CEB Investors' and Analysts' Briefing 4Q10 - Cebu Pacific Air

COVER SHEET
1 5 4 6 7 5
SEC Registration Number
C E B U A I R , I N C .
(Company’s Full Name)
2 N D F L O O R , D O N A J U A N I T A M A R Q U E Z L
I M B U I L D I N G , O S M E N A B L V D . , C E B U C
I T Y
(Business Address: No. Street City/Town/Province)
Robin C. Dui 852-2461
(Contact Person)
(Company Telephone Number)
1 2 3 1 1 7 - A
Month Day (Form Type) Month Day
(Fiscal Year)
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
S T A M P S
Remarks: Please use BLACK ink for scanning purposes.

SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1. For the fiscal year ended December 31, 2010
2. SEC Identification No. 154675
3. BIR Tax Identification No. 000-948-229-000
Cebu Air, Inc.
4. Exact name of issuer as specified in its charter
Cebu City, Philippines
5. Province, country or other jurisdiction of incorporation or organization
6. Industry Classification Code: (SEC Use Only)
2 nd Floor, Dona Juanita Marquez Lim Building, Osmena Blvd., Cebu City 6000
7. Address of issuer's principal office Postal Code
(032) 255-4552
8. Issuer's telephone number, including area code
Not Applicable
9. Former name, former address and former fiscal year, if changed since last report
10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the
RSA
Title of Each Class
Common Stock, P1.00 Par Value
Number of Shares of Common
Stock Outstanding and Amount
of Debt Outstanding
613,236,550 shares
11. Are any or all of the securities listed on the Philippine Stock Exchange?
Yes [x] No [ ]

12. Indicate by check mark whether the registrant:
(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17
thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and
141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or
for such shorter period the registrant was required to file such reports)
Yes [x] No [ ]
(b) has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
13. State the aggregate market value of the voting stock held by non-affiliates of the registrant.
The aggregate market value shall be computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a specified date within 60
days prior to the date of filing. If a determination as to whether a particular person or entity is
an affiliate cannot be made without involving unreasonable effort and expense, the aggregate
market value of the common stock held by non-affiliates may be calculated on the basis of
assumptions reasonable under the circumstances, provided the assumptions are set forth in
this Form.
The aggregate market value of stocks held by non-affiliates is P23,897,216,250.

TABLE OF CONTENTS
Page No.
PART I – BUSINESS AND GENERAL INFORMATION
Item 1 Business.........................................................................................................1
Item 2 Properties…………………………………………………………………. 14
Item 3 Legal Proceedings…………………………………………………………14
Item 4 Submission of Matters to a Vote of Security Holders……………………. 14
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5
Item 6
Market for Registrant’s Common Equity and
Related Stockholder Matter………………………………………………. 15
Management’s Discussion and Analysis or
Plan of Operation…………………………………………………………. 17
Item 7 Financial Statements……………………………………………………… 30
Item 8
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure…………………………………….. 30
Item 9 Independent Public Accountants and Audit Related Fee………………… 30
PART III – CONTROL AND COMPENSATION INFORMATION
Item 10 Board of Directors and Executive Officers of the Registrant…………….. 32
Item 11 Executive Compensation…………………………………………………. 39
Item 12
Security Ownership of Certain Beneficial Owners and
Management……………………………………………………………… 40
Item 13 Certain Relationships and Related Transactions…………………………. 42
PART IV – CORPORATE GOVERNANCE
Item 14 Corporate Governance……………………………………………………. 42
PART V – EXHIBITS AND SCHEDULES
Item 15 Exhibits and Reports on SEC Form 17-C………………………………… 43
SIGNATURES ..................................................................................................................... 44
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTARY SCHEDULES…………………………………………………….. 46

PART 1 – BUSINESS AND GENERAL INFORMATION
Item 1.
Business
Cebu Air, Inc. (the Company) is an airline that operates under the trade name “Cebu Pacific Air”
and is the leading low-cost carrier in the Philippines. It pioneered the “low fare, great value”
strategy in the local aviation industry by providing scheduled air travel services targeted to
passengers who are willing to forego extras for fares that are typically lower than those offered by
traditional full-service airlines while offering reliable services and providing passengers with a
fun travel experience.
The Company was incorporated in August 26, 1988 and was granted a 40-year legislative
franchise to operate international and domestic air transport services in 1991. It commenced its
scheduled passenger operations in 1996 with its first domestic flight from Manila to Cebu. In
1997, it was granted the status as an official Philippine carrier to operate international services by
the Office of the President of the Philippines, pursuant to Executive Order (EO) No. 219.
International operations began in 2001 with flights from Manila to Hong Kong.
In 2005, the Company adopted the low cost carrier (LCC) business model. The core element of
the LCC strategy is to offer affordable air servic es to passengers. This is achieved by having:
high-load, high-frequency flights; high aircraft utilization; a young and simple fleet composition;
and having low distribution costs.
The Company operates an extensive route network serving 50 domestic routes and 23
international routes with a total of 1,832 scheduled weekly flights. It operates from four hubs,
including the Ninoy Aquino International Airport (NAIA) Terminal 3 located in Pasay City,
Metro Manila; Mactan-Cebu International Airport located in Lapu-Lapu City, part of
Metropolitan Cebu; Diosdado Macapagal International Airport located in Clark, Pampanga; and
Davao International Airport located in Davao City, Davao del Sur.
As of December 31, 2010, the Company operated a fleet of 31 aircraft which comprises of ten
Airbus A319, 14 Airbus A320, and seven ATR 72-500 aircraft. It operates its Airbus aircraft on
both domestic and international routes and operates the ATR 72-500 aircraft on domestic routes,
including destinations with runway limitations. The average aircraft age of the Company’s fleet
is approximately 3.1 years as of December 31, 2010.
The Company has three principal distribution channels: the internet; direct sales through booking
sales offices, call centers and government/corporate client accounts; and third-party sales outlets.
Aside from passenger service, it also provides airport-to-airport cargo services on its domestic
and international routes. In addition, the Company offers ancillary services such as cancellation
and rebooking options, in-flight merchandising such as sale of duty-free products on international
flights, excess baggage and travel-related products and services.
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Third Party Sales Outlets
As of December 31, 2010, the Company had a network of distributors in the Philippines selling
its domestic and international air services within an agreed territory or geographical coverage.
Each distributor maintains and grows its own client base and can impose on their clients a service
or transaction fee. Typically, a distributor’s client base would include agents, travel agents or end
customers. The Company also had a network of foreign general sales agents, wholesalers, and
preferred sales agents who market, sell and distribute its air services in other countries.
Publicly-Announced New Product or Service
The Company continues to analyze its route network. The Company can opt to increase
frequencies on existing routes or add new routes/destinations. The Company can also opt to
eliminate unprofitable routes and redeploy capacity.
The Company plans to expand its fleet over the course of the next four years to 47 aircraft by the
end of 2014 (net of redelivery of six leased aircraft). It has already signed a purchase agreement
in February 2007 (as amended) on the basis of which it has firm orders for 22 Airbus A320
aircraft, which are scheduled to be delivered starting October 2010, three of which have already
arrived as of December 31, 2010. It has also entered into operating lease agreements for two
Airbus A320 aircraft.
The additional aircraft will support the Company’s plans to increase frequency on current routes
and to add new city pairs and destinations. The Company has increased frequencies on domestic
routes such as Manila to Cagayan de Oro, Cebu, Davao, Gen. Santos, and Puerto Princesa and
international routes such as Manila to Hong Kong, Singapore, Kuala Lumpur, Bangkok, and
Incheon. The Company plans to launch services from Manila to Pusan which is expected to start
in 2011.
Competition
The Philippine aviation authorities deregulated the airline industry in 1995 eliminating certain
restrictions on domestic routes and frequencies which resulted in fewer regulatory barriers to
entry into the Philippine domestic aviation market. On the international market, although the
Philippines currently operates under a bilateral framework, whereby foreign carriers are granted
landing rights in the Philippines on the basis of reciprocity as set forth in the relevant bilateral
agreements between the Philippine government and foreign nations, the Philippine government
may consider liberalizing the Philippine aviation industry by allowing foreign carriers to exercise
“freedoms of the air” traffic rights beyond those that were established under the bilateral
agreements. The Philippine government may pursue “Open Skies” arrangements or policies such
as ASEAN Open Skies. It may also pursue arrangements or policies similar to EO 29 or EO 500-
A. This will significantly increase competition in the airline business. This will also allow the
Company to expand its route network.
The Company faces intense competition on both its domestic and international routes. The level
and intensity of competition varies from route to route based on a number of factors. Principally,
it competes with other airlines that service the routes it flies. However, on certain domestic
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outes, the Company also considers alternative modes of transportation, particularly sea and land
transport, to be competitors for its services. Substitutes to its services also include video
conferencing and other modes of communication.
The Company’s main competitor in the Philippines is Philippine Airlines (“PAL”), a full-service
Philippine flag carrier. Most of the Company’s domestic and international destinations are also
serviced by PAL. The Company also competes in the Philippines with Air Philippines Express, a
domestic operator with relations to PAL. Certain smaller airlines, including Zest Air and South
East Asian Airlines also compete with the Company domestically. According to Civil
Aeronautics Board (CAB) data, the Company is the leading domestic airline in the Philippines by
passengers carried, with a market share of 48.2% for the year ended December 31, 2010.
The Company intends to capture a portion of the growing tourist market and the large OFW
population. The Company is a leading low-cost airline offering services to more destinations and
serving more routes with a higher frequency between the Philippines and other ASEAN countries
than any other airline in the Philippines. The Company currently competes with the following
LCC’s and full-service airlines in its international operations: AirAsia, Tiger Airways, Jetstar
Airways, PAL, Cathay Pacific, Singapore Airlines, Thai Airways, among others.
Recently, AirAsia has confirmed the set up of a joint venture in the Philippines which is targeted
to start operations in the third quarter of 2011. The Philippine joint venture will operatate out of
Clark in Pampanga initially with two A320 aircraft. AirAsia has been operating in the
Philippines since 2005, with one daily flight between Kuala Lumpur and Clark, and one daily
flight between Kota Kinabalu and Clark.
In addition, Tiger Airways and Philippine carrier Seair initially set-up a “Partner Airline”
program. Seair will operate Singapore flights to/from Clark flights using two 144-seater A319
aircraft leased from Tiger. Seair’s seats and ancillary services for this route will be sold through
Tiger’s website. Tiger recently took 32.5% stake in Seair.
Jetstar Airways also recently announced that it is in talks with various local companies, looking
for a Filipino partner. Jetstar Airways wants to tap markets outside Manila such as Cebu and
Aklan.
Raw Materials
Fuel is a major cost component for airlines. The Company’s fuel requirements are classified by
location and sourced from various suppliers.
The Company’s fuel suppliers at its international stations include PTT, Petronas, Shell-
Singapore, SK-Korea and Chevron HK, among others. It also purchases fuel from PTT
Philippines and Phoenix Petroleum. The Company purchases fuel stocks on a per parcel basis, in
such quantities as are sufficient to meet its monthly operational requirements. Most of the
Company’s contracts with fuel suppliers are on a yearly basis and may be renewed for subsequent
one-year periods.
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Dependence on One or a Few Major Customers and Identify any such Major Customers
The Company’s business is not dependent upon a single customer or a few customers that a loss
of anyone of which would have a material adverse effect on the Company.
Transactions with and/or Dependence on Related Parties
The Company’s significant transactions with related parties are described in detail in Note 26 of
the Notes to Consolidated Financial Statements.
Patents, Trademarks, Licenses, Franchises, Concessions and Royalty Agreements
Patents / Trademarks
The Company has registered the “Cebu Pacific” and the Cebu Pacific feather-like device trade
marks with the Philippine Intellectual Property Office (PIPO). In the Philippines, certificates of
registration of a trade mark filed with the PIPO prior to the effective date of the Philippine
Intellectual Property Code in 1998 are generally effective for a period of 20 years from the date
of the certificate, while those filed after the Philippine Intellectual Property Code became
effective are generally effective for a shorter period of ten years, unless terminated earlier. The
Company currently has 16 trademark applications pending with the PIPO. It has also registered
the business name “Cebu Pacific Air” with the Department of Trade and Industry. Registering a
business name with the Department of Trade and Industry precludes another entity engaged in the
same or similar business from using the same business name as one that has been registered. A
registration of a business name shall be effective for five years from the initial date of registration
and must be renewed within the first three months following the expiration of the five-year period
from the date of original registration.
Licenses / Permits
The Company operates its business in highly regulated environment. The Company’s business
depends upon the permits and licenses issued by the government authorities or agencies for its
operations which include the following:
• Legislative Franchise to Operate a Public Utility
• Certificate of Public Convenience and Necessity
• Letter of Authority
• Air Operator Certificate
• Certificate of Registration
• Certificate of Airworthiness
The Company also has to seek approval from the relevant airport authorities to secure airport
slots for its operations.
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Franchise
In 1991, pursuant to Republic Act (RA) No. 7151, the Company was granted a franchise to
operate air transportation services, both domestic and international. In accordance with the
Company’s franchise, which extends up to year 2031:
a) The Company is subject to franchise tax of five (5) percent of the gross revenue derived
from air transportation operations. For revenue earned from activities other than air
transportation, the Company is subject to regular 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 Company at
any disadvantage, then such privileges shall have been deemed by the fact itself of the
Company’s tax privileges and shall operate equally in favor of the Company.
Kindly refer to Note 1 of the Notes to Consolidated Financial Statements.
Government Approval of Principal Products or Services
The Company operates its business in highly regulated environment. The Company’s business
depends upon the permits and licenses issued by the government authorities or agencies for its
operations which include the following:
• Legislative Franchise to Operate a Public Utility
• Certificate of Public Convenience and Necessity
• Letter of Authority
• Air Operator Certificate
• Certificate of Registration
• Certificate of Airworthiness
The Company also has to seek approval from the relevant airport authorities to secure airport
slots for its operations.
Effects of Existing or Probable Government Regulations on the Business
Civil Aeronautics Administration and Civil Aviation Authority of the Philippines (CAAP)
Policy-making for the Philippine civil aviation industry started with RA 776, known as the Civil
Aeronautics Act of the Philippines (the “Act”), passed in 1952. The Act established the policies
and laws governing the economic and technical regulation of civil aeronautics in the country. It
established the guidelines for the operation of two regulatory organizations, CAB for the
regulation of the economic activities of airline industry participants and the Air Transportation
Office, which was later transformed into the CAAP, created pursuant to RA 9497, otherwise
known as the Civil Aviation Authority Act of 2008.
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The CAB is authorized to regulate the economic aspects of air transportation, to issue general
rules and regulations to carry out the provisions of RA 776, and to approve or disapprove the
conditions of carriage or tariff which an airline desires to adopt. It has general supervision and
regulation over air carriers, general sales agents, cargo sales agents, and airfreight forwarders, as
well as their property, property rights, equipment, facilities and franchises.
The CAAP, a government agency under the supervision of the Department of Transportation and
Communications for purposes of policy coordination, regulates the technical and operational
aspects of air transportation in the Philippines, ensuring safe, economic and efficient air travel. In
particular, it establishes the rules and regulations for the inspection and registration of all aircraft
and facilities owned and operated in the Philippines, determines the charges and/or rates pertinent
to the operation of public air utility facilities and services, and coordinates with the relevant
government agencies in relation to airport security. Moreover, CAAP is likewise tasked to
operate and maintain domestic airports, air navigation and other similar facilities in compliance
with the International Civil Aviation Organization (ICAO), the specialized agency of the United
Nations whose mandate is to ensure the safe, efficient and orderly evolution of international civil
aviation.
The Company complies with and adheres to existing government regulations.
Category 2 Rating
In early January 2008, the Federal Aviation Administration (FAA) of the United States
downgraded the aviation safety ranking of the Philippines to Category 2 from the previous
Category 1 rating. The FAA assesses the civil aviation authorities of all countries with air carriers
that operate to the U.S. to determine whether or not foreign civil aviation authorities are meeting
the safety standards set by the ICAO. The lower Category 2 rating means a country either lacks
laws or regulations necessary to oversee airlines in accordance with minimum international
standards, or its civil aviation authority is deficient in one or more areas, such as technical
expertise, trained personnel, recordkeeping or inspection procedures. Further, it means Philippine
carriers can continue flyin g to the U.S. but only under heightened FAA surveillance or
limitations. In addition, the Philippines has been included in the “Significant Safety Concerns”
posting by the ICAO as a result of an unaddressed safety concern highlighted in the recent ICAO
audit. As a result of this unaddressed safety concern, Air Safety Committee (ASC) of the
European Union banned all Philippine commercial air carriers from operating flights to and from
Europe. The ASC based its decision on the absence of sufficient oversight by the CAAP.
Although the Company does not currently operate flights to the U.S. and Europe, the foregoing
may adversely affect its ability to establish new routes to other countries that base their decision
on flight access on the FAA and ASC’s evaluation.
EO 28 and 29
In March 2011, the Government issued EO 28 which provides for the reconstitution and
reorganization of the existing Single Negotiating Panel into the Philippine Air Negotiating Panel
(PANP) and Philippine Air Consultation Panel (PACP) (collectively, the Philippine Air Panels).
The PANP shall be responsible for the initial negotiations leading to the conclusion of the
relevant Air Services Agreements (ASAs) while the PACP shall be responsible for the succeeding
negotiations of such ASAs or similar arrangements.
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Also in March 2011, the government issued EO 29 which authorizes the CAB and the Philippine
Air Panels to pursue more aggressively the international civil aviation liberalization policy to
boost the country’s competitiveness as a tourism destination and investment location. Among
others, EO 29 provides the following:
• In the negotiation of the ASAs, the Philippine Air Panels may offer and promote third, fourth
and fifth freedom rights to the country’s airports other than the NAIA without restriction as to
frequency, capacity and type of aircraft, and other arrangements that will serve the national
interest as may be determined by the CAB; and
• Notwithstanding the provisions of the relevant ASAs, the CAB may grant any foreign air
carriers increases in frequencies and/or capacities in the country’s airports other than the
NAIA, subject to conditions required by existing laws, rules and regulations. All grants of
frequencies and/or capacities which shall be subject to the approval of the President shall
operate as a waiver by the Philippines of the restrictions on frequencies and capacities under
the relevant ASAs.
The issuance of the foregoing EOs may significantly increase competition.
Research and Development
The Company incurred minimal amounts for research and development activities, which do not
amount to a significant percentage of revenues.
Cost and Effects of Compliance with Environmental Laws
The operations of the Company are subject to various laws enacted for the protection of the
environment. The Company has complied with the following applicable environmental laws and
regulations:
• Presidential Decree No. 1586 (Establishing an Environmental Impact Assessment System)
which directs every person, partnership or corporation to obtain an Environmental
Compliance Certificate (ECC) before undertaking or operating a project declared as
environmentally critical by the President of the Philippines. Petro-chemical industries,
including refineries and fuel depots, are considered environmentally critical projects for
which an ECC is required. The Company has obtained ECCs for the fuel depots it operates
and maintains in Domestic Road, Pasay City (“Manila Depot”), Lapu-Lapu City (“Cebu
Depot”) and Sasa, Davao City (“Davao Depot”) for the storage and distribution of aviation
fuel for its aircraft.
• RA 8749 (The Implementing Rules and Regulations of the Philippine Clean Air Act of 1999)
requires operators of aviation fuel storage tanks, which are considered as a possible source of
air pollution, to obtain a Permit to Operate from the applicable regional office of the EMB.
The aviation fuel storage tanks in the Company’s Manila Depot, Cebu Depot and Davao
Depot are subject to and are compliant with this requirement.
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• RA 9275 (Implementing Rules and Regulations of the Philippine Clean Water Act of 2004)
requires owners or operators of facilities that discharge regulated effluents to secure from the
Laguna Lake Development Authority (Luzon area) and/or the applicable regional office of
the EMB (Visayas and Mindanao areas) a discharge permit, which is the legal authorization
granted by the Department of Energy and Natural Resources for the discharge of waste water.
The Company’s operations generate waste water and effluents for the disposal of which a
Discharge Permit was obtained from the Laguna Lake Development Authority and the
Environment Management Bureau of Region 7 which enables it to discharge and dispose of
liquid waste or water effluent generated in the course of its operations at specifically
designated areas. The Company also contracted the services of government-licensed and
accredited third parties to transport, handle and dispose its waste materials.
Compliance with the foregoing laws does not have a material effect to the Company’s capital
expenditures, earnings and competitive position.
On an annual basis, the Company spend approximately P300,000 in connection with its
compliance with applicable environmental laws.
Employees
As of December 31 2010, the Company had 2,475 permanent full time employees, categorized as
follows:
Division:
Employees
Operations……...…………………………………… 1,699
Commercial …………………………………… 485
Support Departments (1) ……………………………… 291
2,475
Note:
(1) Support Departments include the Office of the General Manager, the Corporate Finance, Planning and
Legal Affairs Department, People Department, Administrative Services Department, Procurement
Department, Information Systems Department, Comp troller Department, Internal Audit Department and
Treasury Department.
The Company’s employees are not unionized, and it has not experienced any labor strikes or
work stoppages in past three years.
Risk
The major business risks facing the Company are as follows:
(1) Cost and Availability of Fuel
The cost and availability of fuel are subject to many economic and political factors and events
occurring throughout the world, the most important of which are not within the Company’s
control. Fuel prices have been subject to high volatility, fluctuating substantially over the past
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several years. Any increase in the cost of fuel or any decline in the availability of adequate
supplies of fuel could have a material adverse effect on the Company’s operations and
profitability.
The Company implements various fuel management strategies to manage the risk of rising fuel
prices including hedging. The Company may also consider adding fuel surcharge in the event of
significant increase in fuel prices.
(2) Competition
The Company faces intense competition on its domestic and international routes, both from other
low-cost carriers and from full-service carriers. Its existing competitors or new entrants into the
market may undercut its fares in the future, increase capacity on their routes or attempt to conduct
low-fare or low-cost airline operations of their own in an effort to increase market share, any of
which could negatively affect the Company’s business. The Company also faces competition
from ground and sea transportation alternatives, including buses, trains, ferries, boats and cars,
which are the principal means of transportation in the Philippines. Video teleconferencing and
other methods of electronic communication, and improvements therein, also add a new dimension
of competition to the industry as they, to a certain extent, provide lower-cost substitutes for air
travel.
The Company focuses on areas of costs, on-time performance, service delivery and scheduling
to remain competitive.
(3) Lack of Marketing Alliance
Many airlines have marketing alliances with other airlines under which they market and advertise
their status as marketing alliance partners. The Company is not a member of any such marketing
alliance with respect to its passenger services. Its lack of alliance could harm its business and
competitive ability.
The Company may try to enter into code sharing agreements, interlining agreements or any other
marketing alliances in the future.
(4) Economic Downturn
The deterioration in the financial markets has heralded a recession in many countries, which led
to significant declines in employment, household wealth, consumer demand and lending and, as a
result, has adversely affected economic growth in the Philippines and elsewhere. Since a
substantial portion of airline travel, for both business and leisure, is discretionary, the airline
industry tends to experience adverse financial results during general economic downturns. Any
deterioration in the economy could negatively affect consumer sentiment and lead to a reduction
in demand for flying which could adversely affect the Company’s business. The Company could
also experience difficulty accessing the financial markets, which could make it more difficult or
expensive to obtain funding in the future.
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(5) Availability of Debt Financing
The Company’s business is highly capital intensive. It has historically required debt financing to
acquire aircraft and expect to incur significant amounts of debt in the future to fund the
acquisition of additional aircraft, its operations, other anticipated capital expenditures, working
capital requirements and expansion overseas. Failure to obtain additional financing could
adversely affect the Company’s ability to grow its business and its future profitability.
(6) Foreign Exchange and Interest Rate Fluctuations
The Company’s exposure to foreign exchange rate fluctuations is principally in respect of its U.S.
dollar-denominated long-term debt as well as a majority of its operating costs, such as U.S.
dollar-denominated purchases of aviation fuel. On the other hand, the Company’s exposure to
interest rate fluctuations is relative to debts incurred which have floating interest rates. In such
cases, any significant devaluation of the Philippine peso and any significant increases in interest
rates will result to increased obligations that could adversely impact the Company’s result of
operations.
The Company may enter into derivative contracts in the future to hedge foreign exchange
exposure. In addition, the Company may fix the interest rates for a portion of its loans.
(7) Airport and Air Traffic Control Infrastructure Constraints
The Company relies on operational efficiency to reduce unit costs and provide reliable service.
Any delay to the addition of capacity at airports or upgrade of facilities in the Philippines could
affect the Company’s operational efficiency.
(8) Reliance on Third Party Facilities and Service Providers
The Company’s inability to lease, acquire or access airport facilities and service providers on
reasonable terms to support its growth or to maintain its current operations would have a material
adverse effect on our business, prospects, financial condition and results of operations.
Furthermore, the Company’s reliance on third parties to provide essential services on its behalf
gives the Company less control over the efficiency, timeliness and quality of services.
(9) Safety and Security
The Company is exposed to potentially significant losses in the event that any of its aircraft is lost
or subject to an accident, terrorist incident or other disaster. In addition, any such event would
give rise to significant costs related to passenger claims, repairs or replacement of a damaged
aircraft and its temporary or permanent loss from service. Moreover, aircraft accidents or
incidents, even if fully insured, are likely to create a public perception that the airline is less safe
than other airlines, which could significantly reduce its passenger volumes and have a material
adverse effect on its business, prospects, financial condition and results of operations. Terrorist
attacks could also result in decreased seat load factors and yields and could result in increased
costs, such as increased fuel expenses or insurance costs.
The Company is committed to operational safety and security. Its commitment to safety and
security is reflected in its rigorous aircraft maintenance program and flight operations manuals,
intensive flight crew, cabin crew and employee training programs and strict compliance with
applicable regulations regarding aircraft and operational safety and security.
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(10) Maintenance Cost and Performance of Maintenance Repair Organizations
As the fleet ages, maintenance and overhaul expenses will increase. Any significant increase in
maintenance and overhaul expenses and the inability of maintenance repair organizations to
provide satisfactory service could adversely affect the business.
The Company enters into long term contracts to manage maintenance and overhaul expenses.
(11) Reliance on Automated Systems and the Internet
The Company depends on automated systems to operate its business, including, among others, its
website, its reservation and its departure control systems. Any disruption to its website or online
reservation and telecommunication services could result in losses, increased expenses and could
harm its reputation.
(12) Dependence on the Efforts of Executive Officers and Other Key Management
The Company’s success depends to a significant extent upon the continued services of its
executive officers and other key management personnel. The unavailability of any of its
executive officers and other key management or failure to recruit suitable or comparable
replacements could have a material adverse effect on our business, prospects, financial condition
and results of operations.
(13) Retaining and Attracting Qualified Personnel
The Company’s business model requires it to have highly skilled, dedicated and efficient pilots,
engineers and other personnel. Its growth plans will require the Company to hire, train and retain
a significant number of new employees in the future. However, from time to time, the airline
industry has experie nced a shortage of skilled personnel, particularly pilots and engineers. The
Company competes against full-service airlines which offer wage and benefit packages that
exceed those offered by the Company. The inability of the Company to hire, train and retain
qualified employees at a reasonable cost could result in inability to execute it growth strategy,
which would have a material adverse effect on our business, prospects, financial condition and
results of operations. In addition, the Company may find it increasingly challenging to maintain
its corporate culture as it replaces or hires additional personnel.
The Company may have to increase wages and benefits to attract and retain qualified personnel.
(14) Availability of Insurance
Insurance is fundamental to airline operations. Because of terrorist attacks or other world events,
certain aviation insurance could become unavailable or available only for reduced amounts of
coverage that are insufficient to comply with the le vels of coverage required by the Company’s
aircraft lenders and lessors or applicable government regulations. Any inability to obtain
insurance, on commercially acceptable terms or at all, for the Company’s general operations or
specific assets would have a material adverse effect on business, prospects, financial condition
and results of operations.
12

