pal holdings, inc

PAL Holdings, Inc. Sustainability Report 2019

Contents

03 Chairman’s Message

04 About PAL Holdings, Inc. Philippine Airlines

PAL express

Our Vision, Mission and Core Values

Buong-Pusong Alaga

12 Company Highlights Awards and Recognition

Customer Satisfaction

Fleet Information

Route Network

Economic Performance

Challenges and Outlook

27 About this Report

30 Health and Safety

41 Employee Training and Development

51 Energy Efficiency

58 Other Essential Topics Corporate Governance

Data Privacy and Security

Our People and Values

Labor Management Practices

Corporate Social Responsibilities

Purpose, Reporting Standards, Scope and Coverage

Materiality Assessment

2

The Chairman's Message

DR. LUCIO C. TAN Chairman and Chief Executive Officer

To our dear stakeholders,

PAL Holdings, Inc. (PHI)’s flight path to a higher level of service excellence was affirmed by Skytrax in 2019 when we won the World’s Most Improved Airline award after being re-certified as a 4-Star Global Airline - all thanks to the combined efforts of our two airline companies, Philippine Airlines (PAL) and PAL express (PALex). Our investments have produced an enhanced safety and service culture, upgraded products and processes, and a stronger global network anchored on a young fleet of advanced aircraft and highly professional flight and ground crews.

Sustainability Begins with the Focus on People We commit to a sustainable business that focuses on the health, safety, knowledge, skills, values and attitudes of our most valuable assets – our employees, supported by robust training, state-of- the-art equipment and cutting-edge innovations such as virtual training modules.

Responsible Citizenship in the Aviation Industry PAL and PALex are active participants in the Carbon Offsetting and Reduction Scheme for International

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Aviation (CORSIA). It is a global climate change initiative that sets a rigorous target of “carbon-neutral growth” by capping future jet engine carbon emissions at 2020 levels and cutting net emissions to half of the 2005 levels by 2050.

Environment: The Engine of Our Sustainable Success We seek to achieve those targets by maximizing fuel- saving measures and deepening a company-wide culture of environmental protection. Having replaced gas-guzzling older fleet with new-generation fuel- efficient aircraft, PHI will prepare over the long term for a switch to sustainable aviation fuels.

Winning with The Heart of the Filipino The flag carrier works constantly to boost tourism, facilitate trade, and uplift the national economy by bridging our island nation, providing direct links to key international markets, and serving the worldwide diaspora of Filipinos along with business and leisure travelers from all over. In carrying out this sacred mission, we will employ discipline, creativity and technology to ensure sustainability for our stakeholders, always representing the Best of the Filipino.

About PAL Holdings, Inc.

PAL Holdings, Inc. (the Parent Company or PHI) was incorporated in the Philippines on May 10, 1930 to engage in the business of a holding company. On October 5, 1979, the Parent Company applied and was granted an extension of its corporate life by the Philippine Securities and Exchange Commission (SEC) for another 50 years from May 1980.

The Parent Company and its subsidiaries are primarily engaged in air transport of passengers and cargo within the Philippines and between the Philippines and several international destinations. The Group operates through its major subsidiaries: Philippine Airlines, Inc., the Philippine national flag carrier, and Air Philippines Corporation, a subsidiary under common control that was indirectly acquired through Zuma Holdings Management Corporation in 2017.

PHI's registered office address is 8th Floor, PNB Financial Center, President Diosdado Macapagal Ave., CCP Complex, Pasay City, Metro Manila.

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About PAL Holdings, Inc. Philippine Airlines

Pioneering in end-to-end airline operations that constitute an industry of its own, Philippine Airlines, Inc. (PAL) lives on with its original name and the national colors, shining through for almost eight decades. PAL stemmed from the Philippine Aerial Taxi Company established in 1931 by co-founder Andres Soriano, who shut it down in 1939 and replaced it with Philippine Air Lines two years later. Braving the imminence of war, PAL had its inaugural flight with only five passengers from Makati to Baguio on March 15, 1941.

A private entity for much of its existence, PAL was brought under government ownership in the 1970s and 1980s, reverting to private hands in the early 1990s. Today, PAL is the only privately-owned major flag carrier in Southeast Asia. Its Chairman and CEO, Dr. Lucio C. Tan, is PAL's longest-serving chief executive.

Through the years, designated as the "national flag carrier" by R.A. 2232, PAL has been recognized to play a central role in boosting the growth of the Philippine economy and the emergence of a nationwide tourism industry.

PAL's flights helped to bridge the various regions of the archipelagic nation, while forging links to the rest of the world that promoted trade, commerce and public mobility. PAL is a major partner to nation- building as it brings the best of the Philippines to the world and the best of the world to the country.

PAL also had the privilege of flying Philippine presidents on most of their state visits, as well as both St. John Paul II and Pope Francis during their respective visits to the Philippines and beyond. A multitude of beauty queens, celebrities and other VIPs also availed PAL's services through the years.

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About PAL Holdings, Inc. Philippine Airlines (cont’d)

During calamities and times of urgent public need, PAL has engaged in relief services by flying home Filipino evacuees from crisis-torn countries in the Middle East, Africa and elsewhere, while providing critical services to communities in need after typhoons and other natural disasters.

Today, PAL is the Philippines' largest international airline and the only full-service Filipino air carrier offering Business Class, Premium Economy and Regular Economy services. Its growing fleet, one of the world's youngest, consists of modern high-technology aircraft such as the Boeing 777 along with the Airbus A350 and A330 for long-haul routes and the A320/A321 family for regional and domestic routes.

PAL's network now stretches across the world. The flag carrier operates from four hub airports (Manila, Cebu, Clark and Davao) in the Philippines to an inclusive total of 32 domestic destinations and 41 points in Asia, Australia/Oceania, the Middle East, Europe and North America. PAL operates the country's only direct air links to mainland U.S.A., Hawaii, Canada, New Zealand and Western Europe, as well as to Sapporo (Japan) and Brisbane (Australia).

PAL is a member of the International Air Transport Association (IATA), Association of Asia Pacific Airlines (AAPA), Air Carriers Association of the Philippines (ACAP), Flight Safety Foundation (FSF), and the National Fire Safety (NFS).

PAL is part of the AAPA Environment Working Group, a sponsor of the Philippine Eagle Foundation. PAL also signed up with the United for Wildlife Transport Taskforce Buckingham Palace Declaration, which aims to reduce illegal trade of wildlife.

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About PAL Holdings, Inc. PAL...Shining Through the Years First airline in Asia (1941)

First Asian airline to cross the Pacific (1946)

First South East Asian airline to fly to Europe (1947)

First airline to be honored by Les Chaines de Rotisseurs (1979)

First Asian airline to fly to China (1979)

First to have B747-200 with Skybeds (1980)

First Philippine carrier to be IOSA-certified (2006)

First to launch PAL Mobile App in the Philippines (2009)

First to accept BancNet ATM cards as form of payment online (2009)

First to show nationwide crowd-sourced inflight safety video (2017)

First to have a Skytrax 4-star rating in the Philippines (2018)

Change of hands over the years

February 1941

Philippine Airlines was established as a private company

September 1948

Government became the

majority stockholder

January 1965

Government relinquished control over PAL, only to be reassumed in 1977

January 1992

PAL was privatized thru PR

Holdings

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September 1998

Asian financial crisis led to suspension of

operations, but resumed two weeks

after

June 1999

PAL is placed under a 10-

year rehabilitation program

October 2007

PAL exits from receivership two

years ahead of the 10-year plan

April 2012

San Miguel Corporation takes

management control of PAL

October 2014

Lucio Tan Group reassumes

management control of PAL

About PAL Holdings, Inc. PAL express (PALex)

Air Philippines Corporation, currently doing business under the name and style of Philippine Airlines or PAL express (PALex), was incorporated in the Philippines on February 8, 1995 while commercial operation began on February 1, 1996.

