have also adopted PFRS 15. When
adopting PFRS 16, an entity is permitted to use either a full retrospective or a modified
retrospective approach, with options to use certain transition reliefs.
The new standard is expected to have significant impact in the Group.
Deferred effectivity
 Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture
The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. These
amendments clarify that a full gain or loss is recognized when a transfer to an associate or
joint venture involves a business as defined in PFRS 3, Business Combinations. Any gain or
loss resulting from the sale or contribution of assets that does not constitute a business,
however, is recognized only to the extent of unrelated investors‟ interests in the associate or
joint venture.
On January 13, 2016, the Financial Reporting Standards Council postponed the original
effective date of January 1, 2016 of the said amendments until the IASB has completed its
broader review of the research project on equity accounting that may result in the
simplification of accounting for such transactions and of other aspects of accounting for
associates and joint ventures.
127
Website & Call Center
Reservation Hotline (Philippines)
Manila: (+632) 702-0888
Cebu: (+6332) 230-8888
Group Bookings
groupbookings@cebupacificair.com
Website
www.cebupacificair.com
Follow us on:
 @CebuPacificAir
 CebuPacificAir Official Page
 CebuPacificAir Channel
 @CebuPacificAir
Independent Public Accountants

SGV & Co.
SGV Building, 6760 Ayala Avenue
1226 Makati City, Philippines
Stock Transfer and Dividend Paying Agent

BDO Unibank, Inc.
Trust and Investment Group
15/F South Tower
BDO Corporate Center
7899 Makati Avenue, Makati City
Investor Relations
investor.relations@cebupacificair.com

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Contents

Cebu Pacific: The most successful

Accountability We take responsibility for what we say,

Respect We uphold the dignity and individuality of each person.

Excellence We strive to be the best in everything we do.

Fun We enjoy our work and provide quality service

Integrity We are honorable. We do what is right, not what is expedient.

Teamwork We value and harness the strengths of each team member.

We collaborate and cooperate with each other

Why everyone flies. through safe, affordable,

We are an employer of choice

We have a deep sense of family

We enhance the quality of life of

We offer our shareholders a fair

John L. Gokongwei, Jr.

Michael Ivan Shau

YEARS ENDED DECEMBER 31 2016 VS 2015

Passengers carried (‘000) 19,130 18,376 16,870 754 4.1%

Seat load factor 86.0% 82.6% 83.9% 3.4 ppts

Number of sectors flown 132,056 132,360 122,994 -304 -0.2%

YEARS ENDED DECEMBER 31 2016 VS 2015

Total revenues 61,899 56,502 52,000 5,398 9.6%

Pre-tax core net income 11,373 8,746 3,320 2,627 30.0%

Total assets 100,514 84,829 76,062 15,686 18.5%

*Note: CEB will begin flying Tablas and

CEB Fare Bundles offer a simple solution for guests looking to

Cebu Pacific’s official Mobile

Mobile Check-In Web Check-In Kiosk Check-In

At the time of booking, passengers can now pre-purchase baggage

Cebu Pacific guests can also book online

Cebu Pacific facilitates online booking and payment in China

Fun Shop Inflight Duty Free

Fun Shop Inflight Duty Free is available on international flights

Airline branded souvenir items such as blankets, model airplanes

Cebu Pacific’s Fun Café presents a wide variety of flavorful buy-on-

Cebu Pacific offers TravelSure travel insurance underwritten by

Guests can avail of Cebu Pacific’s sports equipment handling

Equipment covered by this service include:

Cebu Pacific guests with connecting flights through Singapore

CEB passengers can avail of car rental services through touch

Cebu Pacific is the leading air cargo carrier in the Philippines,

Smile and Waytogo

CEB’s Smile Magazine has a readership of over a million per issue.

Bright Skies for EveryJuan

the Philippines. CEB held the first—the birth of baby ‘Haven’

INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of Directors

Basis for Opinion

Key Audit Matters

Estimation of Asset Retirement Obligation

Reasonableness of Estimated Useful Lives of Aircraft

SYCIP GORRES VELAYO & CO.

Narciso T. Torres, Jr.

March 21, 2017

LIABILITIES AND EQUITY

See accompanying Notes to Consolidated Financial Statements.

Years Ended December 31

12,251,198,186 9,700,220,806 4,157,336,990

OTHER INCOME (EXPENSES)

INCOME BEFORE INCOME TAX 9,716,164,709 3,528,795,289 878,635,984

PROVISION FOR (BENEFIT FROM)

NET INCOME 9,754,136,196 4,387,225,875 853,498,216

OTHER COMPREHENSIVE INCOME (LOSS),

7,847,827 (61,904,911) 209,681,986