(15) Regulations
The Company has no control over applicable regulations. Changes in the interpretation of current
regulations or the introduction of new laws or regulations could have a material adverse effect on
the Company’s business, prospects, financial condition and results of operations.
(16) Catastrophes and Other Factors Beyond the Company’s Control
Like other airlines, the Company is subject to delays caused by factors beyond its control,
including weather conditions, traffic congestion at airports, air traffic control problems and
increased security measures. In the event that the Company delays or cancels flights for any of
these reasons, revenues and profits would be reduced and the Company’s reputation would suffer
which could result in a loss of customers.
(17) Unionization, Work Stoppages, Slowdowns and Increased Labor Costs
At present, the Company has a non-unionized workforce. However, in the event the employees
unionize, it could result to demands that may increase operating expenses and adversely affect the
Company’s profitability. Likewise, disagreements between the labor union and management
could result to work slowdowns or stoppages or disruptions which could be harmful to the
business.
(18) Restrictions under the Philippine Constitution and other Laws
The Company is subject to nationality restrictions under the Philippine Constitution and other
laws, limiting ownership of public utility companies to citizens of the Philippines or corporations
or associations organized under the laws of the Philippines of which at least 60% of the capital
stock outstanding is owned and held by citizens of the Philippines. There is a risk that these
ownership restrictions may be breached which could result in the revocation of the Company’s
franchise generally and its rights to fly on certain international routes.
(19) Relationship with Third Party Sales Outlets
While part of the Company’s strategy is to increase bookings through the internet, sales through
third party sales outlets remain an important distribution channel. There is no assurance that the
Company will be able to maintain favorable relationships with them nor be able to suitably
replace them. The Company’s revenues could be adversely impacted if third parties who sell its
air services elect to prioritize other airlines.
(20) Outbreaks
Any present or future outbreak of contagious diseases could have a material adverse effect on the
Company’s business, prospects, financial condition and results of operations.
(21) Domestic Concentration
Since the Company’s operations has focused and, at least in the near term, will continue to focus
on air travel in the Philippines, it would be materially and adversely affected by any
circumstances causing a reduction in demand for air transportation in the Philippines, including
13

adverse changes in local economic and political conditions, negative travel advisories issued by
foreign governments, declining interest in the Philippines as a tourist destination, or significant
price increases linked to increases in airport access costs and fees imposed on passengers.
(22) Investment Risk
The Company has investment securities, the values of which are dependent on fluctuating market
prices. Any negative movement in the market price of the Company’s investments could affect
the Company’s results of operations.
The foregoing risks are not all inclusive. Other risks that may affect the Company’s business and
operations may not be included in the above disclosure.
Item 2.
Properties
As of the December 31, 2010, the Company does not own any land or buildings. It leases the
office space used for its corporate headquarters from the Philippine Aerospace Development
Corp., while it leases its hangar, aircraft parking and other operational space from the Manila
International Airport Authority. Kindly refer to Notes 12, 16 and 27 of the Notes to Consolidated
Financial Statements for the detailed discussions on Properties, Leases, Purchases and Capital
Expenditure Commitments.
Item 3.
Legal Proceedings
The Company is subject to law suits and legal actions in the ordinary course of business. The
Company is not a party to, and its properties are not subject of, any material pending legal
proceedings that could be expected to have a material adverse effect on the Company’s financial
position or result of operations.
Item 4.
Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the year
covered by this report.
14

PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5.
Market for Registrant’s Common Equity and Related Stockholder Matter
Market Information
The principal market for the Company’s common equity is the Philippine Stock Exchange. Sales
prices of the common stock follow:
High
Low
Year 2010
October to December 2010 P133.50 P82.00
As of March 23, 2011, the latest trading date prior to the completion of this annual report, sales
prices of the common stock is at P86.30.
Holders
The number of shareholders of record as of December 31, 2010 was 20. Common shares
outstanding as of December 31, 2010 were 613,236,550.
15

List of Stockholders of Record
As of December 31, 2010
Number of Percent to
Name of Stockholders Shares Held Total Outstanding
1. CPAir Holdings, Inc. 400,816,841 65.36%
2. PCD Nominee Corporation (Non-Filipino) 161,004,740 26.25%
3. PCD Nominee Corporation (Filipino) 51,411,960 8.38%
4. Lucille Chiongbian Solon 1,000 0.00%
5. Gloria Jane L. Enrile 500 0.00%
5. Priscilla C. Solon 500 0.00%
6. Jan Carlo Domingo Bunda 200 0.00%
6. Manuel Rio dela Rosa Bunda 200 0.00%
6. Generosa Gonzales Doolani 200 0.00%
6. Mohan Gonzales Doolani 200 0.00%
6. Sunita Gonzales Doolani 200 0.00%
7. Jose F. Buenaventura 1 0.00%
7. Antonio L. Go 1 0.00%
7. Frederick D. Go 1 0.00%
7. James L. Go 1 0.00%
7. John L. Gokongwei, Jr. 1 0.00%
7. Lance Y. Gokongwei 1 0.00%
7. Robina Y. Gokongwei-Pe 1 0.00%
7. Oh Wee Khoon 1 0.00%
7. Ricardo J. Romulo 1 0.00%
Total 613,236,550 100.00%
Dividends
No dividend was declared in 2010.
On March 17, 2011, the Board of Directors of the Company approved the declaration of a regular
cash dividend in the amount of P2.00 per share and a special cash dividend in the amount of
P1.00 per share from the unrestricted retained earnings of the Company to all stockholders of
record as of April 14, 2011 and payable on May 12, 2011.
Recent Sales of Unregistered Securities
Not Applicable. All shares of the Company are listed in the Philippine Stock Exchange.
16

Item 6.
Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the accompanying consolidated
financial statements and notes thereto, which form part of this Report. The consolidated financial
statements and notes thereto have been prepared in accordance with the Philippine Financial
Reporting Standards (PFRS).
Results of Operations
Year Ended December 31, 2010 Compared with Year Ended December 31, 2009
Revenues
The Company posted revenues of P29.089 billion for the year ended December 31, 2010 which
was 24.8% higher than the P23.311 billion revenues generated last year. Considerable
improvement in revenues is accounted for as follows:
Passenger Revenues
Passenger revenues increased by P5.152 billion or 26.4% to P24.656 billion in the year ended
December 31, 2010 from P19.504 billion revenues posted last year. This increase was primarily
due to the 19.5% increase in passenger volume to 10.5 million in the twelve months ended
December 31, 2010 from 8.8 million in the twelve months ended December 31, 2009. This was
driven by the increase in number of flights year on year and higher seat load factor in 2010. The
Company increased the size of its fleet by adding two Airbus A320 aircraft and two ATR 72-500
aircraft during the twelve months ended December 31, 2009. These aircraft were in operation for
the entire twelve months ended December 31, 2010 thereby resulting in more flights compared to
2009. Moreover, three Airbus A320 aircraft arrived during the last quarter of 2010 which further
contributed to the increased number of flights. Total number of flights in 2010 was up by 8.2%
year on year. The increase in passenger revenues for the twelve months ended December 31,
2010 compared with the twelve months ended December 31, 2009 was also attributable to the
increase in the average fares which moved up by 5.8% to P2,357 in 2010 from P2,227 in prior
year.
Cargo Revenues
Cargo revenues increased by P411.194 million or 24.4% to P2.096 billion in the year ended
December 31, 2010 from P1.684 billion in the year ended December 31, 2009, mainly as a result
of the increase in the volume of cargo transported during the period.
Ancillary Revenues
Ancillary revenues increased by P214.862 million or 10.1% to P2.337 billion in the year ended
December 31, 2010 from P2.122 billion registered in 2009. Changes in the Company’s travel
regulations led to the reduction in rebooking, refunds and cancellation fees as the Company no
longer allows booking changes including cancellations within 24 hours from the estimated date of
departure. This offset the increase in revenues generated from excess baggage and other ancillary
services. Excluding rebooking, refunds and cancellation fees, ancillary revenues grew by 33.7%
in the twelve months ended December 31, 2010 compared with the twelve months ended
December 31, 2009. The introduction of additional ancillary revenue sources and increases in
rates contributed to the improvement in other ancillary revenues in 2010.
17

Expenses
The Company incurred expenses of P22.639 billion for the year ended December 31, 2010,
12.4% higher than the P20.147 billion expenses incurred last year. Increase in expenses due to
seat growth was partially offset by the strengthening of the Philippine peso against the U.S. dollar
to an average of P45.12 per U.S. dollar for the twelve months ended December 31, 2010 from an
average of P47.64 per U.S. dollar in 2009 based on the Philippine Dealing System weighted
average rates. Expenses increased as a result of the following:
Flying Operations
Flying operations expenses increased by P2.560 billion or 28.9% to P11.417 billion in the year
ended December 31, 2010 from P8.857 billion in the year ended December 31, 2009. Increase in
flying operations expenses was mainly attributable to the increase in aviation fuel expenses by
33.3% to P9.808 billion in the twelve months ended December 31, 2010 from P7.360 billion
incurred last year as a result of the overall increase in the number of flights as well as increase in
aviation fuel prices. Aviation fuel prices rose as referenced by the increase in the average
published MOPS price of U.S. $90.10 per barrel in the twelve months ended December 31, 2010
compared to the U.S. $69.97 per barrel in 2009.
Aircraft and Traffic Servicing
Aircraft and traffic servicing expenses decreased by P170.026 million or 6.5% to P2.462 billion
in the year ended December 31, 2010 from P2.632 billion posted in 2009. Decline was mainly
due to lower airport charges further reduced by the strengthening of the Philippine peso against
the U.S. dollar in 2010.
Repairs and Maintenance
Repairs and maintenance expenses decreased by P278.995 million or 10.9% to P2.290 billion in
the year ended December 31, 2010 from P2.569 billion last year. Decline in repairs and
maintenance expenses resulted from the Company’s effective cost management. The appreciation
of the Philippine peso against the U.S. dollar in 2010 also contributed to the decrease.
Depreciation and Amortization
Depreciation and amortization expenses increased by P183.246 million or 9.6% to P2.101 billion
in the year ended December 31, 2010 from P1.918 billion in the year ended December 31, 2009
mainly because of the addition of two ATR 72-500 aircraft during the course of the twelve
months ended December 31, 2009 which were in operation for the entire twelve months ended
December 31, 2010 and the acquisition of three Airbus A320 aircraft during the last quarter of
2010. The acquisition of one spare engine in fourth quarter 2009 also contributed to the increase.
Aircraft and Engine Lease
Aircraft and engine lease expenses decreased by P119.031 million or 6.9% to P1.605 billion in
the year ended December 31, 2010 from P1.724 billion in prior year consequent to the return of
two leased Boeing 757 aircraft in June and October 2009. Decline in aircraft and engine lease
expenses was also attributable to the strengthening of the Philippine peso to an average of P45.12
per U.S. dollar for the twelve months ended December 31, 2010 compared to an average of
P47.64 per U.S. dollar for the twelve months ended December 31, 2009.
18

Reservation and Sales
Reservation and sales expenses increased by P341.289 million or 34.3% to P1.336 billion in the
year ended December 31, 2010 from P0.995 billion in 2009. This increase was primarily
attributable to the increased advertising and promotions expenditures incurred to promote the
Company’s services on the Company’s international routes during the twelve months ended
December 31, 2010. Increase was also due to higher commission expenses as a result of the
overall increase in passenger and cargo volumes, especially on the international operations.
General and Administrative
General and administrative expenses decreased by P127.622 million or 15.5% to P694.888
million in year ended December 31, 2010 from P822.510 million last year. This was due to the
impairment loss on other receivables recognized in 2009 which offset the increase in other
general and administrative expenses due to the additional staff and service requirements
associated with the increased flight and passenger activity in the twelve months ended December
31, 2010.
Passenger Service
Passenger service expenses increased by P58.585 million or 10.1% to P639.481 million in the
year ended December 31, 2010 from P580.896 million in the year ended December 31, 2009.
This increase was mainly due to the additional cabin crew requirements for Airbus A319 fleet
consequent to the reconfiguration of said aircraft which increased the seat capacity from 150
passengers to 156 passengers thereby requiring more cabin crew to attend to passenger needs.
The Company also hired additional cabin crew for the three Airbus A320 aircraft acquired in the
last quarter of 2010.
Operating Income
As a result of the foregoing, the Company registered operating income of P6.450 billion for the
year ended December 31, 2010, 103.9% higher than the P3.164 billion posted in 2009.
Interest Expense
Interest expense decreased by P81.345 million or 8.0% to P931.482 million in the year ended
December 31, 2010 from P1012.827 million in the year ended December 31, 2009. Decline was
due to the repayment of the Company’s outstanding obligations in accordance with the loan
repayment schedules partially offset by the interest incurred on additional loans availed during
the last quarter of 2010. Likewise, the strengthening of the Philippine peso against the U.S. dollar
in 2010 also contributed to the decline.
Long-term debt as of December 31, 2010 amounted to P18.433 billion, 7.7% higher than the
P17.110 balance as of December 31, 2009. Additional loans were obtained during the last quarter
of 2010.
Foreign Exchange Gains
Foreign exchange gains increased by P158.797 million or 38.0% to P576.979 million in the year
ended December 31, 2010 from P418.182 million in prior year. This was due to the
strengthening of the Philippine peso against the U.S. dollar to an average of P45.12 per U.S.
dollar for the twelve months ended December 31, 2010 from an average of P47.64 per U.S. dollar
in 2009. The Company’s principal exposure to foreign exchange rate fluctuations is in respect of
U.S. dollar denominated long-term debt incurred in connection with aircraft acquisitions.
19

Fuel Hedging Gains
Fuel hedging gains of P474.255 million in the year ended December 31, 2010 resulted from the
higher mark-to-market valuation on fuel hedging positions.
Interest Income
Interest income increased by P228.647 million or 2584.0% to P237.496 million in the year ended
December 31, 2010 from P8.849 million in 2009. Increased cash from operations were placed in
short-term money markets and investment securities which earned interests thus resulting to a
significant increase in interest income in the current year.
Fair Value Gains of Financial Assets designated at FVPL
Fair value gains amounted to P107.631 million for the year ended December 31, 2010. This
resulted from the changes in the fair values of quoted debt and equity instruments designated at
fair value through profit or loss (FVPL) acquired during the current year.
Equity in Net Income (Loss) of Joint Venture
The Company had equity in net income of joint venture of P25.249 million in the year ended
December 31, 2010, an improvement from last year’s net loss of P25.474 million as the losses of
SIAEP, a company which was established in July 2008 and began commercial operations in
August 2009, narrowed. Higher income generated by the current operations of A+ also
accounted for the improvement.
Income before Income Tax
As a result of the foregoing, the Company posted income before income tax of P6.940 billion for
the year ended December 31, 2010, 114.3% higher than the P3.238 billion registered in 2009.
Provision for (Benefit from) Income Tax
Provision for income tax for the year ended December 31, 2010 was P17.760 million. Increase in
provision for income tax was mainly due to the deferred tax liabilities recognized in connection
with the net unrealized foreign exchange gains on foreign currency denominated obligations as a
result of the strengthening of the Philippine peso during the year.
Net Income
Audited net income for the year ended December 31, 2010 surged to P6.922 billion, 112.5%
higher than the P3.258 billion net income posted in 2009.
Year Ended December 31, 2009 Compared with Year Ended December 31, 2008
Revenues
The Company posted revenues of P23.311 billion for the year ended December 31, 2009, 18.4%
higher than the P19.682 billion revenues posted last year. Substantial growth in revenues is
accounted for as follows:
Passenger Revenues
Passenger revenues increased by P2.400 billion or 14.0% to P19.504 billion in the year ended
December 31, 2009 from P17.104 billion in the year ended December 31, 2008. Increase in
passenger revenues was primarily due to the increase in passenger volume to 8.8 million in 2009
from 6.7 million in 2008, resulting from the addition of two Airbus A320 aircraft and two ATR
20

72-500 aircraft, increased frequency in existing routes and the introduction of new destinations in
2009, including Ozamis, Surigao, Siargao, Cauayan, Catarman, Virac and Calbayog. In addition,
the Company acquired four Airbus A320 aircraft and six ATR 72-500 aircraft during the course
of 2008, which were in operation throughout 2009, their first full year of service. Total number of
flights also increased by 41.9% to 80,725 in 2009 from 56,872 in 2008, with the number of
international and domestic flights increasing by 24.9% and 46.3%, respectively. The effect of the
increase in passenger volume was partially offset by the decrease in the average one-way fares by
13.2% to P2,227 in 2009 from P2,567 in 2008.
Cargo Revenues
Cargo revenues increased by P345.888 million or 25.8% to P1.684 billion in the year ended
December 31, 2009 from P1,339 billion in 2008, primarily as a result of the increase in the
volume of cargo carried on existing routes which, in turn, was largely due to the increase in the
number of flights flown in 2009 as compared with 2008.
Ancillary Revenues
Ancillary revenues increased by P883.028 million or 71.3% to P2.122 billion in the year ended
December 31, 2009 from P1.239 billion in prior year. This increase was primarily due to the
increase in rebooking, refunds and cancellation fees and increased excess baggage revenues
consequent to the increase in the number of passengers carried. The Company also generated
higher ancillary revenues on a unit basis on its international flights. In addition, 2009 was the first
complete year in which the Company recognized ancillary revenues resulting from the new
services the Company was able to provide with its Navitaire reservation systems, such as charges
for prepaid baggage, advance seat selection and website administration as well as commissions
earned in respect of sales of travel insurance and from hotel partners.
Expenses
The Company incurred expenses of P20.147 billion for the year ended December 31, 2009,
12.2% higher than the P17.954 billion expenses incurred for the year ended December 31, 2008.
Increase in expenses was partially influenced by the devaluation of the Philippine peso to an
average of P47.637 per U.S. dollar for the twelve months ended December 31, 2009 from an
average of P44.475 per U.S. dollar for the twelve months ended December 31, 2008. Expenses
increased as a result of the following:
Flying Operations
Flying operations expenses decreased by P750.691 million or 7.8% to P8.857 billion in the year
ended December 31, 2009 from P9.608 billion in 2008, primarily as a result of the decrease in
aviation fuel expenses by 13.4% to P7.360 billion in 2009 from P8.502 billion in 2008. Aviation
fuel prices decreased to an average published MOPS price of U.S.$69.97 per barrel in 2009 from
U.S.$121.36 per barrel in 2008. The decrease in aviation fuel prices was partially offset by the
increase in the volume of fuel consumed in 2009 compared with 2008 as a result of an overall
increase in the number of flights. Decrease in flying operations expenses was partially reduced by
the increases in flight deck and aviation insurance expenses due to the addition of two Airbus
A320 aircraft and two ATR 72-500 aircraft in 2009.
Aircraft and Traffic Servicing
Aircraft and traffic servicing expenses increased by P684.923 million or 35.2% to P2.632 billion
in the year ended December 31, 2009 from P1.947 billion in the previous year primarily as a
result of the overall increase in the number of flights, including increased number of international
flights for which landing and take-off fees and groundhandling charges are generally higher than
those of domestic flights.
21

Repairs and Maintenance
Repairs and maintenance expenses increased by P722.437 million or 39.1% to P2,569 billion in
the year ended December 31, 2009 from P1.847 billion in the year ended December 31, 2008,
mainly due to the overall increase in the number of flights and the weakening of the Philippine
peso to an average of P47.637 per U.S. dollar for the twelve months ended December 31, 2009
from an average of P44.475 per U.S. dollar for the twelve months ended December 31, 2008.
Depreciation and Amortization
Depreciation and amortization expenses increased by P370.930 million or 24.0% to P1.918
billion in the year ended December 31, 2009 from P1.547 billion in 2008. Increase was due to
the addition of two ATR 72-500 aircraft in 2009. Moreover, 2009 was the first full year in which
depreciation was recorded on the four ATR 72-500 aircraft delivered in late 2008.
Aircraft and Engine Lease
Aircraft and engine lease expenses increased by P661.039 million or 62.2% to P1.724 billion in
the year ended December 31, 2009 from P1.063 billion last year. This was mainly caused by the
lease of two additional Airbus A320 aircraft in 2009 at generally higher lease rates compared
with the other leased aircraft. Devaluation of the Philippine peso against the U.S. dollar during
the year also contributed to the increase.
Reservation and Sales
Reservation and sales expenses increased by P142.682 million or 16.7% to P994.695 million in
the year ended December 31, 2009 from P852.012 million in the year ended December 31, 2008.
This increase was attributable to the increase in commission expenses due to the overall increase
in the number of passengers, as well as in the increase in advertising and promotion costs.
Advertising and promotions expenditures increased in line with the growth of the business.
Conversely, increase in reservation and sales expenses was partially offset by the decrease in
bookings and reservations costs in 2009 as a result of the introduction of the Navitaire reservation
systems.
General and Administrative
General and administrative expenses increased by P259.677 million or 46.1% to P822.510
million in the year ended December 31, 2009 from P562.834 million in 2008. This increase was
primarily due to the non-recurring provision of P209.662 million relating to the receivable from
Air Slovakia, to which the Company had sub-leased two aircraft. Likewise, increase was
attributable to the increase in staff and related services expenses associated with the increased
flight and passenger activity in 2009. Excluding this non-recurring provision, general and
administrative expenses would have increased by 8.9%, amounting to P612.848 million.
Passenger Service
Passenger service expenses increased by P70.171 million or 13.7% to P580.896 million in the
year ended December 31, 2009 from P510.725 million in the previous year. This increase was
primarily due to an increase in cabin crew costs, partially offset by a decrease in the cost of
passenger food and supplies.
Operating Income
As a result of the foregoing, the Company registered operating income of P3.164 billion for the
year ended December 31, 2009, 83.1% higher than the P1.728 billion posted in 2008.
22

Interest Expense - net
Net interest expense increased by P179.744 million or 21.8% to P1.004 billion in the year ended
December 31, 2009 from P.824 billion in the year ended December 31, 2008. Increase was
primarily due to the additional long-term debt incurred in 2009 relating to the purchase of two
ATR 72-500 aircraft, as well as the devaluation of the peso to an average of P47.637 per U.S.
dollar for the year ended 31 December 2009 from an average of P44.475 per U.S. dollar for the
year ended 31 December 2008. Further, the Company had incurred long-term debt in September
2008 in relation with the acquisition of four ATR 72-500 aircraft, and 2009 was the first year in
which interest expenses on these loans were recognized for the entire twelve months.
Foreign Exchange Gains (Losses)
Foreign exchange gains (losses) increased by P1.925 billion or 127.7% to a gain of P418.182
million in the year ended December 31, 2009 from a loss of P1,507.231 million last year. The
Company’s principal exposure to foreign exchange rate fluctuations is in respect of the U.S.
dollar denominated long-term debt incurred in connection with aircraft acquisitions, as well as in
aviation fuel purchase contracts which are also denominated in U.S. dollars.
Fuel Hedging Gains (Losses)
Fuel hedging gains (losses) comprised a non-recurring gain of P685.575 million in the year ended
December 31, 2009 as a result of certain hedging positions in 2009 being marked to market at
forward prices that were higher than those at the times the Company entered into those hedging
positions, as well as from the differences between the valuations of positions at the end of 2008
and actual gains and losses in 2009. On the other hand, fuel hedging gains (losses) comprised a
non-recurring loss of P2,594.492 million in 2008 as a result of the significantly decreasing fuel
prices in late 2008.
Equity in Net Income (Loss) of Joint Venture
The Company had equity in net loss of joint venture of P25.474 million in the year ended
December 31, 2009 compared with equity in net income of joint venture of P15.530 million in
prior year. The decrease was primarily attributable to the net loss incurred by SIAEP, a company
which was established in July 2008 and began commercial operations in August 2009, partially
offset by net income from the operations of A+.
Income before Income Tax
As a result of the foregoing, the Company posted income before income tax of P3.238 billion for
the year ended December 31, 2009, 201.7% higher than the P3.183 billion net loss before income
tax registered in 2008.
Provision for (Benefit from) Income Tax
Provision for (benefit from) income tax decreased to a benefit of P19.502 million in the year
ended December 31, 2009 from an expense of P77.321 million in 2008. The decrease of provision
for income tax was due to the recognition of additional deferred tax assets from the net operating
loss carry-over, minimum corporate income tax, impairment loss on receivables and asset
retirement obligation. These are temporary differences expected to be reversed more than 12
months after the financial position date.
Net Income
Audited net income for the year ended December 31, 2009 amounted to P3.258 billion, 199.9%
higher than the P3.260 billion net loss posted in the year ended December 31, 2008.
23

Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
Revenues
The Company posted revenues of P19.682 billion for the year ended December 31, 2008, 31.1%
higher than the P15.016 billion revenues generated last year. Significant increase in revenues is
accounted for as follows:
Passenger Revenues
Passenger revenues increased by P4.134 billion or 31.9% to P17.104 billion in the year ended
December 31, 2008 from P12.970 billion in 2007. Increase in passenger revenues was primarily
due to the increased passenger volume to 6.7 million in 2008 from 5.4 million in 2007 resulting
from the addition of four new Airbus A320 aircraft and six ATR 72-500 aircraft, increased flight
frequencies to existing routes and the introduction of new international destinations including
Hanoi, Ho Chi Minh, Kaoshiung, Kota Kinabalu and Osaka and domestic destinations including
Caticlan, Naga, San Jose, Tuguegarao, Ozamiz, Surigao and Busuanga. Total number of flights
increased by 32.3% to 56,872 in 2008 from 43,001 in 2007, with the number of international and
domestic flights increasing by 29.8% and 42.8%, respectively. In addition, increase in the average
one-way fares by 7.6% to P2,567 in 2008 from P2,385 in 2007 also contributed to the growth in
passenger revenues.
Cargo Revenue
Cargo revenues increased by P142.653 million or 11.9% to P1.339 billion in the year ended
December 31, 2008 from P1,196 billion in the year ended December 31, 2007, primarily as a
result of the increase in the number of flights, partially offset by the overall decrease in cargo
fares.
Ancillary Revenue
Ancillary revenues increased by P389.305 million or 45.8% to P1.239 billion in the year ended
December 31, 2008 from P.850 billion in the previous year. This increase was primarily due to
the increase in excess baggage revenues consequent to the increase in the number of passengers
carried in 2008 especially attributable to the growth in international passenger traffic to 1.4
million passengers in 2008 from 1.0 million passengers in 2007. Likewise, increased excess
baggage rates for domestic and international flights and decreased baggage allowance contributed
to the increase. In addition, the Company recognized new ancillary revenue sources during the
current year resulting from the introduction of the Navitaire reservation systems in April 2008.
This, together with the commissions earned in respect of sales of travel insurance, further
increased ancillary revenues in 2008.
Expenses
The Company incurred expenses of P17.954 billion for the year ended December 31, 2008,
44.1% higher than the P12.460 billion expenses incurred in 2007. Expenses increased as a result
of the following:
Flying Operations
Flying operations expenses increased by P3.903 billion or 68.4% to P9.608 billion in the year
ended December 31, 2008 from P5.705 billion in the year ended December 31, 2007. This
increase was primarily due to the increase in aviation fuel expenses by 82.4% to P8.502 billion in
2008 from P4.661 billion in 2007 consequent to the significant increase in aviation fuel prices to
an average published MOPS price of U.S.$121.36 per barrel in 2008 from U.S.$86.90 per barrel
in 2007. Moreover, volume of fuel consumed also increased as a result of the increased number
24

of flights during the year. Increase in flying operations expenses was further influenced by the
increases in flight deck expenses and aviation insurance expenses due to the addition of four
Airbus A320 aircraft and six ATR 72-500 aircraft in 2008.
Aircraft and Traffic Servicing
Aircraft and traffic servicing expenses increased by P490.136 million or 33.6% to P1.947 billion
in the year ended December 31, 2008 from P1.457 billion last year. This was mainly attributable
to the increase in the number of flights flown in 2008, particularly to the increased number of
international flights where landing and take-off fees and groundhandling charges are signific antly
higher compared to domestic airports.
Repairs and Maintenance
Repairs and maintenance expenses increased by P548.977 million or 42.3% to P1.847 billion in
the year ended December 31, 2008 from P1.298 billion in 2007. This increase was primarily due
to the increase in the number of flights flown in 2008.
Depreciation and Amortization
Depreciation and amortization expenses increased by P228.712 million or 17.4% to P1.547
billion in the year ended December 31, 2008 from P1.318 billion in the year ended December 31,
2007. This increase was attributable to the addition of six new ATR 72-500 aircraft as well as the
acquisition of a spare engine in 2008.
Aircraft and Engine Lease
Aircraft and engine lease expenses increased by P628.316 million or 144.6% to P1.063 billion in
the year ended December 31, 2008 from P.435 billion in prior year as a result of the acquisition of
four Airbus A320 aircraft under operating lease arrangements.
Reservation and Sales
Reservation and sales expenses decreased by P403.137 million or 32.1% to P852.012 million in
the year ended December 31, 2008 from P1,255.150 million in 2007. Decrease in reservation and
sales expenses was due to the one-time cost incurred in 2007 as a result of a charge relating to the
termination of the Company’s prior reservation system.
General and Administrative
General and administrative expenses increased by P117.635 million or 26.4% to P562.834
million in the year ended December 31, 2008 from P445.198 million in the year ended December
31, 2007. This increase was principally due to increase in staff expenses associated with the
increased flight and passenger activity in 2008 compared with 2007.
Passenger Service
Passenger service expenses slightly decreased by P6.486 million or 1.3% to P510.725 million in
the year ended December 31, 2008 from P517.210 million last year as a result of the lower
passenger liability insurance costs which were partially offset by higher cabin crew costs in 2008.
Operating Income
As a result of the foregoing, the Company registered operating income of P1.728 billion for the
year ended December 31, 2008, 32.4% lower than the P2.556 billion operating income posted in
2007.
25