It is the 3rd biggest airline in the country operating Airbus A321-200s, A320-200s, and De Havilland DASH 8- 400s and DASH 8-300s. It was in 1999 when the Lucio Tan Group of Companies took over management of PALex. The Lucio Tan Group of Companies’ entry into picture resulted in a big improvement in the Company as it allowed PALex to continue to provide low-cost air travel to the riding public.

The increase in routes and passenger sales allowed PALex to significantly increase its partnership with Philippine Airlines, including the merging of timetables and ticket sales. The strong relationship with the country’s flag carrier also allowed PALex to move into the PAL terminal at the Ninoy Aquino International Airport. PALex was known for its safety, professionalism and first-class service.

PALex is the 2nd Philippine carrier that was included in the IATA Operational Safety Audit Registry in 2014.

The airline was also certified by SGS last December 2018 on the ISO 9001:2015 Quality Management System. This certification is renewed annually.

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About PAL Holdings, Inc. PAL express (PALex) (cont’d)

PAL express is a member of the Air Carriers Association of the Philippines (ACAP), Philippine Society for Quality (PSQ), People Management Association of the Philippines (PMAP), Philippine Society for Talent Development (PSTD), and the Employers Confederation of the Philippines (ECOP).

February December February August April February March December

1995 1995 1996 1997 2008 2018 2018 2018

Air Philippines Issuance of an Air APC first R.A. 8339 was enacted Under Dr. Lucio C. PAL express / PAL express APC/PAL express Corporation (APC) Carrier Operating commercial flight APC’s 25- year Tan’s leadership, Philippine Airlines renewed IATA was certified ISO

incorporation Certificate by the from Manila (T4) franchise to establish, APC was was awarded the Operational 9001:2015 Quality Air Transportation to Zamboanga operate and maintain rebranded as 4-Star Safety Audit or Management

Office (ATO) City domestic & international air

transport services

PAL express Airline Ratings by Skytrax

IOSA System (QMS)

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Our Vision, Mission and Core Values

Vision

• To be the airline of choice in all markets we serve • To be the source of pride for Filipinos everywhere

Mission

• To deliver safe, reliable, efficient and pleasant travel experience exceeding passenger expectations • To provide a satisfying career to our employees and adequate returns to stockholders • To represent the Best of the Philippines, the Best of Filipino to the world

Core Values

• We put our customers first • We grow a successful and

empowered team • We act with passion and aim

for excellence • We embrace and drive

change • We exemplify the Best of the

Filipino spirit

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Buong-Pusong Alaga

Our signature Buong-Pusong Alaga (wholehearted service) is our unwavering promise to every traveler. More than ever, we are dedicated to giving above-and-beyond service in each flight. With rigorous training programs and leadership empowerment workshops, our partners and crew members always ensure that each passenger feels the Heart of the Filipino.

To deliver our service aspiration of a Heartwarming Filipino Travel Experience, we created stronger employee engagement and frontliner service training programs. Through these training programs, our Frontliners learn five service attributes that guide our behavior:

Magaling (Efficient and Skillful) Maaasahan (Reliable and Trusted) Maalaga (Caring and Hospitable) Magalang (Polite) Malambing (Affectionate)

Our Frontliners continue to exhibit these attributes in their daily interactions to build stronger ties with customers and to endear us to many.

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Awards & Recognition

In 2016, we embarked on a company-wide journey to provide best in- class experience in four key aspects of our passengers’ journey. In 2018, the PAL Group, received a 4-Star rating from Skytrax, the international air transport rating organization. Across Skytrax's global quality metrics that measure product and service quality, we have proven our excellence and commitment to world-class standards. In 2019, Skytrax has re-certified the PAL Group as a 4-Star Global Airline based on comprehensive quality audits performed last December 2018 and January 2019.

The PAL Group won the "World’s Most Improved Airline Award" for 2019 as the carrier that achieved the biggest leap in product and service quality among a survey of over 350 leading airlines worldwide.

Skytrax also revealed that PAL is now ranked as the Top 30 Airline in the world, rising 19 spots from Top 49 in 2018 and a full 60 spots from Top 90 in 2013. PAL is also ranked high in other important categories:

1. Top 10 World's Best Business Class Comfort Amenities 2. Top 10 Best Airline Staff in Asia 3. Top 11 World's Best Cabin Crew 4. Top 11 World's Best Airport Services 5. Top 11 World's Best Premium Economy Class 6. Top 14 World's Best Economy Class

How we got that Star...

Buong-Pusong Alaga as our Service Culture

Aircraft Fleet Modernization

Product Upgrades and Innovation

Facility Upgrades

Chairman’s Message

About PHI

Company Highlights Awards & Recognition Customer Satisfaction Fleet Information Route Network Economic Performance Challenges & Outlook

About This Report

Health & Safety

Employee Training & Dev’t

Energy Efficiency

Other Essential Topics

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Awards & Recognition 2019 Asia Pacific Tambuli Awards for Christmas Campaign PAL's 2018 Christmas video "Regalo" bagged the Bronze award under Humanity and Culture - Seasons Celebration category at the prestigious 2019 Asia Pacific Tambuli Awards last June 2019.

The Asia Pacific Tambuli Awards recognizes creative and effective brands with purpose. The video, a collaboration with PAL’s award-winning partner-agency, McCann World Group Philippines, promotes the importance of OFWs coming home and reuniting with their families during Christmas. It has gained 5.5 million views on Facebook and YouTube and was highly talked about online during the holidays.

Other entries for the 2019 Asia Pacific Tambuli came from Australia, New Zealand, Middle East, India, Japan, Singapore, Malaysia and other Asia Pacific (APAC) countries.

Talent Accelerator Award for Immerse Virtual Reality Cabin Crew Training The PAL Group has been named "Talent Accelerator for Immersive Virtual Reality Cabin Crew Training" in the 3rd Annual IDC Digital Transformation (DX) Awards Philippines. IDC DX Awards recognizes outstanding organizations that have made critical breakthroughs in business transformation.

As part of its digital transformation program, the PAL Group started using Virtual Reality (VR) technology for cabin crew training in March 2018.

Through collaboration with Veer Immersive Technologies, Inc., training modules on aircraft familiarization and cabin door operations for Airbus A320 and A321 aircraft were developed. The program - approved by the Civil Aviation Authority of the Philippines - simulates inflight situations that allow trainees to acquire and practice thought processes and skills under realistic, safe, and virtual environment. This program has helped cabin crew members acquire needed skills to respond more effectively to inflight situations.