Interest Expense - net
Net interest expense declined by P41.859 million or 4.8% to P824.234 million in the year ended
December 31, 2008 from P866.094 million in the year ended December 31, 2007 as a result of the
repayment of the current portion of long-term debt in 2008, partially offset by the increase in the
total long-term debt in the second half of 2008 relating to the purchase of two ATR 72-500
aircraft. Decline in interest expense was also partially offset by the decrease in interest income
due to lower floating interest rates in respect of the Company’s cash equivalents to an average
interest rate of 0.5% in 2008 from an average interest rate of 2.8% in 2007.
Foreign Exchange Gains (Losses)
Foreign exchange gains (losses) decreased to a net loss of P1.507 billion in the year ended
December 31, 2008 from a net gain of P1.970 billion in the previous year. The Company’s
principal exposure to foreign exchange rate fluctuations is in respect of the U.S. dollardenominated
long-term debt incurred in connection with aircraft acquisition. Net foreign
exchange loss in 2008 was principally attributable to the relative weakening of the Philippine
peso compared with the U.S. dollar and to the increased U.S. dollar long-term debt in 2008 as the
Company financed the purchase of six aircraft.
Fuel Hedging Gains (Losses)
Fuel hedging gains (losses) comprised a non-recurring loss of P2.594 billion in year ended
December 31, 2008 as a result of the significantly decreasing fuel prices in late 2008 and lower
forward fuel prices as of December 31, 2008 compared with the time the Company entered into
the hedging positions. The Company’s fuel hedging gains (losses) comprised a non-recurring gain
of P.030 billion in 2007.
Equity in Net Income of Joint Venture
Equity in net income of joint venture increased by P6.446 million or 71.0% to P15.530 million in
the year ended December 31, 2008 from P9.084 million in 2007. Increase was attributable to the
net profit earned by A+ of P41.3 million in 2008 compared with a net profit of P18.5 million in
2007.
Income before Income Tax
As a result of the foregoing, the Company posted a loss before income tax of P3.183 billion for
the year ended December 31, 2008, a complete turnaround from the P3.699 billion net income
before income tax registered in 2007.
Provision for Income Tax
Provision for income tax decreased to P77.321 million in the year ended December 31, 2008 from
P84.896 million in prior year primarily as a result of the recognition of deferred tax assets on
accrued future restoration costs and retirement expenses partially offset by the deferred tax
liabilities relating to unrealized foreign exchange gains.
Net Income
Audited net loss for the year ended December 31, 2008 amounted to P3.260 billion, 190.2%
lower than the P3.614 billion net income posted in the year ended December 31, 2007. Excluding
foreign exchange and fuel hedging losses of P4.102 billion in 2008 and foreign exchange and fuel
hedging gains of P2.000 billion in 2007, the Company’s operations would result to net income of
P841.835 million in 2008 from P1,614.017 million in 2007.
26

As of December 31, 2010, except as otherwise disclosed in the financial statements and to the
best of the Company’s knowledge and belief, there are no material off-balance sheet transactions,
arrangements and obligations (including contingent obligations). As of December 31, 2010,
except as otherwise disclosed in the financial statements and to the best of the Company’s
knowledge and belief, there are no transactions, arrangements and obligations with other
unconsolidated entities or other persons created during the reporting period that would have a
significant adverse impact on the Company’s operations and/or financial condition.
Financial Position
December 31, 2010 versus. December 31, 2009
As of December 31, 2010, the Company’s consolidated balance sheet remains solid, with net debt
to equity of 0.40 [total debt after deducting cash and cash equivalents (including financ ial assets
held-for-trading at fair value and available -for-sale assets) divided by total equity]. Consolidated
assets grew to P49.937 billion from P35.323 billion as of December 31, 2009 as the Company
added aircraft to its fleet. Equity grew to P=17.907 billion from P= 7.255 billion in prior year while
book value per share amounted to P=29.20 as of December 31, 2010 from P=12.45 as of December
31, 2009.
The Company’s cash requirements have been mainly sourced through cash flow from operations.
Net cash from operating activities amounted to P10.024 billion. As of December 31, 2010, net
cash used in investing activities amounted to P5.923 billion which included advances to a related
party and pre-delivery payments in connection with the purchase of aircraft. Net cash provided
by financing activities amounted to P1.900 billion. Net cash from financing activities comprised
the proceeds from the issuance of the Company’s common shares partially offset by the
repayments of certain long-term debt.
As of December 31, 2010, except as otherwise disclosed in the financial statements and to the
best of the Company’s knowledge and belief, there are no events that will trigger direct or
contingent financial obligation that is material to the Company, including any default or
acceleration of an obligation.
Material Changes in the 2010 Financial Statements
(Increase/Decrease of 5% or more versus 2009)
Material changes in the Statements of Consolidated Comprehensive Income were explained in
detail in the management’s discussion and analysis or plan of operations stated above.
Consolidated Statements of Financial Position - December 31, 2010 versus December 31, 2009
154.2% increase in Cash and Cash Equivalents
Due to the significant improvement in the Company’s operations as evidenced by the 24.8%
growth in revenues.
27

1603.0% increase in Financial Assets at FVPL
Due to the investment in quoted debt and equity financial instruments acquired during the year
coupled with the increase in the fair value of such instruments from the initially recognized
amount.
8.5% increase in Receivables
Due to the increased receivable from interests earned on short-term money market placements
and investment securities.
6.0% increase in Expendable Parts, Fuel, Materials and Supplies
Due to the increase in spare parts and supplies in connection with the increase in fleet size during
the year.
22.6% decrease in Other Current Assets
Due to the liquidation of advances to suppliers during the year.
16.6% increase in Property and Equipment
Due mainly to the acquisition of three Airbus A320 aircraft during the year.
100% increase in Available-for-Sale Investments
Due to the investment in unquoted equity securities acquired during the year slightly decreased by
the changes in the fair value of these investments.
32.3% increase in Other Noncurrent Assets
Due to fees paid by the Company for the option to purchase aircraft.
12.0% increase in Accounts Payable and Other Accrued Liabilities
Due to the increase in trade payables and accruals of certain operating expenses as a result of the
increased flight and passenger activity in the twelve months ended December 31, 2010.
51.8% decrease in Due to Related Parties
Due to payments made during the year.
32.8% increase in Unearned Transportation Revenue
Due to the increase in sale of passenger travel services.
7.7% increase in Long-Term Debt (including Current Portion)
Due to the additional loans availed to finance the purchase of the three Airbus A320 aircraft
acquired during the year partially offset by the repayment of certain outstanding long-term debt in
accordance with the repayment schedule and the appreciation of the value of Philippine peso
against the U.S. dollar.
10.9% increase in Deferred Tax Liabilities- net
Due to the future taxable amount recognized in connection with unrealized foreign exchange
gains.
40.7% increase in Other Noncurrent Liabilities
Due to the accrual of additional asset retirement cost further increased by the accretion of interest
on the recognized “Asset Retirement Obligation” and increased retirement provision.
28

5.3% increase in Paid-Up Capital
Due to the issuance of the Company’s shares of stocks.
78.7% increase in Capital Paid in Excess of Par Value
Due to the issuance of the Company’s shares of stocks above its recorded par value
100% decrease in Net Unrealized Losses on AFS investments
Due to the decrease in fair value of the acquired unquoted equity securities.
351.7% increase in Retained Earnings
Due to the net income during the year.
Fuel prices have significantly increased in 2011 and this will have an impact on the Company’s
operating income.
For 2010, there are no significant element of income that did not arise from the Company’s
continuing operations.
The Company generally records higher domestic revenue in January, March, April, May and
December as festivals and school holidays in the Philippines increase the Company’s seat load
factors in these periods. Accordingly, the Company’s revenue is relatively lower in July to
September due to decreased domestic travel during those months. Any prolonged disruption in
the Company’s operations during such peak periods could materially affect its financial results.
In addition, the Company has capital expenditure commitments which principally relate to the
acquisition of aircraft. Kindly refer to Note 27 of the Notes to Consolidated Financial Statements
for the detailed discussion on Purchase and Capital Expenditure Commitments.
Key Performance Indicators
The Company sets certain performance measures to gauge its operating performance periodically
and to assess its overall state of corporate health. Listed below are major performance measures,
which the Company has identified as reliable performance indicators. Analyses are employed by
comparisons and measurements based on the financial data as of December 31, 2010 and 2009
and for the years ended December 31, 2010 and 2009:
Key Financial Indicators 2010 2009
Total Revenue P29.089 billion P23.311 billion
Pre-tax Core Net Income P5.781 billion P2.135 billion
EBITDAR Margin 34.9% 29.2%
Cost per Available Seat Kilometre (ASK) (Php) 2.18 2.15
Cost per ASK (U.S. cents) 4.84 4.53
Seat Load Factor 85% 77%
29

The manner by which the Company calculates the above key performance indicators for both
year-end 2010 and 2009 is as follows:
Total Revenue = The sum of revenue obtained from the sale of air
transportation services for passengers and cargo and
ancillary revenue.
Pre-tax Core Net Income = Operating income after deducting net interest expense
and adding equity income/loss of joint venture
EBITDAR Margin = Operating income after adding depreciation and
amortization and aircraft and engine lease expenses
divided by total revenue
Cost per ASK = Operating expenses, including depreciation and
amortization expenses and the costs of operating leases,
but excluding fuel hedging effects, foreign exchange
effects, net financing charges and taxation, divided by
ASK
Seat Load Factor = Total number of passengers divided by the total number
of actual seats on actual flights flown
Item 7.
Financial Statements
The financial statements and schedules listed in the accompanying Index to Financial Statements
and Supplementary Schedules (page 46) are filed as part of this Form 17-A.
Item 8.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9.
Independent Public Accountants and Audit Related Fees
Independent Public Accountants
Sycip Gorres Velayo & Co. (SGV & Co.) has acted as the Company’s independent public
accountant. The same accounting firm is tabled for reappointment for the current year at the
annual meeting of stockholders. The representatives of the principal accountant have always
been present at prior year’s meetings and are expected to be present at the current year’s annual
meeting of stockholders. They may also make a statement and respond to appropriate questions
with respect to matters for which their services were engaged.
The current handling partner of SGV & Co. has been engaged by the Company in 2008 and is
expected to be rotated every five years.
30

Audit Fees
The following table sets out the aggregate fees billed for each of the last three years for
professional services rendered by SGV & Co.
2010 2009 2008
Audit and audit-related fees P 2,100,000 P 1,700,000 P 950,000
Professional fees for due diligence review
for bond/shares offerings - - -
Tax fees - - -
All other fees relating to facilitating
workshops - - -
Total P 2,100,000 P 1,700,000 P 950,000
31

PART III – CONTROL AND COMPENSATION INFORMATION
Item 10.
Board of Directors and Executive Officers of the Registrant
Currently, the Board consists of nine members, of which two are independent directors. The table
below sets forth certain information regarding the members of our Board.
Name Age Position Citizenship
Ricardo J. Romulo……………. 77 Chairman…………………... Filipino
John L. Gokongwei, Jr………... 84 Director……………………. Filipino
James L. Go…………………... 71 Director……………………. Filipino
Lance Y. Gokongwei…………. 44
Director, President and
Chief Executive Officer…… Filipino
Jose F. Buenaventura…………. 76 Director……………………. Filipino
Robina Y. Gokongwei-Pe…...... 49 Director……………………. Filipino
Frederick D. Go………………. 41 Director……………………. Filipino
Antonio L. Go* …………….… 70 Independent Director……… Filipino
Oh Wee Khoon……………….. 52 Independent Director……… Singaporean
* He is not related to any of the other directors
All of the above directors have served their respective offices since June 24, 2010. There are no
other directors who resigned or declined to stand for re-election to the board of directors since the
date of the last annual meeting of the stockholders for any reason whatsoever.
Messrs. Antonio L. Go and Oh Wee Khoon are the independent directors of the Company.
The table below sets forth certain information regarding our executive officers.
Name Age Position Citizenship
Bach Johann M. Sebastian……. 49 Senior Vice President...…… Filipino
Hansley Heinrych C. See……... 36 Chief Financial Officer…... Filipino
Victor Emmanuel B. Custodio... 52 Vice President .…………… Filipino
Rosita D. Menchaca…………... 48 Vice President .…………… Filipino
Augusto Edwin A. Bautista*... 59 Vice President .…………… Filipino
Candice Jennifer A. Iyog……... 38 Vice President .…………… Filipino
Joseph G. Macagga…………… 45 Vice President .…………… Filipino
Antonio Jose L. Rodriguez …... 57 Vice President .…………… Filipino
Robin C. Dui………………….. 64 Vice President .…………… Filipino
Jeanette U. Yu………………… 57 Vice President .…………… Filipino
32

Name Age Position Citizenship
Michael S. Shau………………. 47 Vice President .…………… Filipino
Alejandro B. Reyes…………… 43 Vice President .…………… Filipino
Rosalinda F. Rivera………….... 40 Corporate Secretary………. Filipino
William S. Pamintuan………… 48
* Has retired from service effective December 31, 2010
Assistant Corporate
Secretary…………………...
The table below sets forth certain information regarding our senior consultants.
Filipino
Name Age Citizenship
Garry R. Kingshott……………. 58 Australian
Mark Breen……….................... 35 Irish
Niel O’Carroll……………….... 64 Irish
The business experience for the past five years of each of our directors, executive officers and
senior consultants is set forth below:
Ricardo J. Romulo has been the Chairman of our Board since December 1995. He is also a
director of JG Summit and a Senior Partner in Romulo, Mabanta, Buenaventura, Sayoc&De Los
Angeles.Mr. Romulo is also Chairman of Federal Phoenix Assurance Company, Inc., Digital
Telecommunications Phils., Inc. and InterPhil Laboratories, Inc. He is a director of SM
Development Corporation, Philippine American Life and General Insurance Company, Planters
Development Bank, and Zuellig Pharma Corporation. He received his Bachelor of Laws degree
from Georgetown University and Doctor of Laws degree from Harvard Law School.
John L. Gokongwei, Jr. has been a director of our Company since December 1995. He is the
Chairman Emeritus and a member of the Board of Directors of JG Summit and certain of its
subsidiaries. He also continues to be a member of the Executive Committee of JG Summit. He is
currently the Chairman of the Gokongwei Brothers Foundation, Inc., Deputy Chairman and
Director of United Industrial Corporation Limited and Singapore Land Limited, and a director of
JG Summit Capital Markets Corporation, Digital Telecommunications Phils., Inc., Oriental
Petroleum and Minerals Corporation (“OPMC”), First Private Power Corporation and Bauang
Private Power Corporation. He is also a non-executive director of A. Soriano Corporation. Mr.
John L. Gokongwei, Jr. received a Master’s degree in Business Administration from De La Salle
University and attended the Advanced Management Program at Harvard Business School.
James L. Go has been a director of our Company since May 2002. He is the Chairman and Chief
Executive Officer of JG Summit and, as such, he heads the Executive Committee of JG Summit.
He is currently the Chairman and Chief Executive Officer of Universal Robina Corporation
(“URC”), Robinsons Land Corporation (“RLC”), JG Summit Petrochemical Corporation,
Robinsons, Inc., and OPMC. He is also the President and a Trustee of the Gokongwei Brothers
Foundation, Inc. and the Vice Chairman, President and Chief Executive Officer of Digital
Telecommunications Phils., Inc. He is also a director of First Private Power Corporation, Bauang
33

Private Power Corporation, Panay Electric Co., United Industrial Corporation Limited, Singapore
Land Limited, Marina Centre Holdings, Inc., Hotel Marina City Private Limited and JG Summit
Capital Markets Corporation. Mr. James L. Go received a Bachelor of Science degree and a
Master of Science degree in Chemical Engineering from the Massachusetts Institute of
Technology.
Lance Y. Gokongwei has been the President and Chief Executive Officer of our Company since
1997. He is the President and Chief Operating Officer of JG Summit, URC and JG Summit
Petrochemical Corporation, and the Vice Chairman and Deputy Chief Executive Officer of RLC.
He is also the Chairman of Robinsons Savings Bank, Vice Chairman of JG Summit Capital
Markets Corporation, and a director of Digital Telecommunications Phils., Inc., OPMC, United
Industrial Corporation Limited, and Singapore Land Limited. He is also trustee, secretary and
treasurer of the Gokongwei Brothers Foundation, Inc. Mr. Lance Y. Gokongwei received a
Bachelor of Science degree in Finance and a Bachelor of Science degree in Applied Science from
the University of Pennsylvania.
Jose F. Buenaventura has been director of our Company since December 1995. He is a Senior
Partner in Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles. Mr. Buenaventura is a
Director and President of Consolidated Coconut Corporation and Milano & Co., Inc. He is also a
member of the Board and Corporate Secretary of Country Club Development Corporation and
The Country Club, Inc. He is a member of the Board and Treasurer of Anric Holdings, Inc., a
member of the Board and Corporate Secretary of 2B3C Foundation, Inc. and Peter Paul
Philippine Corporation. He is a member of the Board of GROW, Inc., Nouveau Manufacturing,
Inc., Total Consolidated Asset Management, Inc., Philippine First Insurance Co., Inc. and Philam
Plans, Inc. Mr. Buenaventura received his Bachelor of Laws degree from the Ateneo de Manila
University School of Law and his Master of Laws degree from Georgetown University Law
Centre, Washington D.C. He was admitted to the Philippine Bar in 1959.
Robina Y. Gokongwei-Pe was elected as a director of our Company effective 1 August 2007. She
is currently a director of JG Summit, RLC, Robinsons Savings Bank and JG Summit Capital
Markets Corporation. She is currently the Senior Vice President and Group General Manager of
the Robinsons Retail Group, consisting of Robinsons Department Store, Robinsons Supermarket,
Robinsons Handyman, Inc., True Value, Robinsons Specialty Stores, Robinsons Appliances and
Toys R Us. She obtained her Bachelor of Arts degree in Journalism from the New York
University.
Frederick D. Go was elected as a director of our Company effective 1 August 2007. He is
currently the President and Chief Operating Officer of RLC. He is the Group General Manager of
Shanghai Ding Feng Real Estate Development Company Limited, Xiamen Pacific Estate
Investment Company Limited, and Chengdu Ding Feng Real Estate Development Company
Limited. He is an alternate director of United Industrial Corporation Limited and Singapore Land
Limited. He is the President and director of Robinsons Recreation Corporation, Vice Chairman
and director of Robinsons Savings Bank, director of URC, Robinsons Handyman, Inc.,
Robinsons- Abenson Appliance Corporation, Robinsons Convenience Stores, Inc., JG Summit
Petrochemical Corporation, Robinsons Distribution Centre, Inc., North City Properties, Inc.,
Robinsons Venture Corporation, Waltermart-Handyman, Inc., Handyman Express Mart, Inc.,
Cebu Light Industrial Park, Philippine Hotels Federation and Philippine Retailers Association. He
received a Bachelor of Science degree in Management Engineering from the Ateneo De Manila
University.
34

Antonio L. Go was elected as an independent director of our Company on 6 December 2007. He
also currently serves as an independent director of Digital Telecommunications Phils., Inc.,
Director and President of Equitable Computer Services, Inc. and as director of Equicom Systems
Management, Inc., Medilink Network, Inc., Singapore Land Limited, Equicom Manila Holdings,
Klara Holdings, Inc., Motan Corp., United Industrial Corporation, OPMC, Pin-An Holdings, Inc.,
Equicom Information Technology, and ALGO Leasing and Finance, Inc. He is also a trustee of
Go Kim Pah Foundation and Equitable Foundation, Inc. He graduated from Youngstown
University, United States with a Bachelor of Science degree in Business Administration. He
attended the International Advanced Management program at the International Management
Institute, Geneva, Switzerland as well as the Financial Planning/Control program at the ABA
National School of Bankcard Management, Northwestern University, United States.
Oh Wee Khoon was elected as an independent director of our Company on effective 3 January
2008. He is the founder and managing director of Sobono Energy Private Limited. He is also a
director of the SingaporeWorkforce Development Agency. He graduated with honours from the
University of Manchester, Institute of Science and Technology with a Bachelor of Science degree
in Mechanical Engineering. He obtained his Master’s degree in Business Administration from the
National University of Singapore.
Bach Johann M. Sebastian is the Senior Vice President-Chief Strategist of our Company and is
Head of Corporate Strategy effective 5 May 2007. He is also the Senior Vice President and
Director of Corporate Planning of JG Summit, URC and RLC. Prior to joining our Company in
2002, he was Senior Vice President and Chief Corporate Strategist at PSI Technologies and RFM
Corporation. He was also Chief Economist and Director of the Policy and Planning Group at the
Department of Trade and Industry. He received a Bachelor of Arts degree in Economics from the
University of the Philippines and a Master’s degree in Business Management from the Asian
Institute of Management. He has eight years’ experience in the airline industry, all of which have
been with our Company.
Hansley Heinrych C. See is the Chief Financial Officer of our Company. He is also the
Compliance Officer, Corporate Information Officer and the head of Investors Relations
Department. He joined Cebu Pacific in 2005 as Director of Corporate Planning and was promoted
to Vice President in December 2006. He joined the JG Summit Group in 2001 with the Corporate
Planning department and moved to Litton Mills and Universal Robina Corporation —China as
Finance Manager. Prior to joining the group, he worked as a Research Analyst at Abacus
Securities and as an Investment Manager at Hambrecht and Quist Asia Pacific (Philippines), a
private equity/venture capital firm with headquarters in the United States and with operations in
Asia. Mr. Hansley Heinrych C. See received his Bachelor of Science degree in Management
Engineering from the Ateneo de Manila University. He has five years’ experience in the airline
industry, all of which have been with our Company.
Victor Emmanuel B. Custodio has been the Vice President for Flight Operations of our Company
since 2004. He is also the Chief Pilot for Operations and DC9 Check Airman of Cebu Pacific. He
served as Presidential Pilot and Aide de Camp of Philippine Presidents Aquino and Ramos. He
was formerly the Acting Director of Operations of the 250th Presidential Airlift Wing and
Squadron Commander, Air Operations Officer of the 250th Presidential Airlift Wing. He was
awarded the Minister of National Defence Saber, and received a Bronze Cross Medal, seven
Military Merit Medals, two Military Commendation Medals, four Campaign Medals, a Combat
Kagitingan Badge, and 17 Commendations. Mr. Victor Emmanuel B. Custodio received his
Bachelor of Science degree in PMA from the Philippine Military Academy in 1983. He has 26
years’ experience in the airline industry, the last 12 of which have been with our Company.
35

Rosita D. Menchaca is the Vice President for Inflight Services of our Company effective May
2009 and was previously Vice President for Passenger Service from February 2007 to May 2009.
She initially joined our Company in 1996 as a Cabin Crew Supervisor and has since been
promoted twice, first to Director, Cabin Services, in November 1999 and in May 2006 to Head of
Passenger Services. She previously worked with Philippine Airlines as a flight attendant for two
years and joined Saudi Arabian Airlines in 1985 as a Senior Flight Attendant for eight years. Ms.
Rosita D. Menchaca received her Bachelor of Science degree in Psychology from Silliman
University. She has 26 years’ experience in the airline industry, the last 13 of which have been
with our Company.
Augusto Edwin A. Bautista has been the Vice President for Sales of our Company since 2006.
He previously worked as Cargo Manager for Swiss Air Transport and served as Sales and
Marketing Consultant for Travel Excellence Corporation, a general sales agent for Czechoslovak
Airlines. He also had various work experience in travel agencies and restaurant businesses. Mr.
Augusto Edwin A. Bautista received his Bachelor of Science degree in Commerce, major in
Management, from the De La Salle College. He has 27 years’ experience of the airline industry,
the last 13 of which have been with our Company.
Candice Jennifer A. Iyog has been the Vice President for Marketing and Distribution of our
Company since September 2008 and was Vice President for Marketing and Product from
February 2007 to September 2008. She was formerly the General Manager of Jobstreet.com and,
as such, she was part of a team that launched our Company and developed it into the country’s
leading e-recruitment company. Prior to this, she was also the marketing manager of NABISCO
and was part of the team that launched our Company’s Philippine operations. She also worked at
URC as Product Manager and, as such, handled major snack food brands of URC such as Chippy,
Piattos and Nova. Ms. Candice Jennifer A. Iyog received her Bachelor of Science degree in
Management from the Ateneo de Manila University. She has six years’ experience in the airline
industry, all of which have been with our Company.
Joseph G. Macagga has been the Vice President for Fuel and Cargo Operations of our Company
since September 2004. He started with Cebu Pacific as Manager for Purchasing and handled
Internal Audit for more than two years. He served as Audit Manager for JG Summit Holdings,
Inc. for five years and worked for the Audit Division of SyCip Gorres Velayo & Co for three
years. A Certified Public Accountant, Mr. Joseph G. Macagga received his Bachelor of Science
degree in Commerce, Major in Accounting from the University of Sto. Tomas. He has 13 years’
experience in the airline industry, all of which have been with our Company.
Antonio Jose L. Rodriguez has been the Vice President for Airport Services of our Company
since March 2010. He previously worked with various multinational companies including
California Manufacturing Co. from 1993 to 2003, initially as Human Resources Manager and
later on as Director and finally as Vice President in charge of the Human Resources Group.
Hewas also AVP-Human Resources of Allied Thread Co. Inc. for the period from 1990 to 1992.
Prior to this, he was employed with Triumph International (Phils.) Inc. from 1985 to 1990. He is a
graduate of De La Salle University where he completed Lia-Com a double degree course,
majoring in Business Administration and Behavioural Sciences. He has five years’ experience in
the airline industry, all of which have been with our Company.
36

Robin C. Dui has been the Vice President - Comptroller of our Company since 1998. He was
formerly with the Audit Division of SyCip Gorres Velayo & Co for four years. He previously
worked with Philippine Airlines for 18 years as Manager -General Accounting, Director -
Operations Accounting, Director - Revenue Accounting and Vice President - Comptroller. He
also previously held the position of Director - Finance of GrandAir for one year. He has had
experience in the airline industry for 19 years. A Certified Public Accountant, Mr. Robin C. Dui
obtained a Bachelor of Science degree in Business Administration. He has 30 years’ experience
in the airline industry, 12 of which have been with our Company.
Jeanette U. Yu has been the Vice President -Treasurer of our Company since 1995. She is also
the Chief Financial Officer of Oriental Petroleum and Minerals Corporation and the Senior Vice
President and Treasurer of JG Summit Capital Markets Corporation and Vice President of URC.
Prior to joining URC in 1980, she worked for AEA Development Corporation and Equitable
Banking Corporation. Ms. Jeanette U. Yu received her Bachelor of Science degree in Business
Administration from St. Theresa’s College in Quezon City. She has 15 years’ experience in the
airline industry, all of which have been with our Company.
Michael S. Shau was appointed Vice President for People and Administration Services of our
Company effective March 2010. He has been with the JG Summit Group since January 1999 and
has held various senior management positions with his last assignment as Business Unit General
Manager of Universal Robina Corporation - Packaging Division. He received a degree in
Industrial Management Engineering, Minor in Mechanical Engineering and completed all
academic requirements for a Master’s degree in Business Management, both from De La Salle
University. He has two years’ experience of the airline industry, both of which have been with
our Company.
Alejandro B. Reyes was appointed Vice President for Commercial Planning of our Company
effective January 2008. He previously worked as Senior Vice President of PhilWeb. Prior to this,
he held various positions with The Inquirer Group, the latest of which was Senior Vice President
and Chief Operating Officer of the Inquirer Publications, Inc. He has alsoworked with Power
Sector Assets and Liabilities Management Group (PSALM), I-QUEST Corporation, Bloomberg
LP, Nomura Research Institute and Businessworld Publishing Corporation. Mr. Alejandro B.
Reyes graduated Summa Cum Laude from Georgetown University with a Bachelor of Science
degree in International Economics. He received his Master’s degree in Business Administration
from the University of Virginia. He has two years of experience in the airline industry, which has
been with our Company.
Rosalinda F. Rivera was appointed Corporate Secretary of our Company effective 31 October
2006. She is also the Corporate Secretary of JG Summit, URC, RLC, JG Summit Petrochemical
Corporation and CPAir Holdings, Inc. Prior to joining the JG group, shewas a Senior Associate at
Puno and Puno Law Offices. She received a Juris Doctor degree from the Ateneo de Manila
University School of Law and a Master of Law degree in International Banking from Boston
University School of Law. She was admitted to the Philippine Bar in 1995. She has four years’
experience in the airline industry, all of which have been with our Company.
William S. Pamintuan has been the Assistant Corporate Secretary of our Company since
December 1995. He is also the Corporate Secretary and Senior Vice President of Legal Services
of Digital Telecommunication Phils., Inc. and Digitel Mobile Phils., Inc., and the Head of
DigitelOne and Human Resources Division of DIGITEL. He is a Director of the Philippine
Chamber of Telecommunication Operators, Inc. and a member of the Telecommunications and
37

Broadcast Attorneys’ Association of the Philippines. He obtained his Bachelor of Laws degree
from the University of the Philippines and has 15 years’ experience in the airline industry, all of
which have been with our Company.
Garry R. Kingshott is one of our Company’s senior consultants. He provides advice to the
President with respect to fare structuring, cost management, route development and market entry
strategies. Garry was previously with Jet Lite (India) and Ansett International Limited (Australia)
as their Chief Executive officer. Garry has 20 years’ combined experience in aviation consultancy
and the airline industry, and joined our Company in 2008.
Mark Breen is one of our Company’s senior consultants. He provides advice to the President on
operations-related functions, including airport services, emergency response procedures, airline
service quality, supplier evaluation, product selection, sourcing of spares, inventory management,
crew management and control centre management. Mark was previously with Sama as their Chief
Operating Officer. Mark was educated at the College of Commerce and is a graduate of Transport
Management. He also has a Masters Degree in Air Transport Management from the College of
Aeronautics, School of Engineering of Cranfield University. He a vast amount of airline
experience from his time with, among others, Sama, AirAsia, Gulf Air and Ryan Air. He has 15
years’ experience in the airline industry, and joined our Company in 2009.
Niel O’ Carroll is one of our Company’s senior consultants. He provides advice to the President
on all engineering, maintenance, fleet management and other aircraft-related concerns. Niel
served with various airlines such as Ryanair and TransAer International Airlines and has worked
with various leasing companies before joining our Company. Niel brings to us his fleet
management and technical expertise. He has 45 years’ experience in the airline industry.
The Company’s executive officers can be reached at the address of its business office at Airline
Operations Center, Domestic Road, Pasay City.
Involvement in Certain Legal Proceedings of Directors and Executive Officers
Except as otherwise disclosed, to the best of the Company’s knowledge and belief and after due
inquiry, none of the Company’s directors, nominees for election as director, or executive officer
have in the past five years: (i) had any petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the bankruptcy or within a
two year period of that time; (ii) convicted by final judgment in a criminal proceeding, domestic
or foreign, or have been subjected to a pending judicial proceeding of a criminal nature, domestic
or foreign, excluding traffic violations and other minor offences; (iii) subjected to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, domestic or foreign, permanently or temporarily enjo ining, barring, suspending or
otherwise limiting their involvement in any type of business, securities, commodities or banking
activities; or (iv) found by a domestic or foreign court of competent jurisdiction (in a civil action),
the Philippine SEC or comparable foreign body, or a domestic or foreign exchange or other
organized trading market or self regulatory organization, to have violated a securities or
commodities law or regulation and the judgment has not been reversed, suspended, or vacated.
38

Family Relationship
• Mr. James L. Go is the brother of Mr. John L. Gokongwei, Jr.
• Mr. Lance Y. Gokongwei is the son of Mr. John L. Gokongwei, Jr.
• Mr. Frederick D. Go is the nephew of Mr. John L. Gokongwei, Jr.
• Ms. Robina Y. Gokongwei-Pe is the daughter of Mr. John L. Gokongwei, Jr.
Item 11.
Executive Compensation
The following are our Company’s Chief Executive Officer (“CEO”) and four most highly
compensated executive officers for the years ended 2009, 2010 and 2011 estimates:
Name
Position
Lance Y. Gokongwei . . . . . . . . . . . . . . . . . . …………… President and CEO
Victor Emmanuel B. Custodio . . . . . . . . . . . . …………..Vice President
Antonio Jose L. Rodriguez. . . . . . . . . . . . . . . ………….. Vice President
Michael S. Shau . . . . . . . . . . . . . . . . . . . . ………………Vice President
Jeanette U. Yu . . . . . . . . . . . . . . . . . . . . . . . . …………...Vice President
The following table identifies and summarizes the aggregate compensation of the Company’s
CEO and the four most highly compensated executive officers for the years ended 2009, 2010 and
2011estimates:
Year Salaries Bonuses
Other
Income
Total
CEO and the most highly
compensated executive officers
named above 2009 16,827,982 1,426,437 - 18,254,418
2010 24,888,814 2,334,133 - 27,222,947
2011
Estimates 29,077,868 2,462,511 - 31,540,378
Aggregate compensation paid to
all officers and Directors as a
group unnamed 2009 59,725,024 5,100,974 - 64,825,998
2010 73,989,515 6,515,634 - 80,505,149
2011
Estimates 77,133,464 6,541,463 - 83,674,928
Standard Arrangements
Other than payment of reasonable per diem as may be determined by the Board for every
meeting, there are no standard arrangements pursuant to which directors of the Company are
compensated, or are to be compensated, directly or indirectly, for any services provided as a
director for the last completed year and the ensuing year.
39

Other Arrangements
There are no other arrangements pursuant to which directors of the Company are compensated, or
are to be compensated, directly or indirectly, for any services provided as a director for the last
completed year and the ensuing year.
Employment Contracts and Termination of Employment and Change-in-Control Arrangement
There are no agreements between the Company and its directors and executive officers providing
for benefits upon termination of employment, except for such benefits to which they may be
entitled under the Company’s pension plans.
Warrants and Options Outstanding
There are no outstanding warrants or options held by the Company’s CEO, the named executive
officers, and all officers and directors as a group.
Item 12.
Security Ownership of Certain Beneficial Owners and Management
(1) Security Ownership of Certain Record and Beneficial Owners
As of December 31, 2010, the Company knows no one who beneficially owns in excess of 5% of
the Company’s common stock except as set forth in the table below.
Title of
Class
Names and addresses of
record owners and
relationship with the
Corporation
Name of
beneficial owner
and relationship
with record
owner
Citizenship
No. of
Shares Held
% to Total
Outstanding
Common
Common
Common
CPAir Hold ings, Inc.
43/F Robinsons Equitable
Tower, ADB Avenue, Ortigas
Center, Pasig City
(stockholder)
PCD Nominee Corporation
(Non-Filipino)
37/F Tower 1, The Enterprise
Center, Ayala Ave. corner Paseo
de Roxas, Makati City
(stockholder)
PCD Nominee Corporation
(Filipino)
37/F Tower 1, The Enterprise
Center, Ayala Ave. corner Paseo
de Roxas, Makati City
(stockholder)
Same as record
owner
(See note 1)
PCD Participants
and their clients
(See note 2)
PCD Participants
and their clients
(See note 2)
Filipino 400,816,841 65.36 %
Non-Filipino 161,004,740
(See note 3)
26.25%
Filipino 51,411,960 8.38%
40

1. CPAir Holdings, Inc. is a wholly -owned subsidiary of JG Summit Holdings, Inc. Under the By -laws of CPAir
Holdings, Inc., the President is authorised to represent the corporation at all functions and proceedings. The
incumbent President of CPAir Holdings, Inc. is Mr. Lance Y. Gokongwei.
2. PCD Nominee Corporation is the registered owner of the shares in the books of the Corporation’s transfer agent.
PCD Nominee Corporation is a corporation wholly -owned by Philippine Depository and Trust Corporation, Inc.
(formerly the Philippine Central Depository) (“PDTC”), whose sole purpose is to act as nominee and legal title
holder of all shares of stock lodged in the PDTC. PDTC is a private corporation organized to establish a central
depository in the Philippines and introduce scripless or book-entry trading in the Philippines. Under the current
PDTC system, only participants (brokers and custodians) will be recognized by PDTC as the beneficial owners of
the lodged shares. Each beneficial owner of shares through his participant will be the beneficial owner to the
extent of the number of shares held by such participant in the records of the PCD Nominee.
3. Out of t he PCD Nominee Corporation (Non-Filipino) account, “The Hongkong and Shanghai Banking Corp., Ltd -
Client’s Acct.” holds for various trust accounts the following shares of the Corporation as of December 31, 2010:
No. of shares
% to Outstanding
The Hongkong and Shanghai Banking Corp. Ltd. - Clients’ Acct. 117,763,504 19.20%
The securities are voted by the trustee’s designated officers who are not known to the Corporation.
(2) Security Ownership of Management
Title of
Class Name of Beneficial Owner Position
Amount and
Nature of
Beneficial
Ownership
Citizenship
% to Total
Outstanding
Named Executive Officers 1
Common Lance Y. Gokongwei Director, President
and Chief
Executive Officer 1 Filipino *
Victor Emmanuel B.Custodio Vice President - Filipino -
Antonio Jose L. Rodriguez Vice President - Filipino -
Michael S. Shau Vice President - Filipino -
Jeanette U. Yu Vice President - Filipino -
Subtotal 1 *
Other Directors, Executive Officers and
Nominees
Common Ricardo J. Romulo Chairman 1 Filipino *
Common John L. Gokongwei, Jr. Director 1 Filipino *
Common James L. Go Director 1 Filipino *
Common Jose F. Buenaventura Director 1 Filipino *
Common Robina Y. Gokongwei-Pe Director 1 Filipino *
Common Frederick D.Go Director 1 Filipino *
Common Antonio L.Go
Independent
Director 1 Filipino *
Common Oh Wee Khoon
Independent
Director 1 Singaporean *
Subtotal 8 *
All directors and executive officers as a group unnamed 9 *
41

1
As defined under Part IV (B) (1) (b) of SRC Rule 12, the “named executive officers” to be listed refer to
the Chief Executive Officer and those that are the four (4) most highly compensated executive officers as of
Decemb er 31, 2010.
* less than 0.01%
(3) Voting Trust Holders of 5% or More
There are no persons holding more than 5% of a class of share under a voting trust or similar
agreement as of December 31, 2010.
(4) Change in Control
As of December 31, 2010, there are no arrangements which may result in a change in control of
the Company.
Item 13.
Certain Relationships and Related Transactions
The Company, in its regular conduct of business, had engaged in transactions with its ultimate
parent company, its joint venture and affiliates. See Note 26 (Related Party Transactions) of the
Notes to the Consolidated Financial Statements in the accompanying Audited Financial
Statements filed as part of this Form 17-A.
PART IV – CORPORATE GOVERNANCE
Item 14.
Corporate Governance
The Company’s Board of Directors approved the Corporate Governance Manual (as amended) on
June 15, 2007 in order to monitor and assess the level of the Company’s compliance with leading
practices on good corporate governance as specified in pertinent Philippine SEC circulars. Aside
from establishing specialized committees to aid in complying with the principles of good
corporate governance, the manual also outlines specific investor’s rights and protections and
enumerates particular duties expected from the Board members, officers and employees. It also
features a disclosure system which highlights adherence to the principles of transparency,
accountability and fairness. A compliance officer is tasked with the formulation of specific
measures to determine the level of compliance with the Manual by the Board members, officers
and employees. To date, the Company has not encountered any deviations from the Manual’s
standards.
42

PART V – EXHIBITS AND SCHEDULES
Item 15. Exhibits and Reports on SEC Form 17-C
Exhibits
See accompanying Index to Exhibits (page 46)
Reports on SEC Form 17-C
List of Corporate Disclosures/Replies to SEC Letters
Under SEC Form 17-C
July 1, 2010 to December 31, 2010
Date of Disclosure
Description
October 21, 2010 Disclosure on shareholdings of Officers of Cebu Air, Inc.
November 5, 2010 Press Release “CEB expands international operations”
November 8, 2010 Press Release “CEB posts 37% international passenger growth for Jan-Sept 2010”
November 11, 2010 Notice of local investors/analysts and business press briefing
November 11, 2010 Disclosure on exercise of over-allotment option
November 15, 2010 Press Release “CEB profit surges to P4.8 billion”
December 16, 2010 Press Release “CEB ready for more competition with international LCCs”
December 20, 2010 Acquisition of Cebu Air, Inc. common shares by JG Summit Holdings, Inc.
December 21, 2010 Acquisition of Cebu Air, Inc. common shares by JG Summit Holdings, Inc.
December 22, 2010 Acquisition of Cebu Air, Inc. common shares by JG Summit Holdings, Inc.
December 23, 2010 Acquisition of Cebu Air, Inc. common shares by JG Summit Holdings, Inc.
43

COVER SHEET
1 5 4 6 7 5
SEC Registration Number
C E B U A I R , I N C . A N D S U B S I D I A R I E S
(Company’s Full Name)
2 n d F l o o r , D o ñ a J u a n i t a M a r q u e z L
i m B u i l d i n g , O s m e ñ a B o u l e v a r d , C e
b u
C i t y
(Business Address: No. Street City/Town/Province)
Robin C. Dui (032) 255-4552
(Contact Person)
(Company Telephone Number)
1 2 3 1 A A F S
Month Day (Form Type) Month Day
(Fiscal Year)
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
S T A M P S
Remarks: Please use BLACK ink for scanning purposes.
*SGVMC115503*

SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax: (632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
Cebu Air, Inc.
2nd Floor, Doña Juanita Marquez Lim Building
Osmeña Boulevard, Cebu City
We have audited the accompanying consolidated financial statements of Cebu Air, Inc. and
Subsidiaries, which comprise the consolidated statements of financial position as at
December 31, 2010 and 2009, and the consolidated statements of comprehensive income,
statements of changes in equity and statements of cash flows for each of the three years in the period
ended December 31, 2010, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVMC115503*
A member firm of Ernst & Young Global Limited

- 2 -
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Cebu Air, Inc. and Subsidiaries as at December 31, 2010 and 2009, and its
financial performance and its cash flows for each of the three years in the period ended
December 31, 2010 in accordance with Philippine Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.
March 17, 2011
*SGVMC115503*

CEBU AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
December 31
2010 2009
Current Assets
Cash and cash equivalents (Note 7) P=9,763,288,972 P=3,840,859,455
Financial assets at fair value through profit
or loss (Note 8) 3,879,438,631 227,794,364
Receivables (Note 9) 862,409,591 794,934,681
Expendable parts, fuel, materials and supplies (Note 10) 370,032,035 348,972,488
Other current assets (Note 11) 264,073,803 341,138,916
Total Current Assets 15,139,243,032 5,553,699,904
Noncurrent Assets
Property and equipment (Notes 12, 16, 27 and 28) 33,985,701,079 29,155,171,390
Investment in joint ventures (Note 13) 369,644,738 366,355,686
Available-for-sale investment (Note 8) 114,532,000 –
Other noncurrent assets (Note 14) 327,847,154 247,748,922
Total Noncurrent Assets 34,797,724,971 29,769,275,998
P=49,936,968,003 P=35,322,975,902
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and other accrued liabilities (Note 15) P=5,598,486,319 P=4,999,811,707
Unearned transportation revenue (Note 3) 4,606,311,016 3,469,155,354
Current portion of long-term debt
(Notes 12 and 16) 2,056,043,837 1,862,763,608
Due to related parties (Note 26) 35,529,304 73,716,757
Total Current Liabilities 12,296,370,476 10,405,447,426
Noncurrent Liabilities
Long-term debt - net of current portion
(Notes 12 and 16) 16,376,664,867 15,247,363,123
Deferred tax liabilities - net (Note 24) 153,130,071 138,129,877
Other noncurrent liabilities (Notes 17 and 22) 3,203,752,687 2,277,073,622
Total Noncurrent Liabilities 19,733,547,625 17,662,566,622
Total Liabilities 32,029,918,101 28,068,014,048
Equity (Note 18)
Common stock 613,236,550 582,574,750
Capital paid in excess of par value 8,405,568,120 4,703,920,250
Net unrealized losses on available-for-sale investment (Note 8) (2,714,902) –
Retained earnings 8,890,960,134 1,968,466,854
Total Equity 17,907,049,902 7,254,961,854
P=49,936,968,003 P=35,322,975,902
See accompanying Notes to Consolidated Financial Statements.
*SGVMC115503*

CEBU AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31
2010 2009 2008
REVENUE
Sale of air transportation services:
Passenger
P=24,656,078,237 P=19,504,340,982 P=17,104,394,200
Cargo 2,095,612,223 1,684,418,350 1,338,530,768
Ancillary revenue (Note 19) 2,337,108,499 2,122,246,979 1,239,219,090
29,088,798,959 23,311,006,311 19,682,144,058
EXPENSES
Flying operations (Note 20) 11,417,488,512 8,857,014,923 9,607,705,976
Aircraft and traffic servicing (Note 20) 2,461,807,197 2,631,833,249 1,946,910,478
Repairs and maintenance (Note 20) 2,289,945,384 2,568,940,713 1,846,503,289
Depreciation and amortization (Note 12) 2,100,929,764 1,917,683,713 1,546,753,381
Aircraft and engine lease (Note 27) 1,604,855,579 1,723,886,536 1,062,847,730
Reservation and sales 1,335,983,655 994,694,826 852,012,389
General and administrative (Note 21) 694,888,478 822,510,363 562,833,635
Passenger service 639,480,811 580,896,015 510,724,614
Other expenses (Note 23) 93,293,869 49,503,211 17,992,031
22,638,673,249 20,146,963,549 17,954,283,523
OPERATING INCOME 6,450,125,710 3,164,042,762 1,727,860,535
OTHER INCOME (EXPENSE)
Interest expense (Notes 16 and 17) (931,482,279) (1,012,826,822) (838,465,333)
Foreign exchange gains (losses) 576,978,771 418,182,126 (1,507,231,078)
Fuel hedging gains (losses) (Note 8) 474,255,226 685,574,528 (2,594,491,680)
Interest income (Notes 7 and 8) 237,495,750 8,848,551 14,231,024
Fair value gains of financial assets designated at fair
value through profit or loss (Note 8) 107,631,255 – –
Equity in net income (loss) of joint venture (Note 13) 25,248,534 (25,474,123) 15,530,008
490,127,257 74,304,260 (4,910,427,059)
INCOME (LOSS) BEFORE INCOME TAX 6,940,252,967 3,238,347,022 (3,182,566,524)
PROVISION FOR (BENEFIT FROM) INCOME
TAX (Note 24) 17,759,687 (19,501,683) 77,321,481
NET INCOME (LOSS) 6,922,493,280 3,257,848,705 (3,259,888,005)
Net unrealized losses on available-for-sale
investment (Note 8) (3,878,432) – –
Benefit from income tax (Notes 8 and 24) 1,163,530 – –
OTHER COMPREHENSIVE LOSS, NET OF TAX (2,714,902) – –
TOTAL COMPREHENSIVE INCOME (LOSS) P=6,919,778,378 P=3,257,848,705 (P=3,259,888,005)
Basic/Diluted Earnings (Loss) Per Share
(Note 25) P=11.78 P=5.59 (P=7.11)
See accompanying Notes to Consolidated Financial Statements.
*SGVMC115503*

CEBU AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Year Ended December 31, 2010
Net unrealized
losses on
available-for-sale
investment
(Note 8)
Capital Paid in
Excess of Par
Value (Note 18)
Common Stock
(Note 18)
Retained
Earnings
Total
Equity
Balance at January 1, 2010 P=582,574,750 P=4,703,920,250 P=– P=1,968,466,854 P=7,254,961,854
Net income – – – 6,922,493,280 6,922,493,280
Other comprehensive income – – (2,714,902) – (2,714,902)
Total comprehensive income – – (2,714,902) 6,922,493,280 6,919,778,378
Issuance of shares 30,661,800 3,802,063,200 – – 3,832,725,000
Transaction costs – (100,415,330) – – (100,415,330)
Balance at December 31, 2010 P=613,236,550 P=8,405,568,120 (P=2,714,902) P=8,890,960,134 P=17,907,049,902
For the Year Ended December 31, 2009
Common Stock
(Note 18)
Capital Paid in
Excess of Par
Value (Note 18)
Retained
Earnings
(Deficit)
Total
Equity
Balance at January 1, 2009 P=582,574,750 P=4,703,920,250 (P=1,289,381,851) P=3,997,113,149
Net income – – 3,257,848,705 3,257,848,705
Total comprehensive income – – 3,257,848,705 3,257,848,705
Balance at December 31, 2009 P=582,574,750 P=4,703,920,250 P=1,968,466,854 P=7,254,961,854
*SGVMC115503*

- 2 -
For the Year Ended December 31, 2008
Retained Earnings (Deficit) (Note 18)
Common Stock
(Note 18 )
Capital Paid in
Excess of Par
Value (Note 18) Appropriated Unappropriated Total
Total
Equity
Balance at January 1, 2008 P=335,000,000 P=– P=3,000,000,000 P=1,210,506,154 P=4,210,506,154 P=4,545,506,154
Net loss – – – (3,259,888,005) (3,259,888,005) (3,259,888,005)
Total comprehensive income – – – (3,259,888,005) (3,259,888,005) (3,259,888,005)
Appropriation of retained earnings – – 1,000,000,000 (1,000,000,000) – –
Reversal of appropriation – – (4,000,000,000) 4,000,000,000 – –
Issuance of stock dividends 112,000,000 2,128,000,000 – (2,240,000,000) (2,240,000,000) –
Issuance of shares 135,574,750 2,575,920,250 – – – 2,711,495,000
Balance at December 31, 2008 P=582,574,750 P=4,703,920,250 P=– (P=1,289,381,851) (P=1,289,381,851) P=3,997,113,149
See accompanying Notes to Consolidated Financial Statements.
*SGVMC115503*

CEBU AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
2010 2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax P=6,940,252,967 P=3,238,347,022 (P=3,182,566,524)
Adjustments for:
Depreciation and amortization (Note 12) 2,100,929,764 1,917,683,713 1,546,753,381
Interest expense (Notes 16 and 17) 931,482,279 1,012,826,822 838,465,333
Unrealized foreign exchange losses (gains) (574,806,957) (452,738,225) 1,597,352,394
Fuel hedging losses (gains) (Note 8) (474,255,226) (685,574,528) 2,594,491,680
Interest income (Notes 7 and 8) (237,495,750) (8,848,551) (14,231,024)
Fair value gain of financial assets at fair value
through profit or loss (Note 8) (107,631,255) – –
Equity in net loss (income) of joint venture
(Note 13) (25,248,534) 25,474,123 (15,530,008)
Loss on disposal of property and equipment 4,050,103 – 276,782
Provision for credit losses on receivables (Note 9) 2,127,309 209,662,427 28,700,892
Operating income before working capital changes 8,559,404,700 5,256,832,803 3,393,712,906
Decrease (increase) in:
Receivables 157,564,532 85,823,980 (331,349,493)
Other current assets 77,065,113 1,842,289,762 (1,796,543,596)
Expendable parts, fuel, materials and supplies (21,059,547) (193,665,823) (56,163,453)
Financial assets at fair value through profit or
loss (derivatives) (Note 8) 212,132,124 – 66,220,592
Increase (decrease) in:
Accounts payable and other accrued liabilities 561,841,257 1,314,883,706 1,054,096,451
Unearned transportation revenue 1,137,155,662 794,633,434 1,075,187,974
Financial liabilities at fair value through
profit or loss (derivatives) (Note 8) – (1,488,205,370) (701,797,655)
Due to related parties (2,400,212) (60,627) (582,927)
Noncurrent liabilities 50,624,954 (69,993,475) 283,355,255
Net cash generated from operations 10,732,328,583 7,542,538,390 2,986,136,054
Interest paid (803,117,030) (907,448,770) (738,285,460)
Interest received 94,496,407 8,848,551 11,255,366
Net cash provided by operating activities 10,023,707,960 6,643,938,171 2,259,105,960
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to a related party (Notes 26 and 28) (3,662,583,961) (1,792,140,000) –
Acquisition of property and equipment
(Notes 12 and 27) (2,361,432,894) (1,755,652,619) (1,661,765,957)
Proceeds from disposal of property and
equipment (Note 12) 162,020,516 – –
Acquisition of other noncurrent assets (83,070,335) – –
Dividends received from a joint venture (Note 13) 21,959,482 19,443,595 –
Proceeds from disposal of other noncurrent assets – 142,066,972 12,396,036
Repayments of advances to a related party (Note 26) – 1,792,140,000 –
Additional investment in joint venture (Note 13) – (33,813,500) (270,950,400)
Net cash used in investing activities (5,923,107,192) (1,627,955,552) (1,920,320,321)
(Forward)
*SGVMC115503*

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Years Ended December 31
2010 2009 2008
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares of stock (Note 18) P=3,832,725,000 P=– P=2,711,495,000
Payments of transaction costs (Note 18) (100,415,330) – –
Repayments of long-term debt (1,791,793,102) (1,814,268,254) (1,265,326,921)
Net repayments of borrowings from a related party
(Note 28) (40,480,463) (14,143,844) (1,391,159,688)
Net cash provided by (used in) financing activities 1,900,036,105 (1,828,412,098) 55,008,391
EFFECTS OF EXCHANGE RATE CHANGES IN
CASH AND CASH EQUIVALENTS (78,207,356) 7,239,271 28,603,013
NET INCREASE IN CASH AND
CASH EQUIVALENTS 5,922,429,517 3,194,809,792 422,397,043
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 3,840,859,455 646,049,663 223,652,620
CASH AND CASH EQUIVALENTS AT
END OF YEAR (Note 7) P=9,763,288,972 P=3,840,859,455 P=646,049,663
See accompanying Notes to Consolidated Financial Statements.
*SGVMC115503*

The percentage contributions to the Company’s revenues of its principal business activities are as
follows:
For the Years Ended December 31
2010 2009 2008
Passenger Services 84.8% 83.7% 86.9%
Cargo Services 7.2% 7.2% 6.8%
Ancillary Services 8.0% 9.1% 6.3%
100.0% 100.0% 100.0%
No material reclassification, merger, consolidation, or purchase or sale of a significant amount of
assets not in the ordinary course of business was made in the past three years. The Company has
not been subjected to any bankruptcy, receivership or similar proceeding in the said period.
Distribution Methods of Products or Services
The Company has three principal distribution channels: the internet, direct sales through booking
sales offices, call centers and government/corporate client accounts, and third-party sales outlets.
Internet
In January 2006, the Company introduced its internet booking system. Through
www.cebupacificair.com, passengers can book flights and purchase services online. The system
also provides passengers with real time access to the Company’s flight schedules and fare
options.
Booking Offices and Call Centers
As of December 31, 2010, the Company had a network of seven booking offices located
throughout the Philippines and one booking office located in Hong Kong. It directly operates
these booking offices, which also handle customer service issues, such as customer requests for
change of itinerary. In addition, the Company operates two in-house call centers, one in Manila
and the other in Cebu. It also uses a third-party call centre outsourcing service to help
accommodate heavy call traffic. Its employees who work as reservation agents are also trained to
handle customer service inquiries and to convert inbound calls into sales. Purchases made through
call centers can be settled through various modes, such as credit cards, over the counter in banks,
automated teller machines and payment centers.
Government/Corporate Client Accounts
As of December 31, 2010, the Company had government and corporate accounts for passenger
sales. It provides these accounts with direct access to its reservation system and seat inventory as
well as credit lines and certain incentives. Further, clients may choose to settle their accounts by
post-transaction remittance or by using pre-enrolled credit cards.
2

CEBU AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Cebu Air, Inc. (the Parent Company) was incorporated and organized in the Philippines on
August 18, 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’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 65.36%-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 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) for a period of four years. The Parent Company can
avail of bonus years in certain specified cases but the aggregate ITH availment (basic and bonus
years) shall not exceed eight years (Note 24).
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 of the gross revenue derived
from air transportation operations. For revenue earned from activities other than air
transportation, the Parent Company is subject to regular corporate income tax (RCIT) 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.
*SGVMC115503*