About PHI


About This Report

Health & Safety


Energy Efficiency


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Awards & Recognition Dr. Tan Receives ‘ALAB’ Award for Business Excellence The Anvil Business Club (formerly the Association of Young Filipino-Chinese Entrepreneurs), conferred on PAL Chairman and CEO Dr. Lucio C. Tan the “Anvil Leadership Award for Business Excellence" or ALAB award in recognition of his inspiring business success, outstanding community leadership and philanthropy. The Anvil Business Club is an organization of dynamic entrepreneurs and professionals committed to propagate positive Confucian and Filipino values and to pursue excellence in their own fields for the economic and social progress of the country.

For Anvil, Dr. Tan represents a 'burning flame' ('alab' in Filipino) which galvanizes the cause-oriented organizations and foundations he leads to take concrete action for the benefit of sectors who need help the most -- the marginalized and the underprivileged. The awarding rites were held on June 2019 at the Century Park Hotel - Manila.

Dr. Tan, who is the Chairman Emeritus of the Federation of Filipino Chinese Chambers of Commerce and Industry, Inc., was cited for being a "positive role model of philanthropy, hard work, humility, resourcefulness and leadership".

Aside from being PAL Chairman, he is also the chairman of LT Group, Inc., Philippine National Bank (PNB), Asia Brewery, Tanduay Distillers, the Tan Yan Kee Foundation named in memory of his late father, University of the East (UE) and many others.


About PHI


About This Report

Health & Safety


Energy Efficiency


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Awards & Recognition Asia’s Top 100 in the 10th Employer Branding Awards PAL express, owned by PAL Holdings, Inc., gained recognition recently as one of the Top 100 Employers in the region. The Employer Branding Institute of India held this year’s 10th Asia’s Best Employer Brand Awards at the Pan Pacific Hotel in Singapore to honor top performing companies who adopted the best practices in Employer Branding, Talent Management, Talent Development and Talent Innovation.

Specifically, the international awards program recognized PAL express for its efforts to promote employee welfare and engagement through social media, simplify employment processes with the use of automation, nurture talents through career development programs and boost talent acquisition to become a top-of-mind employer choice.

Last August 2019, the same award-giving body included PAL express in the Philippines Best Employer Brand

The Asia’s Best Employer Brand Award proves that PAL express is recognized in the international arena for its commitment to create a high potential organization shaping future leaders and innovators, aside from being a desirable Asian workplace.

PAL express AVP for Human Resources Lora Liza S. Dioquino receives the award from the Employer Branding Institute - India at the 10th Asia's Best Employer


About PHI


About This Report

Health & Safety


Awards because of the airline’s successful efforts to combine vision with action in the execution of HR strategy, cultivating competencies vital for a “future- ready” company and initiating effective Employee Benefits and Employee Engagement programs.

Source: https://business.mb.com.ph/2019/09/20/pal-express- among-asias-top-employers/

In the image: PAL express President, Bonifacio Sam, with Lora Liza S. Dioquino in our Manila office. Mr. Sam further explained this recognition: “The award is significant as it recognizes our commitment to take care of our people by developing new talent and strengthening skills of the current workforce. This accolade is the result of strong collaboration between PAL express management and our workforce."

Brand Awards ceremony in Singapore last August 2019

Energy Efficiency


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prestigious ISO 9001 certification

Awards & Recognition ISO 9001:2015 Certification from SGS The ISO 9001:2015 certification demonstrates a company's compliance to the set of guidelines developed by the International Organization for Standardization. The standard is used by organizations to evidence their ability to consistently provide products and services that meet customer and regulatory requirements and to demonstrate continuous improvement.

With this, our customers and stakeholders can be assured that we will continue to deliver excellent customer service beyond our signature Buong-Pusong Alaga brand of service.

Air Philippines Corporation, doing business as PAL express, is the first full-service carrier in the country to be awarded the

last December 2018.

Copy of the ISO 9001:2015 (Quality Management System Standard) Certification awarded by SGS.

PAL express President Bonifacio U. Sam during the kickoff ceremonies of the program in 2017.

Celebration when PAL express passed the 2nd phase of the ISO 9001:2015 audit last Dec 15, 2018 and was recommended for the certification.

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About PHI


About This Report

Health & Safety


Energy Efficiency


Customer Satisfaction (CSAT)

Over the years, detractors have significantly reduced while promoters have increased

48%

43% 45% 45%

30%

Promoter

Philippine Airlines and PAL express solicit close-to-real-time customer feedback through the Post Trip Survey. The survey is conducted through a self-accomplished questionnaire designed to measure overall customer experience


About PHI

Company Highlights Awards & Recognition Customer Satisfaction

31% 26% 24% Detractor metrics, to determine touchpoint customer satisfaction with drill-

Fleet Information Route Network

CSAT has been

continuously improving

58%

50% 51%

2016

62% 2019

2016 2019

Intent to Fly With PAL

+2% Increased from 73% (2018)

to 75% (2019)

down to airport and inflight experience and to draw customer feedback and identify improvement areas. E-mail survey invitations are sent daily to all customers who have flown with Philippine Airlines and have provided valid e-mail addresses. Over the years, we have seen continuous improvement in our metrics.

Economic Performance Challenges & Outlook

About This Report

Health & Safety


Energy Efficiency


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Fleet Information

Philippine Airlines Fleet Size:

61 Average Age:

4.8 years As of December 31, 2019

18 Airbus A321 CEO

10 Boeing 777-300ER

6 Airbus A321 NEO SR

6 Airbus A350-900

1 Airbus A321 NEO XR

15 Airbus A330-300

5 Airbus A320-200


About PHI


About This Report

Health & Safety


Energy Efficiency


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Fleet Information

PAL express Fleet Size:

36 Average Age:

8 years As of December 31, 2019

6 Airbus A321 NEO

13 Airbus A320-200


About PHI


About This Report

13 Dash 8-400

4 Dash 8-300

Health & Safety


Energy Efficiency


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Route Network - International


About PHI


About This Report

41 International Destinations

Auckland / Bali (Denpasar) / Bangkok / Beijing / Brisbane / Busan / Dammam / Doha / Dubai / Fukuoka / Guam / Guangzhou / Hanoi / Ho Chi Minh / Hong Kong / Honolulu / Jakarta / Kuala Lumpur / London / Los Angeles / Macau / Manila / Melbourne / Nagoya / New York / Osaka / Phnom Penh / Port Moresby / Quanzhou / Riyadh / San Francisco / Sapporo / Seoul / Shanghai / Singapore / Sydney / Taipei / Tokyo (Haneda/Narita) / Toronto / Vancouver / Xiamen

Health & Safety


Energy Efficiency


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Route Network - Domestic

32 Domestic Destinations

Antique (San Jose) / Bacolod / Basco / Busuanga / Butuan / Cagayan de Oro / Calbayog / Camiguin / Catarman / Caticlan / Cebu / Clark / Cotabato / Davao / Dipolog / Dumaguete / General Santos / Iloilo / Kalibo / Laoag / Legazpi / Manila / Ozamiz / Pagadian / Puerto Princesa / Roxas / San Vicente / Siargao / Tacloban / Tagbilaran / Tawi-Tawi / Zamboanga


About PHI


About This Report

Health & Safety


Energy Efficiency


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Economic Performance Revenues rose in 2019 primarily due to increase in passengers. The Company introduced several new routes that serve as feeder for the core routes, thereby increasing the number of roundtrips and available seat kilometers. As we develop the new routes, available seat kilometers increased by 6% while revenue passenger kilometers grew by 5%, thereby resulting in a slightly lower passenger load factor. Cargo revenues suffered a slight setback in 2019 due to reduced demand for cargo transport.