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On May 24, 2005, the Expanded-Value Added Tax (E-VAT) law was signed as RA No. 9337 or
the E-VAT Act of 2005. The E-VAT law took effect on November 1, 2005 following the approval
on October 19, 2005 of Revenue Regulation (RR) No. 16-2005 which provides for the
implementation of the rules of the E-VAT law. Among the relevant provisions of RA No. 9337
are the following:
a. The franchise tax of the Parent Company is abolished;
b. The Parent Company shall be subject to RCIT;
c. The Parent Company shall remain exempt from any taxes, duties, royalties, registration
license, and other fees and charges;
d. Change in RCIT 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 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 air transportation services both domestic and international for
passengers and cargoes at the Diosdado Macapagal International Airport. The said registration
was valid for one year effective from December 9, 2009 until December 8, 2010, which was still
valid as of December 31, 2010 through temporary operating permit. The registration provides
incentives, rights and privileges such as imposition of five percent tax on gross income earned in
lieu of national and local taxes.
In accordance with Standing Interpretations Committee (SIC) 12, Consolidation - Special Purpose
Entities, the consolidated financial statements include the accounts of Cebu Aircraft Leasing
Limited (CALL), IBON Leasing Limited (ILL), Boracay Leasing Limited (BLL), Surigao Leasing
Limited (SLL) and Sharp Aircraft Leasing Limited (SALL). CALL, ILL, BLL, SLL and SALL
are SPEs in which the Parent Company does not have equity interest. CALL, ILL, BLL, SLL and
SALL acquired the passenger aircraft for lease to the Parent Company under finance lease
arrangements (Note 12) and funded the acquisitions through long-term debt (Note 16).
The accompanying consolidated financial statements of the Parent Company and its special
purpose entities (SPEs or subsidiaries) (the Group) were approved and authorized for issue by the
board of directors (BOD) on March 17, 2011.
2. Summary of Significant Accounting Policies
Basis of Preparation
The accompanying consolidated financial statements of the Group have been prepared on a
historical cost basis, except for financial assets and liabilities at fair value through profit or loss
(FVPL) and available-for-sale (AFS) investment that have been measured at fair value.
*SGVMC115503*

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The financial statements of the Group are presented in Philippine peso, its functional currency.
All values are rounded to the nearest peso except when otherwise indicated.
Statement of Compliance
The consolidated financial statements of the Group have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS).
Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and
the SPEs that it controls.
SIC 12, prescribes guidance on the consolidation of SPE. Under SIC 12, an SPE should be
consolidated when the substance of the relationship between the company and the SPE indicates
that the SPE is controlled by the company. Control over an entity may exist even in cases where
an enterprise owns little or none of the SPE’s equity, such as when an entity retains majority of the
residual risks related to the SPE or its assets in order to obtain benefits from its activities.
The consolidated financial statements are prepared using uniform accounting policies for like
transactions and other events in similar circumstances. All significant intercompany transactions
and balances, including intercompany profits and unrealized profits and losses, are eliminated in
the consolidation.
Changes in Accounting Policies and Disclosures
The accounting policies adopted are consistent with those of the previous financial year except for
the following new and amended PFRS and Philippine Interpretations which were adopted as of
January 1, 2010. The following new and amended standards did not have an impact on the
accounting policies, financial position or performance of the Group.
New Standards and Interpretations
• PFRS 2, Share-based Payment: Group Cash-settled Share-based Payment Transactions
• PFRS 3 (Revised), Business Combinations and PAS 27 (Amended), Consolidated and
Separate Financial Statements
• PAS 39, Financial Instruments: Recognition and Measurement - Eligible Hedged Items
• Philippine Interpretation on International Financial Reporting Interpretations Committee
(IFRIC) 17, Distributions of Non-cash Assets to Owners
Improvements to PFRSs 2008
• PFRS 5, Non-current Assets Held for Sale and Discontinued Operations
Improvements to PFRSs 2009
• PFRS 2, Share-based Payment
• PFRS 5, Non-current Assets Held for Sale and Discontinued Operations
• PFRS 8, Operating Segments
• PAS 1, Presentation of Financial Statements
• PAS 7, Statement of Cash Flows
• PAS 17, Leases
• PAS 36, Impairment of Assets
*SGVMC115503*

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• PAS 38, Intangible Assets
• PAS 39, Financial Instruments: Recognition and Measurement
• Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
• Philippine Interpretation IFRIC 16, Hedge of a Net Investment in a Foreign Operation
Significant Accounting Policies
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 are initially recorded under ‘Unearned transportation
revenue’ account in the consolidated statement of financial position until recognized under
Revenue account in the consolidated statement of comprehensive income when the transportation
service is rendered by the Group (e.g., when passengers and cargo are lifted). Unearned tickets
are recognized as revenue using estimates regarding the timing of recognition based on the terms
and conditions of the ticket and historical trends.
The related commission is recognized as outright expense upon the receipt of payment from
customers, and is included under ‘Reservation and sales’ account.
Ancillary revenue
Revenue from in-flight sales and other services are recognized when the goods are delivered or the
services are carried out.
Interest income
Interest on cash, cash equivalents and other short-term cash investments is recognized as the
interest accrues using the effective interest method.
Expense Recognition
Expenses are recognized when it is probable that a decrease in future economic benefits related to
decrease in an asset or an increase in liability has occurred and the decrease in economic benefits
can be measured reliably. Expenses that arise in the course of ordinary regular activities of the
Group include, among others, the operating expenses on the Group’s operation.
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 and cash equivalents, excluding cash on hand, are classified and
accounted for as loans and receivables.
*SGVMC115503*

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Financial Instruments
Date of recognition
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 a trade date basis.
Initial recognition of financial instruments
Financial instruments are recognized initially at the fair value of the consideration given. Except
for financial instruments at FVPL, the initial measurement of financial assets includes transaction
costs. The Group classifies its financial assets into the following categories: financial assets at
FVPL, held-to-maturity (HTM) investments, AFS investments and loans and receivables.
Financial liabilities are classified into financial liabilities at FVPL and other financial liabilities
carried at cost or amortized cost. The Group has no HTM investments as of December 31, 2010
and 2009.
The classification depends on the purpose for which the investments were acquired and whether
they are quoted in an active market. Management determines the classification of its investments
at initial recognition and, where allowed and appropriate, re-evaluates such designation at every
statement of financial position date.
Determination of fair value
The fair value of financial instruments traded in active markets at the statement of financial
position date is based on their quoted market price or dealer price quotations (bid price for long
positions and ask price for short positions), without any deduction for transaction costs. When
current bid and ask prices are not available, the price of the most recent transaction provides
evidence of the current fair value as long as there has not been a significant change in economic
circumstances since the time of the transaction.
For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which market observable prices exist, options
pricing models and other relevant valuation models. Any difference noted between the fair value
and the transaction price is treated as expense or income, unless it qualifies for recognition as
some type of asset or liability.
‘Day 1’ profit or loss
Where the transaction price in a non-active market is different from the fair value based on other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from an observable market, the Group recognizes the difference
between the transaction price and fair value (a ‘Day 1’ profit or loss) in profit or loss unless it
qualifies for recognition as some other type of asset. In cases where the transaction price used is
made of 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’ profit or loss amount.
*SGVMC115503*

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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.
As of December 31, 2010 and 2009, the Group’s financial assets at FVPL consist of derivative
assets, as well as private and government debt and equity securities (Note 8).
Financial assets and financial liabilities at FVPL are presented in the consolidated statement of
financial position at fair value. Changes in fair value are reflected in profit or loss. Interest earned
or incurred is recorded in interest income or expense, respectively, while dividend income is
recorded in other revenue according to the terms of the contract, or when the right of the payment
has been established.
Derivatives recorded at FVPL
The Group is a counterparty to certain derivative contracts such as commodity options. Such
derivative financial instruments are initially recorded at fair value on the date at which the
derivative contract is entered into and are subsequently re-measured at fair value. Any gains or
losses arising from changes in fair values of derivatives (except those accounted for as accounting
hedges) are taken directly to profit or loss. Derivatives are carried as assets when the fair value is
positive and as liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified primarily as either: (a) a hedge of the
fair value of an asset, liability or a firm commitment (fair value hedge); or (b) a hedge of the
exposure to variability in cash flows attributable to an asset or liability or a forecasted transaction
(cash flow hedge). The Group did not apply hedge accounting on its derivative transactions for
the year ended December 31, 2010 and 2009.
The Group enters into fuel derivatives to manage its exposure to fuel price fluctuations. Such fuel
derivatives are not designated as accounting hedges. These derivatives are entered into for risk
management purposes. The gains or losses on these instruments are accounted for directly as
charges to or credits against current operations under ‘Fuel hedging gains (losses)’ account in
profit or loss.
As of December 31, 2010 and 2009, the Group has no embedded derivatives.
*SGVMC115503*

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AFS investments
AFS investments are those non-derivative investments which are designated as such or do not
qualify to be classified or designated as financial assets at FVPL, HTM investments or loans and
receivables. They are purchased and held indefinitely, and may be sold in response to liquidity
requirements or changes in market conditions.
After initial measurement, AFS investments are subsequently measured at fair value.
The unrealized gains and losses are recognized directly in equity (other comprehensive income
(loss)) under ‘Net unrealized gain (loss) on AFS investments’ account in the statement of financial
position. When the investment is disposed of, the cumulative gain or loss previously recognized
in the statement of comprehensive income is recognized in the statement of income. Where the
Group holds more than one investment in the same security they are deemed to be disposed of on
a first-in first-out basis. Dividends earned while holding AFS investments are recognized in the
statement of income when the right of the payment has been established. The losses arising from
impairment of such investments are recognized in the statement of income and removed from the
‘Net unrealized gain (loss) on AFS investments’ account.
The AFS investment of the Group represents a quoted equity security (Note 8).
Receivables
Receivables are non-derivative financial assets with fixed or determinable payments and fixed
maturities that are not quoted in an active market. After initial measurement, receivables are
subsequently carried at amortized cost using the effective interest method less any allowance for
impairment loss. Amortized cost is calculated by taking into account any discount or premium on
acquisition, and includes fees that are an integral part of the effective interest rate (EIR) and
transaction costs. Gains and losses are recognized in profit or loss, when the receivables are
derecognized or impaired, as well as through the amortization process.
This accounting policy applies primarily to the Group’s trade and other receivables (Note 9) and
certain refundable deposits (Note 14).
Financial liabilities
Issued financial instruments or their components, which are not designated at FVPL are classified
as other financial liabilities where the substance of the contractual arrangement results in the
Group having an obligation either to deliver cash or another financial asset to the holder, or to
satisfy the obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares. The components of issued financial instruments
that contain both liability and equity elements are accounted for separately, with the equity
component being assigned the residual amount after deducting from the instrument as a whole the
amount separately determined as the fair value of the liability component on the date of issue.
After initial measurement, other financial liabilities are subsequently measured at cost or
amortized cost using the effective interest method. Amortized cost is calculated by taking into
account any discount or premium on the issue and fees that are an integral part of the EIR. Any
effects of restatement of foreign currency-denominated liabilities are recognized in profit or loss.
*SGVMC115503*

- 8 -
This accounting policy applies primarily to the Group’s debt, accounts payable and other accrued
liabilities and other obligations that meet the above definition (Notes 15, 16 and 17).
Impairment of Financial Assets
The Group assesses at each statement of financial position date whether there is objective
evidence that a financial asset or group of financial assets is impaired. A financial asset or a group
of financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial recognition of the
asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated
future cash flows of the financial asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the borrower or a group of
borrowers 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 where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
Assets carried at amortized cost
If there is objective evidence that an impairment loss on financial assets carried at amortized cost
(i.e., receivables) has been incurred, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows discounted at the
asset’s original EIR. Time value is generally not considered when the effect of discounting is not
material. The carrying amount of the asset is reduced through the use of an allowance account.
The amount of the loss shall be recognized in profit or loss. The asset, together with the
associated allowance accounts, is written-off when there is no realistic prospect of future recovery.
The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and collectively for financial assets that are not
individually significant. If it is determined that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, the asset is included in a group of
financial assets with similar credit risk characteristics and that group of financial assets is
collectively assessed for impairment. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in the collective
assessment of impairment.
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 (Note 4).
*SGVMC115503*

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AFS investments
The Group assesses at each statement of financial position date whether there is objective
evidence that a financial asset or group of financial assets is impaired. In the case of debt
instruments classified as AFS investments, impairment is assessed based on the same criteria as
financial assets carried at amortized cost. Interest continues to be accrued at the original EIR on
the reduced carrying amount of the asset and is recorded under interest income in profit or loss. If,
in a subsequent year, the fair value of a debt instrument increases, and the increase can be
objectively related to an event occurring after the impairment loss was recognized in profit or loss,
the impairment loss is also reversed through profit or loss.
For equity investments classified as AFS investments, objective evidence would include a
significant or prolonged decline in the fair value of the investments below its cost. The
determination of what is significant and prolonged is subject to judgment. Where there is
evidence of impairment, the cumulative loss measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that investment previously recognized
is removed from other comprehensive income and recognized in profit or loss. Impairment losses
on equity investments are not reversed through the statement of comprehensive income. Increases
in fair value after impairment are recognized directly in other comprehensive income.
Derecognition of Financial Instruments
Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of financial
assets) is derecognized where:
• the rights to receive cash flows from the asset have expired;
• the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a “pass-through” arrangement;
or
• the Group has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of ownership and retained control over the
asset, or (b) has neither transferred nor retained the risks and rewards of the asset but has
transferred the control over the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, and has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of
the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of original carrying amount of the
asset and the maximum amount of consideration that the Group could be required to repay.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged,
cancelled or has expired. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such 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.
*SGVMC115503*

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Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated statement
of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously. This is not generally the case with master netting agreements;
thus, the related assets and liabilities are presented gross in the consolidated statement of financial
position.
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, amortization and
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. Cost also includes asset retirement
obligation (ARO) relating to the leased passenger aircraft.
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 passenger aircraft 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 are
charged against current operations as incurred.
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.
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The EULs of property and equipment of the Group follows:
Passenger aircraft*
Engines
Rotables
Ground Support Equipment
EDP Equipment, mainframe and peripherals
Transportation equipment
Furniture, fixtures and office equipment
Communication equipment
Special tools
Maintenance and test equipment
Other equipment
* With residual value of 15.00%
15 years
15 years
15 years
5 years
3 years
5 years
5 years
5 years
5 years
5 years
5 years
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 item) is included in profit or loss, in the year the item is derecognized.
The assets’ residual values, useful lives and methods of depreciation and amortization are
reviewed and adjusted, if appropriate, at each financial year-end.
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
Group recognizes the present value of these costs as ARO asset (included under ‘Property and
equipment’) and ARO liability (included under ‘Noncurrent liabilities’). The Group depreciates
ARO asset on a straight-line basis over the EUL of the related asset or the lease term, whichever is
shorter, or written off as a result of impairment of the related asset. The Group amortizes ARO
liability using the effective interest method and recognizes accretion expense (included in interest
expense) over the lease term.
The Group regularly assesses the provision for ARO and adjusts the related asset and liability
(Note 3).
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 contract under TMB, the
Group recognizes expenses based on expense as incurred method. For maintenance contract under
PBH, the Group recognizes expense on an accrual basis.
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Investment in Joint Ventures
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.
The Group’s 49.00% and 35.00% investments in Aviation Partnership (Philippines) Corporation
(A-plus) and SIA Engineering (Philippines) Corporation (SIAEP) are accounted for under the
equity method (Note 13). Under the equity method, the investments in JV 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 income reflects the Group’s share in the results of operations of the
JV.
Impairment of Nonfinancial Assets
This accounting policy applies primarily to the Group’s property and equipment and investments
in JV.
At each statement of financial position date, the Group assesses whether there is any indication
that its nonfinancial assets may be impaired. When an indicator of impairment exists or when an
annual impairment testing for an asset is required, the Group makes a formal estimate of
recoverable amount. Recoverable amount is the higher of an asset’s (or cash-generating unit’s)
fair value less costs to sell and its value in use and 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, in which case the recoverable amount is assessed as part of the cash generating
unit to which it belongs. Where the carrying amount of an asset (or cash-generating unit) exceeds
its recoverable amount, the asset (or cash-generating unit) is considered impaired and is written
down to its recoverable amount. In assessing value in use, 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 (or cash-generating
unit).
An assessment is made at each statement of financial position date as to whether there is any
indication that a previously recognized impairment loss may no longer exist or may have
decreased. If such indication exists, the recoverable amount is estimated. A previously
recognized impairment loss is reversed only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last impairment loss was recognized. If that is
the case, the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in
profit or loss. After such a reversal, the depreciation expense is adjusted in future years to allocate
the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining life.
Common Stock
Common stocks are classified as equity and recorded at par. Proceeds in excess of par value are
recorded as ‘Capital paid in excess of par value’ in the consolidated statement of financial
position. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction from the proceeds.
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Dividends on Common Shares
Dividends on common shares are recognized as a liability and deducted from equity when
approved and declared by the BOD, in the case of cash dividends; or by the BOD and
shareholders, in the case of stock dividends.
Provisions and Contingencies
Provisions are recognized when: (a) the Group has a present obligation (legal or constructive) as a
result of a past event; (b) it is probable (i.e., more likely than not) that an outflow of assets
embodying economic benefits will be required to settle the obligation; and (c) 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, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as an interest expense in profit or loss.
Contingent liabilities are not recognized in the consolidated statement of financial position but are
disclosed unless the possibility of an outflow of resources embodying economic benefits is
remote. Contingent assets are not recognized but disclosed in the 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.
Pension Costs
Pension cost is actuarially determined using the projected unit credit method. This method reflects
services rendered by employees up to the date of valuation and incorporates assumptions
concerning employees’ projected salaries. Actuarial valuations are conducted with sufficient
regularity, with option to accelerate when significant changes to underlying assumptions occur.
Pension cost includes current service cost, interest cost, expected return on any plan assets,
actuarial gains and losses and the effect of any curtailment or settlement.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are credited to or charged against profit or loss when the net cumulative unrecognized
actuarial gains and losses at the end of the previous period exceed 10.00% of the higher of the
present value of the defined benefit obligation and the fair value of plan assets at that date. The
excess actuarial gains or losses are recognized over the average remaining working lives of the
employees participating in the plan.
The asset or liability recognized in the consolidated statement of financial position in respect of
defined benefit retirement plan is the present value of the defined benefit obligation as of
statement of financial position date less the fair value of plan assets, together with adjustments for
unrecognized actuarial gains or losses and past service costs. The value of any asset is restricted
to the sum of any past service cost not yet recognized and the present value of any economic
benefits available in the form of refunds from the plan or reductions in the future contributions to
the plan. The defined benefit obligation is calculated annually by an independent actuary. The
present value of the defined benefit obligation is determined by discounting the estimated future
cash inflows using risk-free interest rates that have terms to maturity approximating the terms of
the related pension liability.
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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 taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or substantially enacted as of the statement of
financial position date.
Deferred tax
Deferred tax is provided using the balance sheet liability method on all temporary differences,
with certain exceptions, at the reporting date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, with certain
exceptions. 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 RCIT and unused net operating loss carryover (NOLCO), to
the extent that it is probable that sufficient taxable profit will be available against which the
deductible temporary differences and carryforward benefits of unused tax credits from excess
MCIT 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. Deferred tax liabilities are not provided on non-taxable temporary
differences associated with interests in JV. With respect to interests in JV, deferred tax liabilities
are recognized except where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amounts of deferred tax assets are reviewed at each statement of financial position
date and reduced 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. 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.
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 statement of financial position 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 other comprehensive income.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.
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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.
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.
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.
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The Group had not capitalized any borrowing costs for the years ended December 31, 2010 and
2009 as all borrowing costs from outstanding long-term debt relate to assets that are at state ready
for intended use (Note 16).
Foreign Currency Transactions
Transactions in foreign currencies are initially recorded in the Group’s 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 System (PDS) closing rate prevailing at the statement of financial position date. All
differences are taken to the consolidated statement of comprehensive income. 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.
Earnings (Loss) Per Share (EPS)
Basic EPS is computed by dividing net income applicable to common stock 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 ordinary equity
holders of the Group by the weighted average number of ordinary shares outstanding during the
year plus the weighted average number of ordinary shares that would be issued on the conversion
of all the dilutive potential ordinary shares into ordinary shares.
For the years ended December 31, 2010, 2009 and 2008, 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. The nature of the operating segment is set out in Note 6.
Events after the Reporting Period
Post-year-end events that provide additional information about the Group’s position at the
statement of financial position date (adjusting event) are reflected in the consolidated financial
statements. Post-year-end events that are not adjusting events are disclosed in the notes to the
consolidated financial statements, when material.
Standards Issued but not yet Effective
Standards issued but not yet effective up to the date of issuance of the Group’s financial
statements are listed below. This listing is of standards and interpretations issued, which the
Group reasonably expects to be applicable at a future date. The Group intends to adopt those
standards when they become effective.
• PAS 24 (Amended), Related Party Disclosures
The amended standard is effective for annual periods beginning on or after January 1, 2011. It
clarifies the definition of a related party to simplify the identification of such relationships and
to eliminate inconsistencies in its application. The revised standard introduces a partial
exemption of disclosure requirements for government-related entities. The Group does not
expect any impact on its financial position or performance. Early adoption is permitted for
either the partial exemption for government-related entities or for the entire standard.
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• PAS 32 (Amended), Financial Instruments: Presentation - Classification of Rights Issues
The amendment to PAS 32 is effective for annual periods beginning on or after
February 1, 2010 and amends the definition of a financial liability in order to classify rights
issues (and certain options or warrants) as equity instruments in cases where such rights are
given pro rata to all of the existing owners of the same class of an entity’s non-derivative
equity instruments, or to acquire a fixed number of the entity’s own equity instruments for a
fixed amount in any currency. This amendment will have no impact on the Group after initial
application.
• PAS 12 (Amended), Income Taxes - Deferred Tax: Recovery of Underlying Assets
The amendment to PAS 12 is effective for annual periods beginning on or after
January 1, 2012. It provides a practical solution to the problem of assessing whether recovery
of an asset will be through use or sale. It introduces a presumption that recovery of the
carrying amount of an asset will normally be through sale.
• PFRS 7 (Amended), Financial Instruments - Disclosures: Transfers of Financial Assets
The amendments to PFRS 7 are effective for annual periods beginning on or after
July 1, 2011. The amendments will allow users of financial statements to improve their
understanding of transfer transactions of financial assets (for example, securitizations),
including understanding the possible effects of any risks that may remain with the entity that
transferred the assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken around the end of a reporting
period.
• PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, as issued in 2010, reflects the first phase of the work on the replacement of PAS 39
and applies to classification and measurement of financial assets and financial liabilities as
defined in PAS 39. The standard is effective for annual periods beginning on or after
January 1, 2013. In subsequent phases, hedge accounting and derecognition will be addressed.
The completion of this project is expected in early 2011. The adoption of the first phase of
PFRS 9 will have an effect on the classification and measurement of the Group’s financial
assets. The Group will quantify the effect in conjunction with the other phases, when issued,
to present a comprehensive picture.
• Philippine Interpretation IFRIC-14 (Amended), Prepayments of a Minimum Funding
Requirement
The amendment to Philippine Interpretation IFRIC-14 is effective for annual periods
beginning on or after January 1, 2011, with retrospective application. The amendment
provides guidance on assessing the recoverable amount of a net pension asset. The amendment
permits an entity to treat the prepayment of a minimum funding requirement as an asset. The
amendment is deemed to have no impact on the financial statements of the Group.
*SGVMC115503*

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• Philippine Interpretation IFRIC-15, Agreements for the Construction of Real Estate
This Interpretation, effective for annual periods beginning on or after January 1, 2012, covers
accounting for revenue and associated expenses by entities that undertake the construction of
real estate directly or through subcontractors. The Interpretation requires that revenue on
construction of real estate be recognized only upon completion, except when such contract
qualifies as a construction contract to be accounted for under PAS 11, Construction Contracts,
or involves rendering of services in which case revenue is recognized based on stage of
completion. Contracts involving provision of services with the construction materials and
where the risks and rewards of ownership are transferred to the buyer on a continuous basis
will also be accounted for based on stage of completion.
• Philippine Interpretation IFRIC-19, Extinguishing Financial Liabilities with Equity
Instruments
This Interpretation is effective for annual periods beginning on or after July 1, 2010. The
interpretation clarifies that equity instruments issued to a creditor to extinguish a financial
liability qualify as consideration paid. The equity instruments issued are measured at their fair
value. In case that this cannot be reliably measured, the instruments are measured at the fair
value of the liability extinguished. Any gain or loss is recognized immediately in profit or
loss. The adoption of this interpretation will have no effect on the financial statements of the
Group.
Improvements to PFRSs 2010
Improvements to IFRSs is an omnibus of amendments to PFRSs. The amendments have not been
adopted as they become effective for annual periods on or after either July 1, 2010. The
amendments are listed below:
• PFRS 3, Business Combinations
• PFRS 7, Financial Instruments: Disclosures
• PAS 1, Presentation of Financial Statements
• PAS 27, Consolidated and Separate Financial Statements
• Philippine Interpretation IFRIC-13, Customer Loyalty Programmes
The Group, however, expects no impact from the adoption of the amendments on its financial
position or performance.
3. 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 judgment and estimates follow.
Judgments
a. Going concern
The management of the Group has made an assessment of the Group’s ability to continue as a
going concern and is satisfied that the Group has the resources to continue in business for the
foreseeable future. Furthermore, the Group is not aware of any material uncertainties that may
cast significant doubts upon the Group’s ability to continue as a going concern. Therefore, the
consolidated financial statements continue to be prepared on a going concern basis.
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b. Classification of financial instruments
The Group exercises judgment in classifying a financial instrument, or its component, on
initial recognition as either a financial asset, a financial liability or an equity instrument in
accordance with the substance of the contractual arrangement and the definitions of a financial
asset, financial liability or equity instrument. The substance of a financial instrument, rather
than its legal form, governs its classification in the consolidated statement of financial
position.
In addition, the Group classifies financial assets by evaluating, among others, whether the
asset is quoted or not in an active market. Included in the evaluation on whether a financial
asset is quoted in an active market is the determination of whether quoted prices are readily
and regularly available, and whether those prices represent actual and regularly occurring
market transactions on an arm’s length basis.
c. 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 counterparties’ valuation.
The fair values of the Group’s financial instruments are presented in Note 5.
d. Impairment of financial assets
In determining whether an impairment loss should be recorded in profit or loss, the Group
makes judgments as to whether there is any objective evidence of impairment as a result of
one or more events that has occurred after initial recognition of the asset and that loss event or
events has an impact on the estimated future cash flows of the financial assets or the group of
financial assets that can be reliably estimated. This observable data may include adverse
changes in payment status of borrowings in a group, or national or local economic conditions
that correlate with defaults on assets in the portfolio.
e. 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. Otherwise, they are considered as operating leases.
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. Such leases are accounted for as
operating leases (Note 27).
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f. Consolidation of SPEs
The Group periodically undertakes transactions that may involve obtaining the right to control
or significantly influence the operations of other companies. These transactions include the
purchase of aircraft and assumption of certain liabilities. Also, included are transactions
involving SPEs and similar vehicles. In all such cases, management makes an assessment as
to whether the Group has the right to control or significantly influence the SPEs, and based on
this assessment, the SPE is consolidated as a subsidiary or associated company. In making
this assessment, management considers the underlying economic substance of the transaction
and not only the contractual terms.
g. Determination of functional currency
PAS 21 requires management to use its judgment to determine 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:
a) 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);
b) the currency in which funds from financing activities are generated; and
c) the currency in which receipts from operating activities are usually retained.
The Group’s consolidated financial statements are presented in Philippine peso, which is also
the Parent Company’s functional currency.
h. 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 proceedings will have a material
adverse effect on the Group’s financial position and results of operations. It is possible,
however, that future results of operations could be materially affected by changes in the
estimates or in the effectiveness of the strategies relating to these proceedings (Note 27).
Estimates
The key assumptions concerning the future and other sources of estimation uncertainty at the
statement of financial position 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 allowance for credit losses on receivables
The Group maintains allowance for impairment 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 collectibility 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 provisions for credit losses on receivables are discussed in more detail in Note 9.
*SGVMC115503*