Operating expenses dropped mainly due to the reduction of flying operations costs. Overall, the expenses and other financing charges which grew significantly because of the impact of the Philippine Financial Reporting Standard (PFRS) 16 on Leases overtook revenues, leading to a total comprehensive loss of Php10.2billion.

Financial Performance (in millions of Pesos)

For 2020, amidst the COVID-19 challenges, PAL and PALex are exploring new sources of income while implementing cost saving initiatives.

Key Operating Statistics


About PHI


Revenue

154,537

150,481

Other Charges

-1,445

2018

2019

2018

2019

Expenses

156,466

151,664

Total Comp. Loss

-2,843

2018

2019

2018

2019

About This Report

Health & Safety


Energy Efficiency


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-14,073 -10,199

Year-on-Year 2018 2019

Change

Number of Roundtrips 9% 56,525 61,396

Revenue Hours 7% 320,209 343,256

Number of Passengers 4% 16,085,975 16,761,050

Revenue Passenger Kilometer (000) 5% 40,365,999 42,329,104

Available Seat Kilometer (000) 6% 52,122,143 55,308,139

Passenger Load Factor 1% 77.4% 76.5%

Freight Ton Kilometer (000) 1% 683,906

676,956

Revenue Ton Kilometer (000) 1% 4,599,367

4,631,557

Available Ton Kilometer (000) 5% 7,284,446

7,626,934

Revenue Kilometers (Distance Flown) 8% 198,952,791

214,669,083

Challenges and Outlook Stiff competition, matched with ever increasing costs, have caused the PAL Group to incur losses over the last three years. The PAL Group has lined up various revenue enhancement programs, cash generation strategies and cost control initiatives to improve the results of its operations.

Taal Volcano Eruption

Just about two weeks into the year 2020, on January 12, Taal Volcano in Batangas, Philippines had a phreatic eruption from its main crater that spewed ashes across Calabarzon, Metro Manila, and some parts of Central Luzon, resulting in the suspension of flights in the area. Manila International Airport Authority (MIAA) closed the airport in the evening of January 12 due to ash fall on the airport runways, taxi ways, and ramp as ash poses great safety risk to aircraft operations.

PAL and PALex immediately activated their contingency plan to protect the passengers, crew, employees, and their aircraft from the hazards and risks associated with volcanic activity. For the duration of the airport closure, PAL and PALex have cancelled nearly 100 domestic and international flights, experienced delays and diversions to other airports on some flights.

Prior to the partial reopening of the airport on January 13, 2020, PAL and PALex have commenced a cleanup operation for all their affected aircraft as well as provided assistance for the cleanup of the airport ramp. Operations resumed gradually with the announcement by MIAA of a “partial operations” reopening on January 13, 2020. PAL and PALex continue to monitor status of the volcanic alert level.

COVID-19

On March 11, 2020, the World Health Organization (WHO) declared the COVID-19 outbreak as a global pandemic due to the significant number of cases and countries affected globally. In a move to contain the COVID-19 outbreak, on March 16, 2020, Presidential Proclamation Order No. 929 was issued, declaring State of Calamity throughout the Philippines for a period of six months and imposed an enhanced community quarantine (ECQ) throughout the island of Luzon until April 12, 2020, which was further extended to May 15, 2020.

The COVID-19 outbreak and the measures taken have caused disruptions to businesses and economic activities, and its impact on businesses continue to evolve. Consequently, the Company's passenger operations have also been disrupted, resulting in suspension of its flights both for domestic and international routes, until such time that the quarantine period is lifted.

Even prior to the declaration of the COVID-19 pandemic, PAL and PALex have since taken massive efforts to put measures in place to protect its customers, crew, and employees, as well as to adhere with the government’s response against COVID-19.

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About PHI


About This Report

Health & Safety


Energy Efficiency


Challenges and Outlook COVID-19 (cont'd)

Our Crisis Management Program for Public Health Emergency has been activated as early as January 2020. The Emergency Response Team (ERT), together with the Medical team, are the 24/7 response teams which supervise all safety and health initiatives and activities related to the COVID-19 crisis to ensure everything is carried out effectively. The ERT is also in direct communication with the country’s health authority as well as different health authorities of other countries to provide the required health information to assist in the efforts for contact tracing.

Our Crisis Management Program consists of several layers of protection for all passengers, crew, employees, and its service providers. We promote proper health and hygiene etiquette as well as crucial information through our regular information dissemination campaign. The use of Personal Protective Equipment (PPE) such as masks for all frontliners, employees, service providers, pilots, and cabin crew is mandatory. Alcohol dispensers are installed at strategic locations at the airport and in the aircraft.

At the airport, thermal screening is being done by government authorities on arriving international passengers while we conduct thermal screening to departing passengers to ensure their health and welfare even prior to boarding the aircraft. For the aircraft, an enhanced disinfection program has been in place as early as January 2020 which involves the use of disinfecting agents for every turn- around cleaning in between flights, a thorough disinfection of every aircraft once it lays-over at the Manila hub and a weekly top-to- bottom disinfection.

Thermal screening is also being conducted at all entry points in PAL and PALex offices and facilities. Alcohol dispensers are installed at strategic locations in all the offices. All buildings and facilities, including all ticket offices, have multiple daily disinfection schedule and a thorough disinfection is being performed on the weekends.

PAL President, Mr. Gilbert Santa Maria, with the ground and flight crew in their personal protective equipment as they carry out their duties in these extraordinary times.

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About PHI


About This Report

Health & Safety


Energy Efficiency


Challenges and Outlook Outlook

While PAL and PALex have ceased operating regular flights, we continue to partner with international governments to operate various sweeper flights which will ferry stranded nationals from various places in the Philippines and bring them back to their home country. In the same way, we are partnering with the Philippine government to bring home our Overseas Filipino Workers (OFWs) from various countries.

Since the ECQ started, we have been operating cargo-only flights to bring essential medicines, food supplies, and other crucial shipments. To maximize the volume of essential goods to be transported, some cargoes are loaded inside the cabin.

Both airlines continue to prepare for the resumption of flights, although likely on a much-reduced scale of scheduled flights, which will gradually ramp up as demand recovers.


About PHI


About This Report

Health & Safety


Energy Efficiency


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About This Report

ABOUT THE COVER Our brand-new A350-900 fleet is a testament of how science and nature can inspire another significant evolution in the ongoing mission to conceive and manufacture the perfect aircraft. Its all-new design and state-of-the-art technology enable us to deliver quality and efficient service to our passengers while maximizing fuel economy and minimizing environmental impact. Through these, we were also able to set new standards with the longest route flown among Philippine carriers.

In this spirit of setting new feats, we aspire through this first sustainability report to showcase our relentless passion for excellence, our commitment for sustainability, and our bestowed honor to always represent the Best of the Filipino.

PURPOSE The PAL Holdings, Inc. has published this Sustainability Report 2019 to provide prompt and transparent disclosure about business, activity outcomes and major sustainable management performances for that year in order to earn long-term trust from its stakeholders and achieve sustainable growth that benefits society.