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b. 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 details of expendable parts, fuel, materials and supplies are disclosed in Note 10.
c. Estimation of 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 Group recognizes the present value of
these costs as ARO asset and ARO liability.
Assumptions used to compute ARO are reviewed and updated annually by the Group.
In 2010, the Group contracted a third-party engineer to reassess the amount of future
restoration costs. Based on the reassessment, the Group recognized additional ARO asset and
ARO liability amounting to P=705.7 million (Note 17). As of December 31, 2010 and 2009,
the present value of the cost of restoration is computed based on the Group’s average
borrowing cost.
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 noncurrent assets and noncurrent liabilities, which results in increase of depreciation
expense and interest expense.
The details and the carrying value of ARO asset and liability are disclosed in Notes 12 and 17,
respectively.
d. Estimation of useful lives and residual values 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 estimates the residual value
of its property and equipment based on the expected amount recoverable at the end of its
useful life. The Group reviews annually the EULs and residual values 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 or residual value of property and
equipment would increase recorded depreciation and amortization expense and decrease
noncurrent assets.
The details and the carrying value of property and equipment are disclosed in Note 12.
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e. Recognition of deferred tax assets
The Group assesses the carrying amounts of deferred income taxes at each statement of
financial position date and reduces deferred tax assets to the extent that it is no longer
probable that sufficient taxable profit 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, 2010 and 2009, 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 Parent
Company’s ITH.
The details of deferred tax asset are disclosed in Note 24.
f. Impairment of nonfinancial assets
The Group assesses the impairment of nonfinancial assets, particularly property and
equipment and investment in JV, whenever events or changes in circumstances indicate that
the carrying amount of the nonfinancial asset may not be recoverable. The factors that the
Group considers important which could trigger an impairment review include the following:
• significant underperformance relative to expected historical or projected future operating
results;
• significant changes in the manner of use of the acquired assets or the strategy for overall
business; and
• significant negative industry or economic trends.
An impairment loss is recognized whenever the carrying amount of an asset or investment
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less cost to sell and value in use. The fair value less cost to sell is the amount obtainable from
the sale of an asset in an arm’s length transaction while value in use is the present value of
estimated future cash flows expected to arise from the continuing use of an asset and from its
disposal at the end of its useful life.
Recoverable amounts are estimated for individual assets or investments or, if it is not possible,
for the cash-generating unit to which the asset belongs.
In determining the present value of estimated future cash flows expected to be generated from
the continued use of the assets, the Group is required to make estimates and assumptions that
can materially affect the consolidated financial statements.
The carrying values of property and equipment and investment in JV are disclosed in Notes 12
and 13, respectively.
*SGVMC115503*

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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 22). Actual
results that differ from the Group’s assumptions are accumulated and amortized over future
periods and therefore, generally affect the recognized expense and recorded obligation in such
future periods.
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 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.
The present value of the defined benefit obligation and other details of the retirement plan and
other employee benefit cost are disclosed in Note 22.
h. Passenger revenue recognition
Passenger sales are recognized as revenue when the obligation of the Group to provide
transportation service ceases, either (a) when transportation services are already rendered or
(b) when the Group estimates that unused tickets are already expired. The value of unused
tickets is included as unearned transportation revenue in the consolidated statement of
financial position and recognized as revenue based on estimates. These estimates are based on
historical experience. While actual results may vary from these estimates, the Group believes
it is unlikely that materially different estimates for future refunds, exchanges, and forfeited
tickets would be reported based on other reasonable assumptions or conditions suggested by
actual historical experience and other data available at the time the estimates were made.
As of December 31, 2010 and 2009, the balances of the Group’s unearned transportation
revenue amounted to P=4.6 billion and P=3.5 billion, respectively. Ticket sales that are not
expected to be used for transportation are recognized as revenue using estimates regarding the
timing of recognition based on the terms and conditions of the tickets and historical trends.
4. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments, other than derivatives, comprise cash and cash
equivalents, financial assets at FVPL, AFS investments, 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 they are
summarized in the succeeding paragraphs, together with the related risk management structure.
*SGVMC115503*

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Risk Management Structure
The Group’s risk management structure is closely aligned with that of its ultimate parent. The
Group has its own BOD which is ultimately responsible for the oversight of the Group’s risk
management process which involves 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 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 overall
effectiveness of risk management systems, and both the internal and external 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.
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.
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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 eight 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.
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.
*SGVMC115503*

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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 bank 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.
*SGVMC115503*

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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, 2010 and 2009, without considering the effects of collaterals and
other credit risk mitigation techniques.
2010 2009
Financial assets at FVPL (Note 8)
Designated at FVPL
Quoted debt securities
Private P=2,086,089,903 P=–
Government 1,017,480,478 –
3,103,570,381 –
Quoted equity securities 285,950,784 –
3,389,521,165 –
Derivative financial instruments
not designated as accounting hedges 489,917,466 227,794,364
3,879,438,631 227,794,364
AFS investments (Note 8)
Quoted equity securities 114,532,000 –
Loans and receivables
Cash and cash equivalents* (Note 7) 9,748,864,734 3,826,551,232
Receivables (Note 9)
Trade receivables 465,134,940 564,785,691
Interest receivable 134,819,376 –
Due from related parties 86,576,474 40,389,601
Others** 175,878,801 189,759,389
862,409,591 794,934,681
Refundable deposits*** (Note 14) 9,240,000 9,240,000
P=14,614,484,956 P=4,858,520,277
*Excluding cash on hand
**Include nontrade receivables from derivative counterparties and employees
***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.
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The Group’s credit risk exposures, before taking into account any collateral held or other credit
enhancements, are categorized by geographic location as follows:
2010
Philippines
Asia
(excluding
Philippines) Europe Others Total
Financial assets at FVPL (Note 8)
Designated at FVPL
Quoted debt securities
Private P=159,862,560 P=17,853,621 P=1,525,694,362 P=382,679,360 P=2,086,089,903
Government 948,259,200 69,221,278 – – 1,017,480,478
1,108,121,760 87,074,899 1,525,694,362 382,679,360 3,103,570,381
Quoted equity securities – – – 285,950,784 285,950,784
1,108,121,760 87,074,899 1,525,694,362 668,630,144 3,389,521,165
Derivative financial instruments
not designated as accounting hedges 136,094,034 206,652,904 147,170,528 – 489,917,466
1,244,215,794 293,727,803 1,672,864,890 668,630,144 3,879,438,631
AFS investments (Note 8)
Quoted equity securities – – – 114,532,000 114,532,000
Loans and receivables
Cash and cash equivalents* (Note 7) 9,461,735,841 287,128,893 – – 9,748,864,734
Receivables (Note 9)
Trade receivables 349,540,164 84,845,412 30,749,364 – 465,134,940
Interest receivable 71,058,584 4,248,439 6,633,159 52,879,194 134,819,376
Due from related parties 86,576,474 – – – 86,576,474
Others** 77,620,296 59,537,007 38,721,498 – 175,878,801
584,795,518 148,630,858 76,104,021 52,879,194 862,409,591
Refundable deposits*** (Note 14) – – 9,240,000 – 9,240,000
P=11,290,747,153 P=729,487,554 P=1,758,208,911 P=836,041,338 P=14,614,484,956
*Excluding cash on hand
**Include nontrade receivables from derivative counterparties and employees
***Included under ‘Other noncurrent assets’ account in the consolidated statement of financial position.
2009
Philippines
Asia
(excluding
Philippines) Europe Total
Financial assets at FVPL (Note 8)
Derivative financial instruments
not designated as accounting hedges P=– P=227,794,364 P=– P=227,794,364
Loans and receivables
Cash and cash equivalents* (Note 7) 3,603,491,343 223,059,889 – 3,826,551,232
Receivables (Note 9)
Trade receivables 403,862,479 143,956,471 16,966,741 564,785,691
Due from related parties 40,389,601 – – 40,389,601
Others** 21,433,462 642,642 167,683,285 189,759,389
465,685,542 144,599,113 184,650,026 794,934,681
Refundable deposits*** (Note 14) – – 9,240,000 9,240,000
P=4,069,176,885 P=595,453,366 P=193,890,026 P=4,858,520,277
* Excluding cash on hand
**Include nontrade receivables from derivative counterparties and employees.
*** Included under ‘Other noncurrent assets’ account in the consolidated statement of financial position.
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.
*SGVMC115503*

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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, 2010 and 2009.
2010
Neither Past Due Nor Specifically Impaired
Past Due
High
Grade
Standard
Grade
Substandard
Grade
or Individually
Impaired
Total
Financial assets at FVPL (Note 8)
Derivative financial
instruments not designated as
accounting hedges P=489,917,466 P=– P=– P=– P=489,917,466
Loans and receivables:
Cash and cash equivalents*
(Note 7) 9,748,864,734 – – – 9,748,864,734
Receivables (Note 9)
Trade receivables 296,387,293 96,158,122 – 78,920,400 471,465,815
Interest receivable 134,819,376 – – – 134,819,376
Due from related parties 86,576,474 – – – 86,576,474
Others** 45,199,323 83,708,347 – 273,224,396 402,132,066
Refundable deposits*** (Note 14) 9,240,000 – – – 9,240,000
P=10,811,004,666 P=179,866,469 P=– P=352,144,796 P=11,343,015,931
*Excluding cash on hand
**Include nontrade receivables from derivative counterparties and employees
***Included under ‘Other noncurrent assets’ account in the consolidated statement of financial position.
2009
Neither Past Due Nor Specifically Impaired
Past Due
High
Grade
Standard
Grade
Substandard
Grade
or Individually
Impaired
Total
Financial assets at FVPL (Note 8)
Derivative financial
instruments not designated as
accounting hedges P=227,794,364 P=– P=– P=– P=227,794,364
Loans and receivables:
Cash and cash equivalents*
(Note 7) 3,826,551,232 – – – 3,826,551,232
Receivables (Note 9)
Trade receivables 481,749,690 – – 89,366,876 571,116,566
Due from related parties 40,389,601 – – – 40,389,601
Others** 186,328,128 – – 242,617,195 428,945,323
Refundable deposits***(Note 14) 9,240,000 – – – 9,240,000
P=4,772,053,015 P=– P=– P=331,984,071 P=5,104,037,086
*Excluding cash on hand
**Include nontrade receivables from derivative counterparties and employees
***Included under ‘Other noncurrent assets’ account in the consolidated statement of financial position.
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.
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.
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Past due or individually impaired accounts consist of past due but not impaired receivables
amounting to P=119.6 million and P=86.5 million as December 31, 2010 and 2009, respectively, and
past due and impaired receivables amounting to P=232.6 million and P=245.5 million as of
December 31, 2010 and 2009, 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 statement of financial position. For the past due
and impaired receivables, specific allowance for impairment losses amounted to P=232.6 million
and P=245.5 million as of December 31, 2010 and 2009, respectively (Note 9).
For financial assets such as designated financial assets at FVPL and AFS investments, the Group
assesses their credit quality using external credit ratings from Standard & Poor’s (S&P). Financial
assets with at least A- are identified as high grade, at least B- as standard grade and not rated (NR)
if the credit rating is not performed by an external credit rating agency.
Below is a summary of the Group’s external credit rating classification:
2010
Neither Past Due Nor Specifically Impaired
Past Due
High
Grade
Standard
Grade Not Rated
or Individually
Impaired
Total
Financial assets at FVPL (Note 8)
Designated at FVPL
Quoted debt securities
Private
BBB+ P=– P=47,785,600 P=– P=– P=47,785,600
BB+ – 160,021,480 – – 160,021,480
BB – 81,662,412 – – 81,662,412
B+ – 234,719,360 – – 234,719,360
B- – 159,862,560 – – 159,862,560
NR – – 1,402,038,491 – 1,402,038,491
– 684,051,412 1,402,038,491 – 2,086,089,903
Government
BB – 1,017,480,478 – – 1,017,480,478
– 1,701,531,890 1,402,038,491 – 3,103,570,381
Quoted equity securities
A- 285,950,784 – – – 285,950,784
285,950,784 1,701,531,890 1,402,038,491 – 3,389,521,165
AFS investments (Note 8)
Quoted equity securities
BBB- – 114,532,000 – – 114,532,000
P=285,950,784 P=1,816,063,890 P=1,402,038,491 P=– P=3,504,053,165
The following tables show the aging analysis of the Group’s receivables:
2010
Neither Past Past Due But Not Impaired Past
Due Nor
Impaired 31-60 days 61-90 days 91-180 days
Over
180 days
Due and
Impaired Total
Trade receivables P=392,545,415 P=29,123,386 P=24,822,321 P=12,190,557 P=6,453,261 P=6,330,875 471,465,815
Interest receivable 134,819,376 – – – – – 134,819,376
Due from related parties 86,576,474 – – – – – 86,576,474
Others* 128,907,670 – 739,356 38,400,282 7,831,493 226,253,265 402,132,066
P=742,848,935 P=29,123,386 P=25,561,677 P=50,590,839 P=14,284,754 P=232,584,140 P=1,094,993,731
*Include nontrade receivables from derivative counterparties and employees
2009
Neither Past Past Due But Not Impaired Past
Due Nor
Impaired 31-60 days 61-90 days 91-180 days
Over
180 days
Due and
Impaired
Total
Trade receivables P=481,749,690 P=45,462,279 P=13,771,807 P=17,361,412 P=6,440,503 P=6,330,875 P=571,116,566
Due from related parties 40,389,601 – – – – – 40,389,601
Others* 186,328,128 3,431,261 – – – 239,185,934 428,945,323
P=708,467,419 P=48,893,540 P=13,771,807 P=17,361,412 P=6,440,503 P=245,516,809 P=1,040,451,490
*Include nontrade receivables from derivative counterparties and employees
*SGVMC115503*

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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 P=50,000 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, 2010 and 2009, outstanding cash bonds (included under
‘Accounts payable and other accrued liabilities’ account in the consolidated statement of financial
position) amounted to P=136.9 million and P=101.0 million, respectively (Note 15). 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
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
*SGVMC115503*

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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 statement of financial position 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 statement of financial
position 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.
The tables below summarize the maturity profile of financial instruments based on remaining
contractual undiscounted cash flows as of December 31, 2010 and 2009:
2010
Less than one
month
1 to 3
months
3 to 12
months
1 to 5
years
More than
5 years Total
Financial Assets
Financial assets at FVPL
Designated at FVPL
Quoted debt securities
Private P=51,745,229 P=6,510,240 P=13,472,306 P=1,868,966,549 P=2,299,273,923 P=4,239,968,247
Government – 32,606,000 2,144,050 312,750,450 1,338,688,650 1,686,189,150
51,745,229 39,116,240 15,616,356 2,181,716,999 3,637,962,573 5,926,157,397
Quoted equity securities – – – – 285,950,784 285,950,784
51,745,229 39,116,240 15,616,356 2,181,716,999 3,923,913,357 6,212,108,181
Derivative financial
instruments not
designated as
accounting hedges – 139,059,297 351,425,270 – – 490,484,567
51,745,229 178,175,537 367,041,626 2,181,716,999 3,923,913,357 6,702,592,748
AFS investments
Quoted equity securities – – – – 104,120,000 104,120,000
Loans and receivables
Cash and cash equivalents 9,776,460,386 – – – – 9,776,460,386
Receivables:
Trade receivables 386,222,100 56,120,518 11,647,971 11,144,351 – 465,134,940
Interest receivable 134,819,376 – – – – 134,819,376
Due from related
parties* 86,576,474 – – – – 86,576,474
Others ** 135,284,134 39,319,282 969,633 305,752 – 175,878,801
P=10,571,107,699 P=273,615,337 P=379,659,230 P=2,193,167,102 P=4,028,033,357 P=17,445,582,725
Financial Liabilities
On-balance sheet
Financial liabilities at
amortized cost
Accounts payable and
other accrued
liabilities*** P=1,538,738,776 P=1,469,497,765 P=1,727,247,931 P=361,781,897 P=19,886,872 5,117,153,241
Due to related parties* 35,529,304 – – – – 35,529,304
Long-term debt 213,007,746 566,294,911 2,079,034,332 10,616,930,315 8,713,422,758 22,188,690,062
Others**** – – – 923,451,428 – 923,451,428
1,787,275,826 2,035,792,676 3,806,282,263 11,902,163,640 8,733,309,630 28,264,824,035
Off-balance sheet
Contingent liability***** – – 6,711,777,434 24,777,021,191 – 31,488,798,625
P=1,787,275,826 P=2,035,792,676 P=10,518,059,697 P=36,679,184,831 P=8,733,309,630 P=59,753,622,660
*Receivable and payable on demand
**Include nontrade receivables from derivative counterparties and employees
***Excluding government-related payables
****Included under ‘Other noncurrent liabilities’ in the consolidated statement of financial position.
*****Pertains to capital expenditure commitments (Note 27)
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2009
Less than one
month
1 to 3
months
3 to 12
months
1 to 5
years
More than
5 years Total
Financial Assets
Financial assets at FVPL
Derivative financial
instruments not
designated as accounting
hedges P=– P=75,690,598 P=227,552,424 P=– P=– P=303,243,022
Loans and receivables
Cash and cash equivalents 3,841,124,922 – – – – 3,841,124,922
Receivables
Trade receivables 500,388,829 42,657,317 21,739,545 – – 564,785,691
Due from related
parties* 40,389,601 – – – – 40,389,601
Others** 189,759,389 – – – – 189,759,389
P=4,571,662,741 P=118,347,915 P=249,291,969 P=– P=– P=4,939,302,625
Financial Liabilities
Financial liabilities at
amortized cost
Accounts payable and
other accrued
liabilities*** P=454,140,097 P=4,176,669,268 P=33,120,435 P=– P=– P=4,663,929,800
Due to related parties* 73,716,757 – – – – 73,716,757
Long-term debt – 553,806,613 1,884,006,031 9,135,034,372 7,443,503,843 19,016,350,859
Others**** – – – 910,665,374 – 910,665,374
P=527,856,854 P=4,730,475,881 P=1,917,126,466 P=10,045,699,746 P=7,443,503,843 P=24,664,662,790
*Receivable and payable on demand
**Include nontrade receivables from derivative counterparties and employees
***Excluding government-related payables
****Included under ‘Other noncurrent liabilities’ in the consolidated statement of financial position.
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.
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, 2010, 2009 and 2008, approximately 24.40%, 23.20% and 21.10%, 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 US Dollar. As of
December 31, 2010 and 2009, 68.32% and 73.91%, respectively, of the Group’s financial
liabilities were denominated in US Dollar, respectively.
The Group does not have any foreign currency hedging arrangements.
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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.
2010
US Dollar
Hong Kong
Dollar
Singaporean
Dollar
Other
Currencies*
Total
Financial Assets
Financial Assets at FVPL
Designated at FVPL
Quoted debt securities
Private P=2,086,089,903 P=– P=– P=– P=2,086,089,903
Government 1,017,480,478 – – – 1,017,480,478
3,103,570,381 – – – 3,103,570,381
Quoted equity securities 285,950,784 – – – 285,950,784
3,389,521,165 – – – 3,389,521,165
Derivative financial
instruments not designated
as accounting hedges 489,917,466 – – – 489,917,466
3,879,438,631 – – – 3,879,438,631
AFS investments:
Quoted equity securities 114,532,000 114,532,000
Cash and cash equivalents 1,567,055,465 45,463,367 13,116,910 258,013,947 1,883,649,689
Receivables 348,009,633 6,836,340 36,788,388 70,264,523 461,898,884
Refundable deposits** 9,240,000 – – – 9,240,000
5,918,275,729 52,299,707 49,905,298 328,278,470 6,348,759,204
Financial Liabilities
Accounts payable and other
accrued liabilities*** 2,527,277,204 35,990,964 45,849,225 79,987,436 2,689,104,829
Long-term debt 18,432,708,704 – – – 18,432,708,704
Others**** 923,451,428 – – – 923,451,428
P=21,883,437,336 P=35,990,964 P=45,849,225 P=79,987,436 P=22,045,264,961
* 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 statement of financial position.
***Excluding government-related payables
**** Included under ‘Other noncurrent liabilities’ in the consolidated statement of financial position.
2009
US Dollar
Hong Kong
Dollar
Singaporean
Dollar
Other
Currencies*
Total
Financial Assets
Financial Assets at FVPL
Derivative financial
instruments not designated
as accounting hedges P=227,794,364 P=– P=– P=– P=227,794,364
Cash and cash equivalents 66,485,872 35,259,013 37,841,597 139,543,036 279,129,518
Receivables 473,305,027 16,017,938 13,207,009 72,026,367 574,556,341
Refundable deposits** 9,240,000 – – – 9,240,000
P=776,825,263 P=51,276,951 P=51,048,606 P=211,569,403 P=1,090,720,223
Financial Liabilities
Accounts payable and other
accrued liabilities*** P=2,724,153,551 P=34,577,933 P=21,349,961 P=68,484,838 P=2,848,566,283
Long-term debt 17,110,126,731 – – – 17,110,126,731
Others**** 910,665,374 – – – 910,665,374
P=20,744,945,656 P=34,577,933 P=21,349,961 P=68,484,838 P=20,869,358,388
* 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 statement of financial position.
***Excluding government-related payables
**** Included under ‘Other noncurrent liabilities’ in the consolidated statement of financial position.
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The exchange rates used to restate the Group’s foreign currency-denominated assets and liabilities
as of December 31, 2010 and 2009 follow:
2010 2009
US dollar P=43.84 to US$1.00 P=46.20 to US$1.00
Singapore dollar P=34.16 to SGD1.00 P=33.11 to SGD1.00
Hong Kong dollar P=5.64 to HKD1.00 P=5.99 to HKD1.00
The following table sets forth the impact of the range of reasonably possible changes in the
US dollar - Philippine peso exchange value on the Group’s pre-tax income for the years ended
December 31, 2010, 2009 and 2008 (in thousands).
2010 2009 2008
Changes in foreign exchange value P=5 (P=5) P=5 (P=5) P=5 (P=5)
Change in pre-tax income (P=1,833,907) P=1,833,907 (P=2,161,052) P=2,161,052 (P=1,836,122) P=1,836,122
Change in equity P=13,063 (P=13,063) – – – –
Other than the potential impact on the Group’s pre-tax income and change in equity from AFS
investments, 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
P=989.8 million, P=938.3 million and P=707.9 million as of December 31, 2010, 2009 and 2008,
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
statement of financial position and on some financial instruments not recognized in the
consolidated statement 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 16).
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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:
December 31, 2010
Total
(In US Dollar)
Total
(in Philippine
Peso)
1-2 years >2-3 years >3-4 years >4-5 years >5 years
Fair Value
ECA-backed loans
from foreign banks
(Note 16)
Floating rate
US Dollar
London
Interbank
Offering
Rate (LIBOR)
6 months + margin US$1,211,956 US$1,132,585 US$1,181,953 US$1,232,086 US$1,284,346 US$7,291,709 US$13,334,635 P=584,590,468 P=392,351,552
US Dollar
LIBOR
3 months + margin 7,268,522 7,482,058 7,741,580 7,986,369 8,231,612 65,439,910 104,150,051 4,565,938,174 4,248,601,240
8,480,478 8,614,643 8,923,533 9,218,455 9,515,958 72,731,619 117,484,686 5,150,528,642 4,640,952,792
Commercial loans
from foreign banks
(Note 16)
Floating rate
US Dollar
LIBOR
6 months + margin 1,484,287 1,556,977 1,635,135 1,361,101 – – 6,037,500 264,683,997 234,616,294
US$9,964,765 US$10,171,620 US$10,558,668 US$10,579,556 US$9,515,958 US$72,731,619 US$123,522,186 P=5,415,212,639 P=4,875,569,086
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December 31, 2009
Total
(In US Dollar)
Total
(in Philippine
Peso)
1-2 years >2-3 years >3-4 years >4-5 years >5 years
Fair Value
Commercial loans
from foreign banks
(Note 16)
Floating rate
US Dollar
LIBOR
6 months + margin US$1,693,626 US$1,777,678 US$1,865,176 US$1,958,488 US$1,700,951 US$– US$8,995,919 P=415,611,458 P=365,629,445
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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, 2010, 2009 and 2008.
2010 2009 2008
Changes in interest rates 1.50% (1.50%) 1.50% (1.50%) 1.50% (1.50%)
Changes in pre-tax income (P=42,709,321) P=42,709,321 (P=17,090,428) P=17,090,428 (P=185,959,218) P=185,959,218
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 designated at FVPL.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant, of the Group’s pre-tax income, through the impact of
mark-to-market of financial assets designated at FVPL which are recognized in profit or loss.
2010
Changes in market interest rates 1.50% (1.50%)
Changes in pre-tax income (P=210,554,767) P=248,358,396
Other than the potential impact on the Group’s pre-tax income, there is no other effect on equity.
5. Fair Value Measurement
The methods and assumptions used by the Group in estimating the fair value of its financial
instruments are:
Cash and cash equivalents (excluding cash on hand), Receivables and Accounts payable and other
accrued liabilities
Carrying amounts approximate their fair values due to the relatively short-term maturity of these
instruments.
Investments in quoted equity securities
Fair values are based on quoted prices published in markets.
Amounts due from and due to related parties
Carrying amounts of due from/to related parties, which are receivable/payable and due on demand,
approximate their fair values.
Non-interest 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 6.93% in 2010 and 8.72% in 2009.
Derivative instruments
The fair values of fuel derivatives are based on quotes obtained from an independent counterparty.
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
curve used range from 3.29% to 3.72% as of December 31, 2010 and from 6.14% to 6.88% as of
December 31, 2009.
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The following table summarizes the carrying amounts and fair values of all the Group’s financial
instruments.
2010 2009
Carrying Value Fair Value Carrying Value Fair Value
Financial Assets
Financial assets at FVPL (Note 8)
Designated at FVPL
Quoted debt securities
Private P=2,086,089,903 P=2,086,089,903 P=– P=–
Government 1,017,480,478 1,017,480,478 – –
3,103,570,381 3,103,570,381 – –
Quoted equity securities 285,950,784 285,950,784 – –
3,389,521,165 3,389,521,165 – –
Derivative financial instruments
not designated as accounting
hedges 489,917,466 489,917,466 227,794,364 227,794,364
3,879,438,631 3,879,438,631 227,794,364 227,794,364
AFS investments (Note 8)
Quoted equity securities 114,532,000 114,532,000 – –
Loans and receivables
Cash and cash equivalents
(Note 7) 9,763,288,972 9,763,288,972 3,840,859,455 3,840,859,455
Receivables (Note 9)
Trade receivables 465,134,940 465,134,940 564,785,691 564,785,691
Interest receivable 134,819,376 134,819,376 – –
Due from related parties 86,576,474 86,576,474 40,389,601 40,389,601
Others* 175,878,801 175,878,801 189,759,389 189,759,389
Refundable deposits** (Note 14) 9,240,000 5,870,794 9,240,000 5,123,925
10,749,470,563 10,746,101,357 4,645,034,136 4,640,918,061
Total financial assets P=14,628,909,194 P=14,625,539,988 P=4,872,828,500 P=4,868,712,425
Financial Liabilities
Financial liabilities at amortized
cost:
Accounts payable and other
accrued liabilities***
(Note 15) P=5,117,153,241 P=5,117,153,241 P=4,663,929,800 P=4,663,929,800
Due to related parties 35,529,304 35,529,304 73,716,757 73,716,757
Long-term debt****(Note 16) 18,432,708,704 16,164,927,534 17,110,126,731 14,503,855,491
Others***** 923,451,428 923,451,428 910,665,374 910,665,374
Total financial liabilities P=24,508,842,677 P=22,241,061,507 P=22,758,438,662 P=20,152,167,422
* Include nontrade receivables from derivative counterparties and employees
** Included under ‘Other noncurrent assets’ account in the consolidated statements of financial position
*** Excluding government-related payables
**** Includes current portion
***** Included under ‘Other noncurrent liabilities’ in the consolidated statements of financial position.
The Group uses the following hierarchy for determining and disclosing the fair value of financial
assets designated at FVPL, derivative financial instruments and AFS investments 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.
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The table below shows the Group’s financial instruments carried at fair value hierarchy
classification:
2010 2009
Level 1 Level 2 Level 1 Level 2
Financial assets at FVPL (Note 8)
Designated at FVPL
Quoted debt securities
Private P=2,086,089,903 P=– P=– P=–
Government 1,017,480,478 – – –
3,103,570,381 – – –
Quoted equity securities 285,950,784 – – –
3,389,521,165 – – –
Derivative financial instruments
not designated as accounting
hedges – 489,917,466 – 227,794,364
3,389,521,165 489,917,466 – 227,794,364
AFS investments (Note 8)
Quoted equity securities 114,532,000 – – –
P=3,504,053,165 P=489,917,466 P=– P=227,794,364
There are no financial instruments measured at Level 3. There were no transfers within any
hierarchy level of fair value measurements for the years ended December 31, 2010 and 2009,
respectively.
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 revenue of the operating segment was mainly derived from rendering transportation services.
All sales are made to external customers.
Segment information for the reportable segment is shown in the following table:
2010 2009 2008
Revenue P=30,510,408,495 P=24,423,611,516 P=19,711,905,090
Net income (loss) 6,922,493,280 3,257,848,705 (3,259,888,005)
Depreciation and amortization 2,100,929,764 1,917,683,713 1,546,753,381
Interest expense 931,482,279 1,012,826,822 838,465,333
Interest income 237,495,750 8,848,551 14,231,024
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:
2010 2009 2008
Total segment revenue of reportable operating
segment P=29,088,798,959 P=23,311,006,311 P=19,682,144,058
Nontransport revenue and other income 1,421,609,536 1,112,605,205 29,761,032
Total revenue P=30,510,408,495 P=24,423,611,516 P=19,711,905,090
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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:
2010 2009 2008
Total segment income of reportable segment P=6,450,125,710 P=3,164,042,762 P=1,727,860,535
Add (deduct) unallocated items:
Nontransport revenue and other income 1,421,609,536 1,112,605,205 29,761,032
Nontransport expenses and other charges (931,482,279) (1,038,300,945) (4,940,188,091)
Benefit from (provision for) income tax (17,759,687) 19,501,683 (77,321,481)
Net income (loss) 6,922,493,280 3,257,848,705 (3,259,888,005)
Other comprehensive loss (2,714,902) – –
Total comprehensive income (loss) P=6,919,778,378 P=3,257,848,705 (P=3,259,888,005)
The Group’s major revenue-producing asset is the fleet of aircraft owned by the Group, which is
employed across its route network (Note 12).
The Group has no significant customer which contributes 10.00% or more to the revenues of the
Group.
7. Cash and Cash Equivalents
This account consists of:
2010 2009
Cash on hand P=14,424,238 P=14,308,223
Cash in banks 669,548,018 2,021,058,418
Short-term placements (Note 26) 9,079,316,716 1,805,492,814
P=9,763,288,972 P=3,840,859,455
Cash in banks earns interest at the respective bank deposit rates. Short-term placements, which
represent money market placements, are made for varying periods of up to three months
depending on the immediate cash requirements of the Group, and earn an average interest of
4.24%, 2.20% and 0.50% in 2010, 2009 and 2008, respectively, on short-term placements
denominated in Philippine peso. Moreover, short-term placements in US dollar earn an average of
1.20% in 2010.
Interest income on cash and cash equivalents, presented in the consolidated statements of
comprehensive income, amounted to P=133.5 million, P=8.8 million and P=11.3 million in 2010, 2009
and 2008, respectively.
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8. Investment and Trading Securities
Financial Assets at FVPL
This account consists of:
2010 2009
Designated at FVPL
Quoted debt securities:
Private P=2,086,089,903 P=–
Government 1,017,480,478 –
3,103,570,381 –
Quoted equity securities 285,950,784 –
3,389,521,165 –
Derivative financial instruments
not designated as accounting hedges 489,917,466 227,794,364
P=3,879,438,631 P=227,794,364
On June 30, 2010, the Group acquired from JGSHI the financial assets designated at FVPL and
AFS by execution of deed of assignment.
At inception, the Group classified this group of debt and equity securities as financial assets
designated at FVPL since their performance are managed and evaluated on a fair value basis in
accordance with the Group’s documented investment strategy. The information about these
financial instruments is reported to management on that basis.
As of December 31, 2010, the Group earned interest income of P=104.0 million from debt
securities as financial assets designated at FVPL.
The financial assets designated at FVPL are shown inclusive of unrealized gain amounting to
P=107.6 million.
Commodity options
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, 2010
and 2009, the Group has outstanding fuel hedging transactions with notional quantity of
845,000 US barrels and 420,000 US barrels, respectively. 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 options can be exercised at various
calculation dates with specified quantities on each calculation date. The options have various
maturity dates through December 31, 2011.
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Fair value changes on derivatives
The changes in fair value of all derivative financial instruments not designated as accounting
hedges follow:
2010 2009
Balance at beginning of period
Derivative assets P=227,794,364 P=–
Derivative liabilities – (1,945,985,534)
227,794,364 (1,945,985,534)
Net changes in fair value of derivatives 474,255,226 685,574,528
702,049,590 (1,260,411,006)
Fair value of settled instruments (212,132,124) 1,488,205,370
Balance at end of period P=489,917,466 P=227,794,364
Attributable to:
Derivative assets P=489,917,466 P=227,794,364
AFS Investment
This account represents investment in a quoted equity security. As of December 31, 2010, the
carrying value of AFS investment amounted to P=114.5 million.
In 2010, the Group recognized unrealized loss on AFS amounting to P=2.7 million, net of tax
amounting to P=1.2 million.
9. Receivables
This account consists of:
2010 2009
Trade receivables (Note 26) P=471,465,815 P=571,116,566
Interest receivable 134,819,376 –
Due from related parties (Note 26) 86,576,474 40,389,601
Others 402,132,066 428,945,323
1,094,993,731 1,040,451,490
Less allowance for credit losses 232,584,140 245,516,809
P=862,409,591 P=794,934,681
Trade receivables are non-interest bearing and generally have 30 to 90 days terms.
In 2010, there was reclassification of advances to suppliers from ‘Receivables’ to ‘Other current
assets’. The Group made the reclassification to make receivables purely financial assets since
advances to suppliers are to be settled through goods and services.
Others include receivable under a sublease agreement amounting to P=225.4 million with another
airline company denominated in US dollar. This receivable is fully provided with allowance for
credit losses.
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The changes in the allowance for credit losses on receivables follow:
2010
Trade
Receivables Others Total
Balance at beginning of year P=6,330,875 P=239,185,934 P=245,516,809
Unrealized foreign exchange gain on
allowance for credit losses – (12,932,669) (12,932,669)
Provision for credit losses (Note 21) 2,127,309 – 2,127,309
Write-off (2,127,309) – (2,127,309)
Balance at end of year P=6,330,875 P=226,253,265 P=232,584,140
2009
Trade
Receivables Others Total
Balance at beginning of year P=6,330,875 P= 29,523,507 P=35,854,382
Provision for credit losses (Note 21) – 209,662,427 209,662,427
Balance at end of year P=6,330,875 P=239,185,934 P=245,516,809
As of December 31, 2010 and 2009, the specific allowance for credit losses on trade receivables
and other receivables amounted to P=6.3 million and P=226.3 million, and P=6.3 million and
P=239.2 million, respectively. In 2010, the Group has written off receivables amounting to
P=2.1 million. The provision for credit loss in 2009 relates to other receivables.
10. Expendable Parts, Fuel, Materials and Supplies
This account consists of:
2010 2009
At cost:
Expendable parts P=246,212,162 P=172,061,131
Fuel 100,926,756 155,635,257
Materials and supplies 22,893,117 21,276,100
P=370,032,035 P=348,972,488
The cost of expendable and consumable parts, and materials and supplies recognized as expense
(included under ‘Repairs and maintenance’ account in the consolidated statement of
comprehensive income) for years ended December 31, 2010, 2009 and 2008 amounted to
P=172.2 million, P=94.5 million and P=63.9 million, respectively.
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11. Other Current Assets
This account consists of:
2010 2009
Prepaid rent P=135,568,016 P=127,689,069
Advances to suppliers 50,042,184 141,523,959
Prepaid insurance 39,089,719 42,014,640
Prepaid fuel tax 36,306,139 23,456,483
Others 3,067,745 6,454,765
P=264,073,803 P=341,138,916
Prepaid rent pertains to advance rental on aircraft under operating lease and on office spaces in
airports (Note 27).
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12. Property and Equipment
The composition and movements in this account follow:
Passenger
Aircraft
(Notes 16 and 28) Engines Rotables
2010
Ground
Support
Equipment
EDP
Equipment,
Mainframe and
Peripherals
Leasehold
Improvements
Transportation
Equipment
Sub-total
Cost
Balance at January 1, 2010 P=29,082,449,841 P=1,861,014,616 P=645,242,966 P=226,290,672 P=401,958,225 P=123,328,105 P=132,976,761 P=32,473,261,186
Additions 4,617,905,673 – 249,857,038 61,171,112 79,198,359 – 13,870,536 5,022,002,718
Reclassification 1,480,356,826 – – – – 33,634,663 – 1,513,991,489
Disposals/others (845,724,477) (164,105,247) (96,278,255) – – (132,812) (13,718,075) (1,119,958,866)
Balance at December 31, 2010 34,334,987,863 1,696,909,369 798,821,749 287,461,784 481,156,584 156,829,956 133,129,222 37,889,296,527
Accumulated Depreciation
and Amortization
Balance at January 1, 2010 5,608,304,763 500,303,926 87,047,351 125,785,164 306,959,766 84,204,878 68,991,712 6,781,597,560
Depreciation and amortization 1,802,923,773 95,647,460 46,311,472 42,305,054 60,803,986 15,353,198 19,343,695 2,082,688,638
Disposals/others (91,815,044) (9,535,490) (1,802,621) – – (29,514) (13,405,902) (116,588,571)
Balance at December 31, 2010 7,319,413,492 586,415,896 131,556,202 168,090,218 367,763,752 99,528,562 74,929,505 8,747,697,627
Net Book Value at
December 31, 2010 P=27,015,574,371 P=1,110,493,473 P=667,265,547 P=119,371,566 P=113,392,832 P=57,301,394 P=58,199,717 P=29,141,598,900
(Forward)
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Furniture,
Fixtures and
Office
Equipment
Communication
Equipment
Special
Tools
2010
Maintenance
and Test
Equipment
Other
Equipment
Construction
In-progress
Total
Cost
Balance at January 1, 2010 P=54,222,266 P=6,174,321 P=11,933,090 P=5,697,385 P=59,654,657 P=3,409,527,269 P=36,020,470,174
Additions 10,402,157 1,062,698 457,490 712,992 7,558,844 3,027,480,866 8,069,677,765
Reclassification – – – – – (1,513,991,489) –
Disposals/others – – – – – (134,848,017) (1,254,806,883)
Balance at December 31, 2010 64,624,423 7,237,019 12,390,580 6,410,377 67,213,501 4,788,168,629 42,835,341,056
Accumulated Depreciation and Amortization
Balance at January 1, 2010 34,648,972 3,407,186 10,720,871 5,596,765 29,327,430 – 6,865,298,784
Depreciation and amortization 6,933,482 940,470 498,330 124,379 9,744,465 – 2,100,929,764
Disposals/others – – – – – – (116,588,571)
Balance at December 31, 2010 41,582,454 4,347,656 11,219,201 5,721,144 39,071,895 – 8,849,639,977
Net Book Value at December 31, 2010 P=23,041,969 P=2,889,363 P=1,171,379 P=689,233 P=28,141,606 P=4,788,168,629 P=33,985,701,079
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Passenger
Aircraft
(Note 16) Engines Rotables
2009
Ground
Support
Equipment
EDP
Equipment,
Mainframe and
Peripherals
Leasehold
Improvements
Transportation
Equipment
Sub-total
Cost
Balance at January 1, 2009 P=27,135,964,502 P=1,445,988,273 P=452,887,018 P=172,712,317 P=327,772,983 P=110,312,277 P=84,131,582 P=29,729,768,952
Additions 1,946,485,339 415,026,343 227,259,326 53,578,355 74,185,242 – 48,845,179 2,765,379,784
Reclassification – – – – – 13,015,828 – 13,015,828
Disposals/others – – (34,903,378) – – – – (34,903,378)
Balance at December 31, 2009 29,082,449,841 1,861,014,616 645,242,966 226,290,672 401,958,225 123,328,105 132,976,761 32,473,261,186
Accumulated Depreciation
and Amortization
Balance at January 1, 2009 3,922,697,367 421,807,112 53,823,013 92,674,545 261,769,001 73,985,295 54,125,739 4,880,882,072
Depreciation and amortization 1,685,607,396 78,496,814 34,167,620 33,110,619 45,190,765 10,219,583 14,865,973 1,901,658,770
Disposals – – (943,282) – – – – (943,282)
Balance at December 31, 2009 5,608,304,763 500,303,926 87,047,351 125,785,164 306,959,766 84,204,878 68,991,712 6,781,597,560
Net Book Value at December 31, 2009 P=23,474,145,078 P=1,360,710,690 P=558,195,615 P=100,505,508 P=94,998,459 P=39,123,227 P=63,985,049 P=25,691,663,626
Furniture,
Fixtures and
Office
Equipment
Communication
Equipment
Special
Tools
2009
Maintenance
and Test
Equipment
Other
Equipment
Construction
In-progress
Total
Cost
Balance at January 1, 2009 P=45,918,941 P=4,886,541 P=11,187,696 P=5,599,173 P=39,896,606 P=2,800,329,434 P=32,637,587,343
Additions 8,303,325 1,287,780 745,394 98,212 19,758,051 622,213,663 3,417,786,209
Reclassification – – – – – (13,015,828) –
Disposals/others – – – – – – (34,903,378)
Balance at December 31, 2009 54,222,266 6,174,321 11,933,090 5,697,385 59,654,657 3,409,527,269 36,020,470,174
Accumulated Depreciation and Amortization
Balance at January 1, 2009 28,088,534 2,590,665 10,198,179 5,584,468 21,214,435 – 4,948,558,353
Depreciation and amortization 6,560,438 816,521 522,692 12,297 8,112,995 – 1,917,683,713
Disposals – – – – – – (943,282)
Balance at December 31, 2009 34,648,972 3,407,186 10,720,871 5,596,765 29,327,430 – 6,865,298,784
Net Book Value at December 31, 2009 P=19,573,294 P=2,767,135 P=1,212,219 P=100,620 P=30,327,227 P=3,409,527,269 P=29,155,171,390
*SGVMC115503*