REPORTING STANDARD This report was prepared in accordance with the SEC guidelines. The GRI Standard issued by the Global Reporting Initiative (GRI) was used as reference for Economic, Environmental, Social and Governance (EESG) information.

SCOPE AND COVERAGE Our 2019 Annual and Sustainability Report cover the domestic and international business operations and activities of Philippine Airlines and PAL express for the calendar year 2019 with some parts covering information updated until April 2020.

The economic data are based on the consolidated financial statements in the 2019 Annual Report which incorporates the financial performance of PAL Holdings, Philippine Airlines and PAL express.

FEEDBACK We enjoin our stakeholders to send their feedback regarding matters in this Sustainability Report via email to [email protected]

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About PHI

Company Highlights

About This Report Purpose, Reporting Standard, Scope and Coverage Materiality Assessment

Health & Safety


Energy Efficiency


mailto:[email protected]


About This Report

Materiality Assessment PHI’s Material Topics After further evaluation and deliberation with top management, the following were deemed material for the Company and are priority topics for this report:

1 Health & Safety


About PHI

Company Highlights

About This Report Purpose, Reporting

A Materiality Assessment workshop was held and a survey was conducted among 50 representatives of PAL Holdings, Inc., Philippine Airlines and PAL express to determine the material topics to be included in the Sustainability Report. Material topics were identified based on their economic, environmental and social impact on the organization, as well as their substantive influence on the assessments and decisions of stakeholders. Materiality assessment ensures that reports are more relevant, more credible and more user-friendly.

Employee Training & Development

3 Energy Efficiency

On top of these priorities from the top management, other essential topics are also discussed in this report:

Corporate Governance Data Privacy and Security Our People and Values Labor Management Practices Corporate Social Responsibility

Standard, Scope and Coverage Materiality Assessment

Health & Safety


Energy Efficiency


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2

Our Health Program It is our policy to ensure the health and safety of our personnel. Thus, PAL and PALex implement programs and provide necessary medical and dental benefits to our employees. Through the "Live Well, Work Well Program", our employees enjoy modern and holistic approach of wellness activities including physical, psychological, financial, and spiritual well-being.


PAL and PALex Medical provides in-house medical services handled by our full-time medical practitioners and retainer specialists. We maintain our primary and satellite medical clinics with facilities that serve both employees in various offices and airline passengers in the airport. Our partnership with other medical institutions supports our aim to provide healthcare services to our employees as well as their dependents in various parts of the country.

To provide excellent care, we send our doctors and nurses to Occupational Health and Safety trainings held by primary health organizations. Our Medical Team undergoes customer service training to further enhance its service delivery. Medical services are being improved through feedback from employees and dependents as inspired by desired employee experience framework.

Our employees receive preventive and out-patient in- house medical services. For patient care beyond what PAL and PALex Medical offer, endorsements are made to our partner clinics and hospitals. Our passengers in the airport may also avail of our medical services for any emergencies needing immediate attention.

We continuously boost our Health Awareness Programs through Medical Forums, Mental Health Awareness, Info-bulletins, Annual Medical Exams, Weight Monitoring for Cabin Crew, etc. We also do collaborative efforts with various departments in handling emerging cases to formulate a unified process in handling possible cases such as the COVID-19. A collaboration with Safety and Security Department comprises the COVID-19 Monitoring Team. The team constantly disseminates information for everyone’s awareness on preventive measures and communicate with official governing bodies for updates.

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31

y

Our Health Program The PAL Group created a 4-point enhancement on responding to health emergencies in the workplace to have an effective preparedness, response, and recovery from any medical-related incident or emergency.

1 Trained employees who may be involved in emergency response. A CPR- AED Training extended not just to Medical Practitioners but also to laymen in collaboration with UST-Faculty of Medicine, an American Heart Association-Accredited Training Facility for CPR-AED. Identified employees were trained to be ‘rescuers’ as first responders in key areas.

2 Aligned Medical Emergency Response Process. PAL Physicians with varying specializations formulated a 4-step process during a medical emergency. It is vital to follow a standard process to ensure uniformity and alignment for the whole Company.

4- Step Process during a Medical Emergency

3 Collaborated with Admin Support Staff and Security Personnel. Briefings were conducted for identified employees and security personnel tapped to be part of Medical Emergenc Response Team. Effective communication is the key to any medical emergency response. To achieve quality communication, Admin Support Staff from each department were briefed of their crucial role during a medical emergency.

Positioned Medical Equipment in identified locations. Stretchers and wheelchairs are placed on Security Guard Stations/Clinic of each key area and agreement was made with Lifeline Ambulance Services. To ensure proper transport of patients to the clinic, necessary medical equipment are provided to strategic places and locations.


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To respond to health emergencies in the workplace, an Emergency Response Team is created that empowers different employees from various departments through basic first aid training.

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4

Our Safety Program Safety is the cornerstone of PAL and PALex operations. The Management is committed to continuously improve strategies to ensure a high level of safety performance. Safety is everybody's responsibility. All employees share the responsibility to comply with national and international laws and requirements, Company standards and delivery of high level of safety performance.

Our Safety Program PAL and PALex Safety Management System (SMS) complies with Philippine Civil Air Regulations (PCAR) and International Civil Aviation Organization (ICAO) Document 9859 Safety Management Manual. This covers Flight Operations, Simulator Training providers, Inflight Services, Maintenance and Engineering, Ground Operations, Cargo, and Training. Our SMS also interacts with local government authorities, all applicable Aviation Authorities and Aerodrome Operators where we operate, service providers and suppliers, and other airlines.

Framework and Commitment PAL and PALex are committed to effectively administer and implement SMS by defining responsibilities and accountabilities, providing adequate resources during normal and emergency operations, ensuring skilled, trained, and informed personnel are available to perform, placing acceptable risk management

Safety Goal A working SMS will effectively prevent accidents and yield profitability by minimizing loss, while being compliant with the Company policies and regulatory standards to ensure safe operational practices and keep airworthy airplanes under a balanced allocation of organizational resources. One of our safety goals is to maintain zero (0) high consequence events (fatal and non-fatal accidents) and serious incidents. Both Philippine Airlines and PAL express had no fatal accidents for the last 22 years and 20 years, respectively.

The Four Pillars Our Safety Management System is structured upon the four basic components of safety management in accordance with PCAR and ICAO Document 9859 namely: Safety Policy and Objectives, Safety Risk Management, Safety Assurance, and Safety Promotion.

1. Safety Policy and Objectives Our SMS incorporates policies and procedures in place that explicitly describe our responsibility, authority, accountability, and expectation. It is integrated into "the way things are done" in our organizational structure and activities because every employee


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process, having a non-punitive environment to promote empowered safety culture, and supporting conduct of audits for continuous improvement.

Safety Promotion

33

contributes to the safety and health of our organization.

Safety Assurance Safety Risk

Management

Safety Policy and Objectives

Our Safety Program Safety Council The Safety Council, the highest safety review committee, during its trimester meetings, reviews the performance of the SMS if the management of safety and its established action plans are effective to meet the safety objectives and safety goals which were established by the PAL Group Senior Management.

Safety Action Groups Another venue in which employee participation on safety is required is in the Safety Action Groups (SAGs). The SAG is a venue to review specific major occurrences to ensure that appropriate actions have taken place. This is a high-level committee composed of the SAG head, designated safety officer, line manager and representative of front-line personnel.