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Passenger Aircraft Held as Securing Assets Under Various Loans
In 2005 and 2006, the Group entered into Export Credit Agency (ECA)-backed loan facilities
(ECA loans) to partially finance the purchase of ten Airbus A319 aircraft. In 2007, the Group also
entered into a commercial loan facility to partially finance the purchase of two Airbus A320
aircraft, one CFM 565B4/P engine, two CFM 565B5/P engines and one Quick Engine Change
(QEC) Kit. In 2008, the Group entered into both ECA loans and commercial loans to partially
finance the purchase of six Avion de Transport Regional (ATR) 72-500 turboprop aircraft. Then
in 2009, ECA loans were availed to finance the purchase of two ATR 72-500 turboprop aircraft.
In 2010, the Group entered into ECA loan to finance the purchase of three Airbus A320 aircraft.
Under the terms of the ECA loan and the commercial loan facilities (Note 16), 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 by the guarantors which are CPAHI and JGSHI. Failure to pay
the obligation will allow the respective lenders to foreclose the securing assets.
As of December 31, 2010 and 2009, the carrying amounts of the securing assets (included under
the ‘Property and equipment’ account) amounted to P=26.6 billion and P=23.6 billion, respectively.
On July 18, 2010, one ATR 72-500 turboprop aircraft was damaged due to a hard landing at the
Ninoy Aquino International Airport (NAIA). On November 30, 2010, the Group received
insurance proceeds and terminated the related loan. Accordingly, rights over the aircraft went to
the insurers.
Operating Fleet
As of December 31, 2010 and 2009, the Group’s operating fleet follows:
2010 2009
Owned (Note 16):
Airbus A319 10 10
Airbus A320 5 2
ATR 72-500 7 8
Under operating lease (Note 27):
Airbus A320 9 9
31 29
Construction in-progress represents the cost of aircraft 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, 2010 and 2009, the Group’s capitalized pre-delivery payments as
construction-in-progress amounted to P=4.8 billion and P=3.4 billion, respectively.
As of December 31, 2010 and 2009, the gross amount of fully depreciated property and equipment
which are still in use by the Group amounted to P=430.4 million and P=345.0 million, respectively.
*SGVMC115503*

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13. Investment in Joint Ventures
This account represents the Group’s 49.00% and 35.00% interest in A-plus and SIAEP,
respectively. These jointly controlled entities 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. A-plus
was incorporated 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.
The movements in the carrying values of the Group’s investments in A-plus and SIAEP follow:
2010
A-plus SIAEP Total
Cost P=87,012,572 P=304,763,900 P=391,776,472
Accumulated Equity in Net Income (Loss)
Balance at beginning of period 21,590,662 (47,011,448) (25,420,786)
Equity in net income (loss) for the period 30,485,667 (5,237,133) 25,248,534
Dividends received (21,959,482) – (21,959,482)
Balance at end of period 30,116,847 (52,248,581) (22,131,734)
Net Carrying Value P=117,129,419 P=252,515,319 P=369,644,738
2009
A-plus SIAEP Total
Cost
Balance at beginning of period P=87,012,572 P=270,950,400 P=357,962,972
Additions – 33,813,500 33,813,500
Balance at end of period 87,012,572 304,763,900 391,776,472
Accumulated Equity in Net Income (Loss)
Balance at beginning of period 24,157,910 (4,660,978) 19,496,932
Equity in net income (loss) for the period 16,876,347 (42,350,470) (25,474,123)
Dividends received (19,443,595) – (19,443,595)
Balance at end of period 21,590,662 (47,011,448) (25,420,786)
Net Carrying Value P=108,603,234 P=257,752,452 P=366,355,686
Selected financial information of A-plus and SIAEP follows:
2010 2009
A-plus SIAEP A-plus SIAEP
Total current assets P=389,229,753 P=198,601,718 P=320,311,261 P=180,571,520
Total assets 440,003,102 827,498,709 395,640,695 824,131,114
Total current liabilities 199,744,327 136,071,974 163,605,255 79,651,426
Total liabilities 199,744,327 136,071,974 172,079,904 79,651,426
Net income (loss) 62,215,647 (14,963,237) 34,441,525 (121,001,344)
The fiscal year-end of A-plus and SIAEP is every March 31.
The undistributed earnings of A-plus included in the consolidated retained earnings amounted to
P=30.1 million and P=21.6 million as of December 31, 2010 and 2009, respectively, which is not
currently available for dividend distribution unless declared by A-plus.
The Group has no share of any contingent liabilities or capital commitments as of
December 31, 2010 and 2009.
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14. Other Noncurrent Assets
This account consists of:
2010 2009
Creditable withholding tax P=105,122,460 P=106,718,423
Refundable deposits 9,240,000 9,240,000
Others 213,484,694 131,790,499
P=327,847,154 P=247,748,922
Refundable deposits pertain to security deposits provided to lessor for aircraft under operating
lease.
Others include option and commitment fees.
15. Accounts Payable and Other Accrued Liabilities
This account consists of:
2010 2009
Accrued expenses P=2,756,352,038 P=2,680,026,500
Trade payables (Note 26) 1,995,958,241 1,653,174,194
Airport and other related fees payable 435,286,079 330,026,161
Advances from agents and others 159,557,017 116,676,592
Accrued interest payable (Note 16) 118,666,608 160,873,352
Other payables 132,666,336 59,034,908
P=5,598,486,319 P=4,999,811,707
Accrued Expenses
The Group’s accrued expenses include accruals for:
2010 2009
Maintenance P=637,721,177 P=867,799,823
Compensation and benefits 519,578,237 189,958,024
Advertising and promotion 292,832,984 189,072,676
Landing and take-off fees 237,135,007 255,145,076
Training costs 221,810,780 147,092,481
Ground handling charges 185,902,242 174,394,466
Navigational charges 185,830,569 156,160,771
Repairs and services 115,290,273 213,394,866
Rent (Note 27) 71,405,104 59,030,433
Fuel 66,914,013 120,563,391
Aircraft insurance 41,059,836 40,622,537
Catering supplies 38,441,922 38,819,586
Reservation costs 11,773,991 12,087,036
Others 130,655,903 215,885,334
P=2,756,352,038 P=2,680,026,500
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Others represent accrual of professional fees, security, utilities and other expenses.
Trade Payables
Trade payables, which consist mostly of payables related to the purchase of inventories, are
non interest-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.
Airport and Other Related Fees Payable
Airport and other related fees payable are amounts payable to the Philippine Tourism Authority
and Air Transportation Office on aviation security, terminal fees and travel taxes.
Interest Payable
Interest payable is related to long-term debt and normally settled quarterly throughout the year.
Advances from Agents and Others
Advances from agents and others represent cash bonds required from major sales and ticket
offices or agents.
Other Payables
Other payables are non interest-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.
16. Long-term Debt
This account consists of:
2010
Interest Rates Maturities US Dollar
Philippine Peso
Equivalent
ECA loans 3.37% to 5.83% Various
dates
through
2022
US$242,476,310 P=10,630,161,421
Commercial loans from
foreign banks
0.86% to 2.54%
(US Dollar LIBOR
6 months + margin or
3 months + margin) 117,484,686 5,150,528,642
359,960,996 15,780,690,063
4.11% to 5.67% Various
dates
1.64% to 2.12% through
(US Dollar LIBOR 2017
54,455,626 2,387,334,644
6 months + margin) 6,037,500 264,683,997
60,493,126 2,652,018,641
420,454,122 18,432,708,704
Less current portion 46,898,810 2,056,043,837
US$373,555,312 P=16,376,664,867
*SGVMC115503*

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2009
Interest Rates Maturities US Dollar
Philippine Peso
Equivalent
ECA loans 3.37% to 5.83% Various
dates
through
2018 US$300,086,362 P=13,863,989,944
Commercial loans from
foreign banks
4.11% to 5.67% Various
dates
4.75% to 5.25% through
(US Dollar LIBOR 2017
61,266,782 2,830,525,329
6 months + margin) 8,995,919 415,611,458
70,262,701 3,246,136,787
370,349,063 17,110,126,731
Less current portion 40,319,559 1,862,763,608
US$330,029,504 P=15,247,363,123
ECA Loans
In 2005 and 2006, the Group entered into ECA-backed loan facilities to partially finance the
purchase of ten Airbus A319 aircraft. The security trustee of the ECA loans established CALL, a
special purpose company, which purchased the aircraft from the supplier and leases such aircraft
to the Parent Company pursuant to twelve-year finance lease agreements. The quarterly rental
payments made by the Parent Company to CALL correspond to the principal and interest
payments made by CALL to the ECA-backed lenders. The quarterly lease rentals to CALL 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 2008, the Group entered into ECA-backed loan facilities to partially finance the purchase of six
ATR 72-500 turboprop aircraft. The security trustee of the ECA loans established BLL, a special
purpose company, which purchased the aircraft from the supplier and leases such aircraft to the
Parent Company pursuant to ten-year finance lease agreements. The semi-annual rental payments
made by the Parent Company to BLL corresponds to the principal and interest payments made by
BLL to the ECA-backed lenders. The semi-annual lease rentals to BLL are guaranteed by JGSHI.
The Parent Company has the option to purchase the aircraft for a nominal amount at the end of
such leases.
In 2009, the Group entered into ECA-backed loan facilities to fully finance the purchase of two
ATR 72-500 turboprop aircraft. The security trustee of the ECA loans established SLL, a special
purpose company, which purchased the aircraft from the supplier and leases such aircraft to the
Parent Company pursuant to ten-year finance lease agreements. The semi-annual rental payments
made by the Parent Company to SLL corresponds to the principal and interest payments made by
SLL to the ECA-backed lenders. The semi-annual lease rentals to SLL are guaranteed by JGSHI.
The Parent Company has the option to purchase the aircraft for a nominal amount at the end of
such leases.
In 2010, the Group entered into ECA-backed loan facilities to fully finance the purchase of three
Airbus A320 aircraft. The security trustee of the ECA loans established SALL, a special purpose
company, which purchased the aircraft from the supplier and leases such aircraft to the Parent
Company pursuant to twelve-year finance lease agreements. The quarterly rental payments made
by the Parent Company to SALL corresponds to the principal and interest payments made by
SALL to the ECA-backed lenders. The quarterly lease rentals to SALL are guaranteed by JGSHI.
The Parent Company has the option to purchase the aircraft for a nominal amount at the end of
such leases.
*SGVMC115503*