Line Safety Team (LST) Employee participation is also manifested in the monthly Line Safety Team (LST) Meetings where attendees identify hazards, manage risks, formulate and implement strategies to address such risks. It is composed of representatives from sub departments, divisions, outstations, service providers, and concerned employees.

2. Safety Risk Management Management of risks includes a Hazard Identification process which involves the identification and analysis of hazards in order to identify its safety consequences in terms of its effects to operations. We use tools to identify hazards such as our safety reporting forms and eReports which for 2019 resulted in 2,422 safety reports received and recorded in Aviation Quality Database (AQD) and all were addressed.

Flight Data Analysis (FDA) We also identify hazards in flight through Flight Data Analysis (FDA) which involves real-time downloading of aircraft data which are then collected and analyzed by Flight Safety Division.

The program is in compliance with RP-CAR regulation which covers all fleet. It is in-house and managed by Safety Department and utilizes AirFASE that is jointly developed by Teledyne Controls and Airbus. Flight Safety Division, being the process owners of FDA Program, manages the FDAP and performs the analysis on a regular basis.

Fatigue Management We also collect and analyze fatigue reports submitted by operational personnel regarding any fatigue-related impairments experienced during their duty period. This type of proactive report is important to be recognized as fatigue may affect the safety of our operations.

Just Culture To encourage proactive safety reporting, we ensure that no actions are taken against any employee who reports a safety concern. PAL Group has come up with non-punitive guidelines and a Just Culture model which are being used by different department heads to determine the culpability of personnel involved in accidents and incidents.

Other sources of hazard identification include feedback from training, group review, safety audits and inspections for flight, cabin, airport, and facilities.

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Our Safety Program 3. Safety Assurance Safety performance indicators and targets are in place to validate our performance in the safety risk management we designed. We have assessments, checks, inspections, investigations, reviews, surveys, management of change, and observance of best practices. All of these ensure the effectiveness of our safety program.

Safety assurance gives the Company confidence that its set safety standards are met with quality. The Company checks if the organizational and regulatory procedures are consistently practiced towards the set performance targets.

Quality Management System Another integral part of continuous monitoring of our performance is our Quality Assurance Program. The Program includes all planned and unplanned audits necessary to enhance confidence that our management system, all operations and maintenance processes are conducted in accordance with the Aviation Authority regulations and PAL Group standards.

IOSA Certification The International Air Transport Association (IATA) guides airlines on aviation activities to operate safely, securely, efficiently and economically on established standards. PAL and PALex, to conform with IATA standards, validate their activities through internal and external IATA Operational Safety Audits (IOSA). PAL had its 1st IOSA Certification in 2006 while PALex had its first IOSA Certification in 2014 which is being renewed every two years.

4. Safety Promotion PAL and PALex have developed formal means of safety communication to ensure that relevant personnel are fully aware of the SMS program, safety critical and generic information.

SMS Trainings We also ensure that all personnel, supervisors, manager, senior officers and accountable managers are trained and competent to perform their safety management duties.

In 2019, there were a total of 3,514 employees who completed the SMS Training, 2,138 employees are from PAL and 1,376 are from PALex. LMS (Learning Module System) for SMS Level 1 Training had been launched last January 2020. It is an e-learning tool that aims to reach participants despite geographical challenges faced by our offices across all our outstations, both domestic and international.


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35

Our Safety Program Aircraft Maintenance Our team of aircraft engineers is responsible for ensuring that PAL and PALex fleet are well- maintained based on technical requirements by aircraft manufacturers and regulatory authorities. Proper maintenance of our fleet is crucial to the safe operation of the aircraft, leading to safe transport of crew and passengers.


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Lufthansa Technik Philippines (LTP) provides line maintenance up to A-check maintenance services for all PAL A350, A330, A321, A320, and B777 aircraft, as well as for PALex A321 and A320 fleet. LTP is part of the Lufthansa Technik Group, a global network with numerous maintenance stations worldwide. The Civil Aviation Authority of the Philippines (CAAP), US Federal Aviation Administration (FAA), European Union Aviation Safety Agency (EASA) and other countries have certified LTP as a qualified provider of aircraft Maintenance and Repair Organization (MRO) services.

PALex is certified by the CAAP as an Approved Maintenance Organization for De Havilland Dash 8- 300 and Dash 8-400 Classics and Next Generation. PALex conducts scheduled and unscheduled maintenance both in Manila and Cebu. It provides line and base maintenance up to C- check for the De Havilland fleet. LTP handles

technical management and line maintenance up to A check for the A321 fleet of PALex. Line maintenance services at foreign outstations are provided by contracted CAAP approved maintenance handlers.

Heavy maintenance requirements of PAL and PALex for the jets, engine overhaul services and other related services are outsourced to Maintenance and Repair Organizations that are approved by CAAP, FAA and EASA.

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36

Customers' Safety Our Inflight Meals

Our Catering is committed to provide safe, reliable, efficient and professional services to all PAL and PALex flights.

We have 44 online caterers globally. In 2019, we loaded 18M meals for 73,000 flights.

Our inflight meals are produced by our reliable caterers who follow and practice GMP (Good Manufacturing Practices) and HACCP (Hazard Analysis Critical Control Point) principles. Most of them are also ISO (International Organization for Standardization) certified and FSSC (Food Safety Management System) certified .

Our caterers use World Food Safety Guidelines for Airline Catering as their comprehensive guide for meeting and exceeding food safety standards, which classifies effective food safety control as part and parcel to inflight catering. It sets the following standards by which all relevant companies must abide:

1. Accountability from top management to its

employees

2. Prerequisite programs like Good Manufacturing Practices, Vendor Management, Training, Allergen Management, etc.

3. Hazard Analysis and Critical Control Point (HACCP) principles. HACCP, as described by IFSA World Food Safety Guidelines, “is a management tool that provides a more structured approach to the control of identified hazards than that achievable by traditional inspection and quality control procedures”.

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Energy Efficiency


“44 caterers globally,

18 Million meals, 73,000 flights”

0.00203 %

Customers' Safety and PAL express equipped all aircraft with

Customer Complaints

Food Hygiene Concerns

2018

2019

Regular inspections and audits are conducted

to ensure caterers comply with food safety

standards. As a result, our rate of food

hygiene concerns decreased from 0.00231% in

2018 to 0.00203% in 2019, which means we

had only 2 concerns for every 100,000 meals.

We work closely with our caterers to mitigate

and control contamination. Currently, we do

not have food safety concerns that lead to

payment of fees, penalties or warnings.

Explosion and Fire Containment Bag (FCB) The risks that lithium battery fires pose to inflight safety are increasing with the growing use of digital devices. To mitigate the risk and to keep our flights and customers safe, PAL

Brimstone Explosion and Fire Containment bag which is an effective tool in containing onboard battery fires. Each bag comes with gloves for handling hot devices. These bags are placed strategically inside the aircraft.

Features of the Brimstone Explosion and Fire Containment Bag: • Withstands internal temperatures of up to

1,200⁰F • One of its layer is Carbon Filter which works

towards denying oxygen • Another layer is Kevlar which protects against

shrapnel/projectiles in the event of battery explosion

• Absorbs the toxic fumes emitted during a lithium battery fire.

The Company received substantiated complaints from our customers relating to safety. Substantiated complaints include complaints from customers that went through the organization's formal channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies. In 2019, there were seven (7) substantiated complaints received and all were addressed. Most of the customer complaints were incidents during flight such as injuries sustained due to severe turbulence.


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Energy Efficiency


38

0.00231 %

1 S

s of ses

Occupational Health & Safety PAL and PALex have a high regard for the safety and health of its workers. All workers are provided with appropriate training and resources to ensure that each task is accomplished safely and efficiently.

Occupational Safety and Health Committee (OSHCOM) is well-represented by decision-makers of our departments, as well as their individual contributors. The OSHCOM convenes every month to discuss all issues and programs related to the safety and health of workers.

8,090,240 afe man-hours


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Safety Officers are appointed, giving the assurance that safety concerns

will be dealt with accordingly. These personnel are provided with

continuous training as well.

In 2019, there were 74 cases of work-related injuries and 32 cases of work-

There were 99 cases of work-related injuries

for 2019

There were 32 case work-related illnes

for 2019

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Health & Safety Our Health Program Our Safety Program

related illnesses for PAL. On the other hand, there were 25 cases of work- related injuries and no cases of work-related illness for PALex. All

employees who were injured and got ill were taken care of by PAL and

PALex Medical. Both PAL and PALex had zero work-related fatalities for

2019.

5S Program

In 2019, there were ZERO work related fatalities for both PAL &

PALex

Customer's Safety Occupational Health & Safety Emergency Response


Energy Efficiency Our primary office buildings are located in various areas of the different cities in Metro Manila. Despite this, we ensure that our canteen facilities are maintained to bring in safe and healthy food to our employees.

We continue to uphold 5S program to ensure orderly and safe workplace for our employees. To reinforce this, we have organized a pool of departmental champions who ensure that the program is being observed in their own departments.

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0

Emergency Response

Our main objective in any emergency situation, including a public health emergency, will always be to protect and save lives, and attend to the welfare of passengers and employees, the emergency responders, the organization, its properties and the environment.

Planning and preparation are the key elements for an effective management and successful resolution of an emergency situation or similar incidents. In an emergency, the succession of events is unpredictable; therefore, published procedures and operational plans will serve as a guide and checklist and may require field modification in order to meet the requirements of a specific emergency. These procedures and plans are documented in our Crisis Management Manual.

The policies and procedures described in the Crisis Management Manual are expected to be followed by all Philippine Airlines and PAL express personnel, and those personnel with designated roles and responsibilities to respond to emergency situations or provide humanitarian assistance to victims and their family.

The Crisis Management Manual has a whole chapter dedicated to responding to Public Health Emergencies such as the COVID-19 pandemic.

With the emergence of the COVID-19 pandemic, PAL Group has activated its protocols to respond and mitigate the COVID-19 threat to its operations, passengers, and employees. These protocols comply with applicable health regulations promulgated by the Philippine Department of Health and the different health authorities from countries in which PAL operates, the World Health Organization and International Air Transport Association.

In 2019, the group conducted a total of 23 emergency exercise which consists of 20 table top exercises of an aviation disaster scenario; one (1) simultaneous evacuation drill held annually in Inflight Center, NAIA Terminal 2, Maintenance Base Complex, Data Center Building, and in PAL PNB Financial Center Building; and two (2) earthquake drills.

PAL and PAL express also comply with the ICAO requirement and CAAP requirement to have an emergency response plan. This, along with business continuity plans, prepares the Company for an emergency. Furthermore, PAL and PAL express periodically test for the effectivity of the emergency response plans and constantly review opportunities for improvement towards faster and more efficient recovery from an emergency or a crisis.

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20Table Top Exercise

1 Evacuation Drill

2 Earthquake Drills

Total

Emergency

Exercise

conducted

Employee Training and Development

41

Pilot Training

The following divisions ensure the efficiency of flight trainings:

Training Policy It is our policy to provide initial and continuous trainings and to develop each employee into a person who possesses the right Knowledge, Skills, Values and Attitudes (KSVA) needed to deliver the performance called for by his duties and responsibilities.

Pilot Training PAL Aviation Training Center (PATC) is responsible for the training and development of flight deck crew and flight dispatchers of the PAL Group. The training center ensures all training and qualification requirements of pilots and dispatchers are compliant with: (a) Civil Aviation Authority of the Philippines (CAAP); (b) International Civil Aviation Organization (ICAO); (c) IATA Operational Safety Audit (IOSA); and (d) other needs by (but not limited to) Flight Operations Department (FOD), Integrated Operations Control Center (IOCC), and Safety Department.

1. Flight Training Division- Upholds training standards of the Company by training, guiding, and monitoring the performance of pilots and flight instructors using flight training devices. The division provides type-rating and instructor courses.

2. Ground Training Division- Provides theoretical and practical instructions, periodic refresher, recurrent, and special courses to flight crew and dispatchers. Supports ground training needs of pilots for type-rating and instructor courses.

3. Quality and Standards- Plans, organizes, and implements the quality management system of PATC. This office ensures that the highest standards of training are given to the flight crew members and flight dispatchers.


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Employee Training & Dev’t Pilot Training Cabin Crew Training Our Trainers & Front lines Holistic Training Program

Energy Efficiency


42

Pilot Training Training is mostly done in classrooms, Flight Training Devices, and blended learning using Learning Management System (LMS) or e-learning.

The Company has invested on various equipment for the training of our pilot roster. An Airbus A320 Full Flight Simulator was purchased for the training of our roster of A320/A321 pilots. Other training equipment include the Airbus Procedure Trainer and B777 Enhanced Virtual Procedure Trainer.

Simulator trainings for Airbus and Boeing Wide Body aircraft are performed in other training venues in Clark, Haneda, Singapore, Vietnam and Thailand while ground training are all done at PATC in Manila.

PATC is a holder of Approved Training Organization Certificate (ATOC) given by the Civil Aviation Authority of the Philippines (CAAP) which allows the Sub-department to conduct pilot and dispatcher training for the Company and external clients.

Non-compliance with training-related regulatory requirement would not allow pilots and dispatchers to fulfill their duties. This would result in shortage of manning and penalties from regulators not only in the Philippines, but also in outstations where PAL flies. PATC also uses training performance to gauge the skill level of our trainees and determine areas of improvement. Training must be as dynamic as how the aviation industry evolves. Data gathered from all stakeholders are used to draw up a training solution for the improvement of our trainees. This ensures high standards of safety and efficiency of our crew.

A320 Full Flight Simulator


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43

Pilot Training Management has always been supportive to the training and development of the crew. We not only adhere and comply with regulatory or mandated requirements, but also work on the improvement on the quality of our training.

Management has supported our thrust to standardize and improve the quality of our ground and flight instructors by giving them valuable workshops and additional trainings.

All instructors undergo Airbus Instructor Pilot Course (AIPC), which comprises the Core Course (given to all instructors), and the type-specific courses (given to all Airbus simulator instructors). An instructor’s workshop entitled “Effective Performance Coaching” is being given to all instructors and is expected to be completed by mid- 2021.

The good collaboration between PATC and Safety Department has resulted in the improvement in training methodologies and evaluation.