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The terms of the ECA-backed facilities, which are the same for each of the ten Airbus A319
aircraft, eight ATR 72-500 turboprop aircraft and three 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 three Airbus A320 aircraft, and equal principal
repayments for the last six Airbus A319 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 related to CALL and BLL shall be at fixed rates,
which range from 3.78% to 5.83% in 2010, 2009 and 2008. Interest on loans from ECA
lenders related to SLL shall be fixed at 3.37% for one aircraft and US dollar LIBOR 6 months
plus margin for the other aircraft. Interest on loans from the ECA lenders related to SALL for
the three Airbus A320 aircraft shall be US dollar LIBOR 3 months plus margin.
• As provided under the ECA-backed facility, CALL, BLL, SLL and SALL 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 and SALL 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
CALL or BLL or SLL or SALL becomes insolvent, (e) failure to discharge any attachment or
sequestration order against CALL’s, BLL’s, SLL’s and SALL’s assets, (f) entering into 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, 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.
• 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.
On November 30, 2010, the Parent Company pre-terminated the lease agreement with BLL.
The outstanding balance of the related loans and accrued interests amounting to P=638.1 million
(US$14.5 million) and P=13.0 million (US$0.3 million), respectively, were also pre-terminated.
The proceeds from the insurance claim on the related aircraft were used to settle the loan and
accrued interest. JGSHI was released as guarantor on the related loans.
As of December 31, 2010 and 2009, the total outstanding balance of the ECA loans amounted to
P=15.8 billion (US$360.0 million) and P=13.9 billion (US$300.1 million), respectively. Interest
expense amounted to P=623.4 million, P=732.8 million and P=614.6 million in 2010, 2009 and 2008,
respectively.
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Commercial Loans from Foreign Banks
In 2007, the Group entered into a commercial loan facility to partially finance the purchase of
two 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 ILL, a special purpose
company, 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 aircraft, (b) six-year finance
lease arrangement for the engines and (c) five-year finance lease arrangement for the QEC Kit.
The quarterly rental payments of the Parent Company correspond to the principal and interest
payments made by ILL to the commercial lenders and are guaranteed by JGSHI. 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.
In 2008, the Group also entered into a commercial loan facility, in addition to ECA-backed loan
facility, to partially finance the purchase of six ATR 72-500 turboprop aircraft. The security
trustee of the commercial loan facility established BLL, a special purpose company, which
purchased the aircraft from the supplier and leases such aircraft to the Parent Company. The
commercial loan facility is payable in 12 equal, consecutive, semi-annual installments starting six
months after the utilization date.
The terms of the commercial loans from foreign banks follow:
• Term of ten years starting from the delivery date of each Airbus A320 aircraft.
• Terms of six and five years for the engines and QEC Kit, respectively.
• Term of six years starting from the delivery date of each ATR 72-500 turboprop aircraft.
• Annuity style principal repayments for the two Airbus A320 aircraft and six ATR 72-500
turboprop aircraft, and equal principal repayments for the engines and the QEC Kit. Principal
repayments shall be made on a quarterly and semi-annual basis for the two Airbus A320
aircraft, engines and the QEC Kit and six ATR 72-500 turboprop aircraft, respectively.
• Interest on the commercial loan facility for the two Airbus A320 aircraft shall be
US dollar LIBOR 3 months plus margin. On February 29, 2009, the interest rates on the two
Airbus A320 aircraft, engines and QEC Kit were fixed ranging from 4.11% to 5.67%.
• Interest on the commercial loan facility for the six ATR 72-500 turboprop aircraft shall be
US dollar LIBOR 6 months plus margin.
• The commercial loan facility provides for material breach as an event of default.
• Upon default, 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, 2010 and 2009, the total outstanding balance of the commercial loans from
foreign banks amounted to P=2.7 billion (US$60.5 million) and P=3.2 billion (US$70.3 million),
respectively. Interest expense amounted to P=137.7 million, P=173.1 million and P=157.8 million in
2010, 2009 and 2008, respectively.
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17. Other Noncurrent Liabilities
This account consists of:
2010 2009
ARO P=2,070,145,159 P=1,194,091,048
Accrued maintenance 923,451,428 910,665,374
Pension liability (Note 22) 210,156,100 172,317,200
P=3,203,752,687 P=2,277,073,622
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 an internal estimate made by the work of both third
party and the Group’s engineers in 2007, which includes estimates of certain redelivery costs at
the end of the operating aircraft lease (see Note 3).
In 2010, the Group employed third party professionals to reevaluate the Group’s estimates on
ARO. In relation to this, the Group recorded additional ARO asset and liability amounting to
P=705.7 million.
The rollforward analysis of the Group’s ARO follows:
2010 2009
Balance at beginning of year
P=1,194,091,048 P=1,258,139,119
Additional provision for the year* 705,651,245 –
Accretion expense** 170,402,866 106,955,190
Capitalized during the year*** – 211,006,826
Payment of restorations during the year – (382,010,087)
Balance at end of year
P=2,070,145,159 P=1,194,091,048
*Related to the change in accounting estimates for the recognized ARO liability
**Included under interest expense account in the consolidated statements of comprehensive income
***Related to recognized ARO liability for two additional Airbus A320 aircraft under operating lease agreements entered in
2009
Accrued Maintenance
This account pertains to accrual of maintenance costs of aircraft based on the number of flying
hours but will be settled beyond one year based on management’s assessment.
18. Equity
The details of the Parent Company’s common stock follow:
2010 2009 2008
Beginning of year P=582,574,750 P=582,574,750 P=335,000,000
Issuance of stock dividends – – 112,000,000
Issuance of shares during the year 30,661,800 – 135,574,750
End of year P=613,236,550 P=582,574,750 P=582,574,750
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The Parent Company has 1.34 billion authorized shares at P=1.00 par value per share. As of
December 31, 2010 and 2009, all of the Parent Company’s issued common stocks are outstanding.
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 debt-to-capital ratios follow:
2010 2009
(a) Long term debt (Note 16)
P=18,432,708,704 P=17,110,126,731
(b) Capital 17,907,049,902 7,254,961,854
(c) Debt-to-capital ratio (a/b) 1.0:1 2.4:1
The JGSHI Group’s policy is to keep the debt to capital ratio at the 2:1 level as of
December 31, 2010 and 2009. Such ratio is currently being managed on a group level by the
Group’s ultimate parent.
Appropriation of Retained Earnings
On May 21, 2007, the Parent Company’s BOD appropriated P=300.0 million from its unrestricted
retained earnings as of December 31, 2006 for purposes of the Parent Company’s re-fleeting
program. The BOD approved further the appropriation of P=2.7 billion from its unrestricted
retained earnings as of December 31, 2007. The appropriation will be used for purposes of the
Group’s re-fleeting and expansion programs, and settlement of certain maturing loans.
On March 4, 2008, the Parent Company’s BOD approved the additional appropriation of
P=1.0 billion from its unrestricted retained earnings as of December 31, 2007 for the same purpose.
Subsequently on September 22, 2008, the Parent Company’s BOD and stockholders approved the
reversal of the total appropriated retained earnings of P=4.0 billion and such amount was made part
of the unrestricted retained earnings.
Issuance of Common Shares of Stock
On October 26, 2010, the Parent Company listed with the PSE its common stock, wherein it
offered 212,419,700 shares to the public at P=125.00 per share. Of the total shares sold, 30,661,800
shares are newly issued shares with total proceeds amounting to P=3.8 billion. The Parent
Company incurred transaction costs incidental to the IPO amounting to P=100.4 million, which is
charged against ‘Capital paid in excess of par value’ in the consolidated statement of financial
position.
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19. Ancillary Revenue
Ancillary revenue consists of:
2010 2009 2008
Excess baggage fees P=778,395,570 P=733,642,196 P=465,318,108
Rebooking, refunds and cancellation fees 423,397,044 690,763,508 344,043,895
Others 1,135,315,885 697,841,275 429,857,087
P=2,337,108,499 P=2,122,246,979 P=1,239,219,090
Others pertain to revenues from in-flight sales and services provided through reservation system
such as advance seat selection, website administration as well as commissions.
20. Operating Expenses
Flying Operations
Flying operations consists of:
2010 2009 2008
Aviation fuel expense
P=9,807,825,079 P=7,360,258,422 P=8,502,271,999
Flight deck 1,365,724,876 1,171,174,972 877,482,118
Aircraft insurance 152,573,085 146,903,306 123,828,503
Others 91,365,472 178,678,223 104,123,356
P=11,417,488,512 P=8,857,014,923 P=9,607,705,976
Aircraft and Traffic Servicing
Aircraft and traffic servicing consists of:
2010 2009 2008
Airport charges
P=1,405,341,791 P=1,625,449,978 P=1,159,209,189
Ground handling 758,912,700 768,108,059 583,514,333
Others 297,552,706 238,275,212 204,186,956
P=2,461,807,197 P=2,631,833,249 P=1,946,910,478
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.
21. General and Administrative Expenses
This account consists of staff-related expenses, provision for credit losses on receivables (Note 9),
travel and transportation, rent, non-aircraft repairs and maintenance, utilities and insurance.
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22. 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 traffic and servicing, repairs and
maintenance, reservation and sales, general and administrative, and passenger service.
Defined Benefit Plan
The Parent Company has an unfunded, noncontributory, defined benefit plan covering
substantially all of its regular employees. The benefits are based on years of service and
compensation on the last year of employment.
As of January 1, 2010, 2009 and 2008, the assumptions used to determine pension benefits of the
Parent Company follow:
2010 2009 2008
Average remaining working life 10 years 9 years 9 years
Discount rate 9.93% 13.49% 10.22%
Salary rate increase 5.50% 5.50% 7.00%
As of December 31, 2010, 2009 and 2008, the discount rate used in determining the pension
liability is 8.65%, 9.93% and 13.49%, which is determined by reference to market yields at the
statement of financial position date on Philippine government bonds.
The amounts recognized as pension liability (included under ‘Other noncurrent liabilities’ account
in the consolidated statements of financial position) follow (Note 17):
2010 2009
Present value of defined benefit obligation (PVO) P=230,193,900 P=160,237,500
Unrecognized actuarial gain (loss) (20,037,800) 12,079,700
Pension liability at end of year P=210,156,100 P=172,317,200
Movements in unrecognized actuarial gain (loss) follow:
2010 2009
Balance at beginning of year P=12,079,700 P=62,577,400
Amortization of actuarial gain – (5,937,300)
Actuarial loss due to PVO (32,117,500) (44,560,400)
Balance at end of year (P=20,037,800) P=12,079,700
Movements in the defined benefit liability follow:
2010 2009
Balance at beginning of year P=172,317,200 P=153,990,700
Pension expense during year 40,229,800 19,261,800
Benefits paid during year (2,390,900) (935,300)
Balance at end of year P=210,156,100 P=172,317,200
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Components of pension expense included in the consolidated statements of comprehensive income
follow:
2010 2009 2008
Current service cost P=24,318,200 P=12,867,400 P=14,592,600
Interest cost 15,911,600 12,331,700 10,337,000
Past service cost – – 12,384,600
Amortization of actuarial gain – (5,937,300) (672,500)
Total pension expense P=40,229,800 P=19,261,800 P=36,641,700
Changes in the present value of the defined benefit obligation follow:
2010 2009
Balance at beginning of year P=160,237,500 P=91,413,300
Current service cost 24,318,200 12,867,400
Interest cost 15,911,600 12,331,700
Benefits paid (2,390,900) (935,300)
Actuarial loss 32,117,500 44,560,400
Balance at end of year P=230,193,900 P=160,237,500
Amounts for the current and previous periods follow:
2010 2009 2008 2007 2006
Present value of retirement
obligation P=230,193,900 P=160,237,500 P=91,413,300 P=101,178,300 P=124,264,500
Experience adjustments –
(gain)/loss (1,435,700) 1,445,500 1,199,000 (10,200,000) (13,402,800)
23. Other Expenses
This account consists mainly of bank charges.
24. Income Taxes
Provision for (benefit from) income tax consists of:
2010 2009 2008
Current:
MCIT P=1,595,963 P=4,585,763 P=–
Deferred 16,163,724 (24,087,446) 77,321,481
P=17,759,687 (P=19,501,683) P=77,321,481
Provision for income tax pertains to RCIT or minimum corporate income tax (MCIT) and
deferred income tax.
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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.
Effective November 1, 2005, RA No. 9337, an act amending the National Internal Revenue Code
(NIRC of 1997), provides that the RCIT rate shall be 35.00% until January 1, 2009. Starting
January 1, 2009 the RCIT rate shall be 30.00%. Interest allowed as a deductible expense is
reduced by an amount equivalent to 42.00% of interest income subjected to final tax starting
November 1, 2005 until December 31, 2008. Starting January 1, 2009, interest allowed as
deductible expense shall be reduced by 33.00% of interest income subjected to final tax.
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, the NIRC of 1997 allows the Parent Company to deduct from its taxable income for
the current year its accumulated net operating losses carried over (NOLCO) from the immediately
preceding three consecutive taxable years.
Details of the Parent Company’s NOLCO and MCIT are as follows:
NOLCO
MCIT
Year Incurred Amount Expired Balance Expiry Year
2008 P=81,434,888 P=– P=81,434,888 2011
2009 79,186,012 – 79,186,012 2012
2010 533,255,953 – 533,255,953 2013
P=693,876,853 P=– P=693,876,853
Year Incurred Amount Expired Balance Expiry Year
2009 P=4,585,763 P=– P=4,585,763 2012
2010 1,595,963 – 1,595,963 2013
P=6,181,726 P=– P=6,181,726
The Parent Company has the following registrations with the BOI as a new operator of air
transport on a non-pioneer status under the Omnibus Investments Code of 1987 (Executive
Order 226):
Batch Date of Registration
Registration
Number ITH Period
Number of
Aircraft
First December 14, 2005 2005-213 2007-2010 20
Second June 4, 2008 2008-119 2010-2013 8
Third November 3,2010 2010-180 2011-2016 3
31
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On the above registrations, the Parent Company can avail of bonus years in certain specified cases
but the aggregate ITH availment (basic and bonus years) shall not exceed eight years.
As of December 31, 2010, the Parent Company has complied with externally imposed capital
requirements set by the BOI in order to avail the ITH incentives for the first and second batch
aircraft of registered activity (Note 1).
The components of the Group’s deferred tax assets and liabilities follow:
2010 2009
Deferred tax assets on:
ARO - liability P=621,043,542 P=358,227,314
NOLCO 208,163,056 48,186,270
Allowance for impairment losses on
receivables 69,775,242 73,655,043
Unrealized foreign exchange loss 56,819,216 –
Accrued retirement costs 63,046,830 51,695,160
MCIT 6,181,726 4,585,763
Unrealized loss on AFS investment* 1,163,530 –
1,026,193,142 536,349,550
Deferred tax liabilities on:
Unrealized foreign exchange gain 586,658,102 369,252,479
ARO - asset 248,190,060 110,720,283
Double depreciation 194,506,665 194,506,665
Unrealized gain on derivative asset 117,679,009 –
Unrealized gain on financial assets designated
at FVPL 32,289,377 –
1,179,323,213 674,479,427
Net deferred tax liabilities P=153,130,071 P=138,129,877
* Movement under other comprehensive income (loss)
The Group’s recognized deferred tax assets and deferred tax liabilities are expected to be reversed
more than twelve months after the statement of financial position date.
The Group has the following gross deductible and taxable temporary differences which are
expected to reverse within the ITH period, and for which deferred tax assets and deferred tax
liabilities, respectively, were not set up on account of the Parent Company’s ITH.
2010 2009
Deductible temporary differences:
Accrued expenses P=297,646,860 P=24,081,919
Taxable temporary differences:
ARO - asset P=307,286,348 294,671,234
Derivative asset 97,654,104 227,794,364
Foreign exchange gain - net – 209,902,587
P=404,940,452 P=732,368,185
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A reconciliation of the statutory income tax rate to the effective income tax rate follows:
2010 2009 2008
Statutory income tax rate 30.00% 30.00% 35.00%
Adjustments resulting from:
Income subject to ITH (29.71) (27.33) 5.03
Interest income subjected to final tax (0.49) (0.08) 0.01
Unrecognized deferred tax
assets and liabilities 0.41 (3.46) (37.62)
Nondeductible items 0.16 0.03 –
Equity in net (income ) loss of JV (0.11) 0.24 0.15
Effect of change in income tax rates – – (5.00)
Effective income tax rate 0.26% (0.60%) (2.43%)
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 Parent Company recognized EAR expenses (allocated under different expense
accounts in the consolidated statements of comprehensive income) amounting to P=4.8 million,
P=12.7 million, and P=10.7 million in 2010, 2009 and 2008, respectively.
25. Earnings Per Share
The following reflects the income and share data used in the basic/dilutive EPS computations:
2010 2009 2008
(a) Net income (loss) attributable to common
shareholders
P=6,922,493,280 P=3,257,848,705 (P=3,259,888,005)
(b) Weighted average number of common
shares for basic EPS 587,685,050 582,574,750 458,297,986
(c) Basic/diluted earnings (loss) per share P=11.78 P=5.59 (P=7.11)
The Group has no dilutive potential common shares in 2010, 2009 and 2008.
26. Related Party Transactions
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 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.
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The significant transactions and outstanding balances of the Group with the related parties follow.
Consolidated Statement of Financial Position
Due to
Due from Related
Related Parties Parties
Cash and Cash
Equivalents
Trade
Receivables
Trade
Payables
Ultimate parent company
JGSHI December 31, 2010 P=– P=– P=350,000 P=– P=–
December 31, 2009 – – 42,357,610 – P=6,200
CPAHI December 31, 2010 – 58,814,274 – – –
December 31, 2009 – 900,670 – – –
JV in which the Parent
Company is a venturer
A-plus December 31, 2010 – 26,929,793 – – 71,153,167
December 31, 2009 – 35,416,334 – – 11,647,754
SIAEP December 31, 2010 – 832,407 – – –
December 31, 2009 – 4,072,597 – – –
Other related parties
Robinsons Savings December 31, 2010 4,552,678,192 – 858,368 5,631 150,859
Bank (RSB) December 31, 2009 225,301,492 – 563,510 48,544 511,746
Universal Robina December 31, 2010 – – 33,709,732 2,183,937 6,241,941
Corporation (URC) December 31, 2009 – – 30,666,495 1,809,752 2,157,837
Digitel Telecommunication December 31, 2010 – – – 1,671,261 –
(DIGITEL) December 31, 2009 – – – 1,964,812 241,740
Robinsons Land December 31, 2010 – – – 281,841 21,113
Corporation (RLC) December 31, 2009 – – 129,142 314,339 315,858
Summit Publishing, December 31, 2010 – – – 855,930 –
Inc. (SPI) December 31, 2009 – – – 630,178 –
JG Petrochemical December 31, 2010 – – – 263,484 –
Corporation (JGPC) December 31, 2009 – – – 3,396 –
Robinsons Inc. December 31, 2010 – – 611,204 1,131,598 3,677,235
December 31, 2009 – – – 500,914 –
Unicon Insurance Brokers December 31, 2010 – – – – 3,512
December 31, 2009 – – – – –
Total December 31, 2010 P=4,552,678,192 P=86,576,474 P=35,529,304 P=6,393,682 P=81,247,827
December 31, 2009 P=225,301,492 P=40,389,601 P=73,716,757 P=5,271,935 P=14,881,135
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Consolidated Statement of Comprehensive Income
Sale of Air
Year Transportation Service Interest Income Repairs and Maintenance
JV in which the Parent
Company is a venturer
A-plus 2010 P=– P=– P=259,226,381
2009 – – 260,736,827
2008 – – 178,272,202
SIAEP 2010 263,606 – –
2009 – – 4,053,972
2008 – – –
Other related parties
RSB 2010 715,413 28,960,516 –
2009 692,339 240,915 –
2008 – 10,890 –
URC 2010 23,185,728 – –
2009 21,576,590 – –
2008 17,997,037 – –
DIGITEL 2010 15,921,059 – –
2009 11,499,788 – –
2008 10,196,168 – –
RLC 2010 6,035,538 – –
2009 7,723,286 – –
2008 2,566,877 – –
SPI 2010 2,484,213 – –
2009 2,026,424 – –
2008 841,467 – –
JGPC 2010 830,006 – –
2009 40,398 – –
2008 146,366 – –
Robinsons Inc. 2010 11,592,290 – –
2009 – – –
2008 – – –
Total 2010 P=61,027,853 P=28,960,516 P=259,226,381
2009 P=43,558,825 P=240,915 P=264,790,799
2008 P=31,747,915 P=10,890 P=178,272,202
*Other related parties pertain to entities which are subsidiaries of JGSHI and therefore, entities under common control.
There are no impairment losses recorded against outstanding balances with related parties as of
December 31, 2010, 2009 and 2008. Also, these transactions are unsecured, interest-free and
short-term in nature.
The Group’s significant transactions with related parties follow:
1. In 2010 and 2009, the Group provides non interest-bearing advances to JGSHI recorded as
‘Due from related parties’. In 2010, total advances made to JGSHI amounted to P=3.7 billion,
which was settled on June 30, 2010 by assigning debt and equity securities amounting to
P=3.7 billion (Note 28). In 2009, total advances made to JGSHI amounted to P=1.8 billion,
which were settled in the same year.
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2. Expenses advanced by the Group on behalf of CPAHI. The said expenses are subject to
reimbursement and are recorded under ‘Receivables’ in the consolidated statements of
financial position.
3. 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.
4. 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
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’ in the consolidated statements of comprehensive income and any
unpaid amount as of statement of financial position date as trade payable under ‘Accounts
payable and other accrued liabilities’.
5. The Group maintains deposit accounts and short-term investments with RSB which is reported
as ‘Cash and cash equivalents’. 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 as ‘Due to related parties’.
6. The Group provides air transportation services to certain related parties, for which unpaid
amounts are recorded as trade receivables under ‘Receivables’ 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.
The compensation of the Group’s key management personnel by benefit type follows:
2010 2009 2008
Short-term employee benefits P=118,221,095 P=92,213,212 P=84,568,078
Post-employment benefits 1,528,853 3,404,135 259,203
P=119,749,948 P=95,617,347 P=84,827,281
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.
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27. Commitments and Contingencies
Operating Aircraft Lease Commitments
The Group entered into operating lease agreements with certain leasing companies which cover
the following aircraft:
A320 aircraft
The following table summarizes the specific lease agreements on nine Airbus A320 aircraft:
Date of Lease
Agreement Original Lessors New Lessors No. of Units Lease Term
December 23, 2004 CIT Aerospace International
(CITAI)
Wilmington Trust SP
Services (Dublin)
Limited*
2 May 2005 - May 2012
June 2005 - June 2012
April 23, 2007 Celestial Aviation Trading 17 Inishcrean Leasing 1 October 2007 - October 2016
Limited (CAT 17)
Limited (Inishcrean)**
May 29, 2007 CITAI – 4 March 2008 - March 2014
April 2008 - April 2014
May 2008 - May 2014
October 2008 - October 2014
March 14, 2008 Celestial Aviation Trading 19 GY Aviation Lease 2 January 2009 - January 2017
Limited (CAT 19)
0905 Co. Limited***
* Effective November 21, 2008 for the first aircraft and December 9, 2008 for the second aircraft.
** Effective June 24, 2009.
*** Effective March 25, 2010.
On March 14, 2008, the Group entered into an operating lease agreement with CAT 19 for the
lease of two Airbus A320 aircraft, which were delivered in 2009. On the same date, the Group
also entered into another lease agreement with Celestial Aviation Trading 23 Limited (CAT 23)
for the lease of two additional Airbus A320 aircraft to be received in 2012. In November 2010,
the Group signed an amendment to the operating lease agreements with CAT 23, advancing the
delivery of the two Airbus A320 aircraft from 2012 to 2011.
Lease agreements with CITAI, CAT 17 and CAT 19 were amended to effect the novation of lease
rights by the original lessors to new lessors as allowed under the existing lease agreements.
Boeing 757 aircraft
On August 22, 2001, the Group entered into aircraft operating lease agreements with PALSI, Inc.
(PALSI) and Pegasus Aviation IV, Inc. (Pegasus) for the lease of one B757-236 aircraft from
each company. The respective lease terms are for a period of seven years. The delivery dates of
the aircraft which were leased from Pegasus and PALSI were December 13, 2001 and
February 18, 2002, respectively. The lease agreements expired on December 13, 2008 and
February 18, 2009, and the two aircraft were returned to the lessors in June and October 2009.
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Under the aforementioned aircraft lease agreements, the Group paid PALSI and Pegasus monthly
maintenance expenses based on billing statements (included in ‘Accounts payable and other
accrued liabilities’ account in the consolidated statements of financial position) throughout the
lease term.
On March 18, 2006, the Group entered into a sub-lease agreement with Air Slovakia for the sublease
of the two B757-236 aircraft which were leased from PALSI and Pegasus. The sub-lease
agreements were for a period of two years, which expired on February 18, 2009 and
December 13, 2008. Rent income earned (included in the consolidated statements of
comprehensive income) under the aforementioned sub-lease agreement amounted to
P=131.7 million and P=204.3 million in 2009 and 2008, respectively.
Future minimum lease payments under the above-indicated operating aircraft leases follow:
2010 2009 2008
US dollar
Philippine peso
equivalent
US dollar
Philippine peso
equivalent US dollar
Philippine peso
equivalent
Within one year US$37,805,531 P=1,657,394,460 US$33,749,946 P=1,559,247,483 US$27,900,136 P=1,325,814,463
After one year but not more
than five years 113,948,252 4,995,491,378 118,485,725 5,474,040,499 97,286,394 4,623,049,443
Over five years 8,408,350 368,622,089 25,541,362 1,180,010,948 35,857,829 1,703,964,034
US$160,162,133 P=7,021,507,927 US$177,777,033 P=8,213,298,930 US$161,044,359 P=7,652,827,940
Lease expenses relating to aircraft leases (included in ‘Aircraft and engine lease’ account in the
consolidated statements of comprehensive income) amounted to P=1.6 billion, P=1.7 billion and
P=1.1 billion in 2010, 2009 and 2008, respectively.
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:
2010 2009 2008
Within one year P=101,622,518 P=92,283,350 P=76,145,138
After one year but not more than
five years 443,485,392 406,896,291 432,109,782
Over five years 124,367,033 230,752,642 280,466,642
P=669,474,943 P=729,932,283 P=788,721,562
Lease expenses relating to both cancellable and non-cancellable non-aircraft leases (allocated
under different expense accounts in the consolidated statements of comprehensive income)
amounted to P=231.2 million, P=239.7 million and P=149.2 million in 2010, 2009 and 2008,
respectively.
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Aircraft and Spare Engine Purchase Commitments
As of December 31, 2009, the Group has existing commitments to purchase 15 additional new
Airbus A320 aircraft, which are scheduled for delivery between 2010 and 2014, and one spare
engine to be delivered in 2011. In 2010, the Group exercised its option to purchase five Airbus
A320 aircraft and entered into a new commitment to purchase two Airbus A320 aircraft to be
delivered between 2011 and 2014. As of December 31, 2010, the Group has existing
commitments to purchase 22 new Airbus A320 aircraft, three of which were delivered on
October 28, December 10 and December 22, 2010, respectively. The remaining 19 Airbus A320
aircraft are scheduled to be delivered between 2011 and 2014, and one spare engine is to be
delivered in 2011.
Also in 2007, the Group has a commitment to purchase six ATR 72-500 turboprop aircraft and has
exercised an option to purchase additional four ATR 72-500 turboprop aircraft. These turboprop
aircraft will cater to destinations in the country’s smaller airports. The Group has taken delivery
of the initial six aircraft in 2008 and the remaining two were received during the first quarter of
2009. One ATR 72-500 turboprop aircraft is scheduled for delivery in March 2011. The Group
terminated the purchase commitment for one ATR 72-500 turboprop aircraft.
The above-indicated commitments relate to the Group’s re-fleeting and expansion programs.
Capital Expenditure Commitments
The Group’s capital expenditure commitments relate principally to the acquisition of aircraft fleet,
aggregating to P=31.5 billion as of December 31, 2010.
December 31, 2010
Philippine peso
US dollar equivalent
Within one year US$153,097,113 P=6,711,777,434
After one year but not more than
five years 565,169,279 24,777,021,191
US$718,266,392 P=31,488,798,625
Contingencies
The Group has pending suits and claims for sums of money against certain general sales agents
which are either pending decision by the courts or being contested, the outcome of which are not
presently determinable. 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
proceedings will have a material adverse effect on the Group’s financial position and results of
operations.
The Parent Company has a pending tax preassessment, the outcome of which is not presently
determinable.
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28. Supplemental Disclosures to the Consolidated Statements of Cash Flows
The principal noncash activities of the Group were as follows:
a. On June 30, 2010, JGSHI settled its payable to the Group through transfer of quoted debt and
equity securities amounting to P=3.7 billion and accrued interest receivable amounting
to P=71.4 million. The transfer price was at fair value. These investments are classified by the
Group as designated financial assets at FVPL and AFS investments amounting to P=3.5 billion
and P=118.4 million, respectively (Notes 8 and 26).
b. On February 28, 2010, the Group sold an engine for P=89.5 million with a book value of
P=72.2 million to a third party maintenance service provider (buyer). The transaction was
settled through direct offset against the Group’s US-dollar denominated liability to the buyer
amounting to P=88.3 million.
c. On December 31, 2010, the Group recognized a liability based on the schedule of pre-delivery
payments amounting to P=286.0 million with a corresponding debit to ‘Construction-in
progress’ account. The liability was paid on January 3, 2011.
d. In 2010, the additions in ‘Passenger aircraft’ account include increase in ARO asset
amounting to P=705.7 million due to change in accounting estimates. In 2009, the additions in
‘Passenger aircraft’ account include capitalized ARO asset related to new operating lease
agreements amounting to P=211.0 million (Note 17). The above capitalized ARO asset has
corresponding recognition of ARO liability with the same amount.
e. In 2010, the Group acquired three passenger aircraft by assuming direct liabilities (Notes 12
and 16). This transaction is considered as a non-cash financing activity.
Presentation of cash flows from financing activities
Beginning 2010, cash flows arising from financing activities with related parties are reported on a
net basis since turnover for cash receipts and payments for these items is quick, the amounts are
large, and the maturities are short. The 2009 and 2008 cash flows presentation have been aligned
with the 2010 cash flows presentation.
29. Events After the Statement of Financial Position Date
From January 1, 2011 up to March 17, 2011, a total of 5,554,280 common shares of the Parent
Company were acquired by JGSHI.
On February 28, 2011, the BOD of the Parent Company approved the creation and
implementation of a share buyback program (SBP). The SBP will involve up to P=2.0 billion
worth of the Parent Company’s common share. The SBP shall commence upon approval and
shall end upon utilization of the said amount, or as may be otherwise determined by the BOD.
On March 7, 2011, the Group received one ATR 72-500 turboprop aircraft.
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On March 17, 2011, the BOD of the Parent Company approved the declaration of a regular cash
dividend in the amount of P=2.00 per share and a special cash dividend in the amount of P=1.00 per
share from the unrestricted retained earnings of the Parent Company to all stockholders of record
as of April 14, 2011 and payable on May 12, 2011.
*SGVMC115503*

SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax: (632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULE
The Stockholders and the Board of Directors
Cebu Air, Inc.
2nd Floor, Doña Juanita Marquez Lim Building
Osmeña Boulevard, Cebu City
We have audited in accordance with Philippine Standards on Auditing the consolidated financial
statements of Cebu Air, Inc. and Subsidiaries (the Group) included in this Form 17-A and have issued
our report thereon dated March 17, 2011. Our audits were made for the purpose of forming an opinion
on the basic consolidated financial statements taken as a whole. The schedules listed in the Index to
Consolidated Financial Statements and Supplementary Schedules are the responsibility of the Group’s
management and are presented for purposes of complying with Securities Regulation Code Rule 68.1,
and are not part of the basic consolidated financial statements. These schedules have been subjected
to the auditing procedures applied in the audit of the basic consolidated financial statements and, in
our opinion, fairly state in all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Vicky B. Lee-Salas
Partner
CPA Certificate No. 86838
SEC Accreditation No. 0115-AR-2
Tax Identification No. 129-434-735
BIR Accreditation No. 08-001998-53-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641532, January 3, 2011, Makati City
March 17, 2011
*SGVMC115503*
A member firm of Ernst & Young Global Limited