PATC started working on digital transformation into Competency-Based Training (CBT) and will eventually go into Evidence-Based Training (EBT).

B777 Full Flight Simulator


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Pilot Training PAL Aviation School To ensure continuous supply of pilots, PAL maintain its own Aviation School. Founded in 1960, the PAL Aviation School aims to produce highly competent and airline-oriented pilots by delivering a holistic training package using modern equipment, facilities and methodologies.

The PAL Aviation School specializes in several courses, each developed to suit the career goals of pilot trainees. Other than programs intended for pilot trainees destined for employment in Philippine Airlines or other local/foreign airlines and agencies, programs for paying students are available in both single-engine and twin-engine courses with actual flight training done on the Cessna 172R Skyhawk and the Piper Seminole PA 144 respectively. These programs can be amended to incorporate the requirements of sponsoring airlines subject to Approved Training Organization (ATO) approval.

The PAL Aviation School utilizes a Redbird SD Instrument Trainer and Redbird Citation Mustang for the trainee's simulator training. The ab initio training curriculum qualifies a trainee to apply for a Private Pilot License and Commercial Pilot License with Instrument Rating.


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45

Cabin Crew Training Safety is paramount to PAL and PALex. Cabin crew training are done in-house and the Inflight Services Training (IFST) Division handles the training requirements to ensure that the crew meet all regulatory requirements and are equipped with the needed Knowledge, Skills, Values and Attitudes (KSVA) to perform their task safely and exceeding customers' expectation.

Apart from the training mandated by regulators, IFST also conducts other forms of training for our crew such as Inflight Service Trainings which place PAL and PALex crew at par with the industry’s best cabin crew, trainings on the requirements of World Health Organization (WHO), Transportation Security Administration (TSA), Office of Transport Security (OTS) and First Aid requirements for cabin health and security. Other trainings conducted pertain to positions and qualification upgrades.

As part of its efforts in innovation, the Company has invested in a state-of-the-art Cabin Fire and Smoke Trainer (CFST) which is a special structural equipment that simulates inflight fire scenarios.

The CFST mimics the layout of an actual aircraft cabin based on a realistic cabin footprint with an aisle, galley, seats, overhead stowage bins and a lavatory where fire scenarios are simulated and addressed through modern training methods. During the training proper, crew members are asked to play various roles: as fire fighter, communication channel between the crew and the cockpit/flight deck and assisting fire fighter


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Cabin Crew Training The Company also acquired Cabin Door and Window trainers for the use of all cabin crew for their training. These trainers strengthen the knowledge of crew in cabin and window door opening, giving them the opportunity to learn and practice without having to do it in an actual aircraft.


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Following the steps of CFST is the virtual reality (VR) training program, an innovation which marked another first in Philippine Aviation for the use and training of cabin crew members. In collaboration with a local tech start-up and the local aviation authority, an immense VR training program was developed to improve the standards of learning and service. The solution has provided cabin crew members an enhanced and immersive learning experience that not only resulted in higher retention rates but also more interactive and fun training.

The VR-enhanced training has also helped the cabin crew members acquire stronger skills to respond more effectively to real-world challenges when under pressure, while productively cutting logistical requirements and dependency to aircraft availability.

Cabin crew training metrices, such as response time, test scores, and behavioral tendencies, are recorded, measured, and reviewed to ensure that standards are met.

The VR training solution is a testament to the airline’s commitment in providing quality customer service and safety to its passengers.


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Our Trainers & Front Lines Trainings for knowledge, skills, values and attitude for all employees' professional and personal development co-exists with the Company's goal to enhance the growth and development of its people. Business continuity is achieved when performance is enhanced by necessary training of all our individual contributors and leaders from different groups, namely, Commercial, Office of the President, Operations, Finance & Administration, and third-party providers in both international and domestic areas.

Our Trainers For the trainer's continuous competency enhancement, regular attendance to training is observed. Some trainers also attend initial and recurrent Dangerous Goods Regulations training at the International Airline Transport Association (IATA), a governing body for airlines, as a mandatory requirement to meet regulatory compliance. Attendance to internal and external training and line trainer development for in-house and third- party trainers allow continuous growth and leads to the acquisition of the latest trends and best practices on learning and development that ensure ready support for our agents.

Our Front lines Our employees from both Philippine Airlines and PAL express, as well as our third-party handlers, assigned at the airport particularly at the check-in counters, gates, ramp, baggage and cargo offices, and third-party handlers for sales such as those in our contact centers, are well equipped with the necessary skills to perform their duties with a ‘Buong-Pusong Alaga’ service.

In order for Airport and Sales personnel to be fully equipped and compliant with all regulations governing airlines, Commercial Training and Development Division (CTDD) trainers provide regular trainings to the personnel. Trainers ensure that permits of airport personnel are maintained and current as a requirement.


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Holistic Training Program Annual published courses are provided to all interested employees. These courses provide a general learning and development solution, which addresses personally and professionally directed learning needs.

Essential skills are embedded in the curriculum of frontline personnel courses which include customer service, personality development, communication, values formation, and new employee indoctrination for a more holistic development of new employees.

Adaptation of the Learning Management System (LMS) and other training methodologies (virtual training, self-paced/distance learning) are offered to ensure fast and efficient delivery and reach as many employees.

ACE It! The Group implemented a new program called Assess, Consult, Engage (ACE) It. It is a needs-specific, function- targeted intervention in learning and development that provides more tailored training solutions that address training gaps in specific functions within departments.

For behavioral skills, Management and People Development Division (MPDD) ensures regular consultation with each department for their team's professional development.


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49

Holistic Training Program More of Training and Development Training and Development is a strategic partner in business growth which include opening of new stations, implementing new systems (Passenger Services System) for Airport and Sales operations and providing a holistic training approach to employee learning and development.

Line Performance Observations, a post-training activity, is conducted to ensure learning application at work. We participate in the monthly Ground Operations Safety Action Group (GOSAG) of Airport Operations Department discussing operational situations and concerns. We are also recipients of updated policies and procedures pertaining to line operations

Other Management Approaches: 1. Program implementation has been integrated in the trainer's commitment

setting, monitoring, and coaching activity. 2. Technology has been used for collaboration, faster coordination, and close

monitoring of performance. Cloud-based drives, software, and systems have been utilized for communication, documentation, file storage, etc.

3. Regular employee touchpoint and commitment setting for a more people- centric approach for improved performance.


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to ensure courses are current.

The management recognizes the critical function of learning and development in achieving its business objectives through people. We maintain updated operations manuals that serve as our reference in addition to the strong partnership with the client departments in the design and delivery of our training programs.

PAL Group commits to incorporate the latest trends and best practices on learning and development in their training programs. Attendance to these internal and external trainings, including the line trainer development training, allows for employee's continuous growth.

167,461 hours is the total training hours provided to male employees

186,578 hours is the total training hours provided to female employees

41 hours/employee is the average training hours provided to male employees

45 hours/employee is the average training hours provided to female employees


Energy Efficiency


50

2019 Training Hours for PAL and PALex employees

Our Policy

Based on the Global Climate Risk Index 2020, the Philippines ranked 2nd as the most affected by climate change in 2018 and the 4th among the long-term climate impacted countries in the last two decades (1999-2018).

The global aviation industry contributes roughly 2% of all man-made carbon dioxide (CO2) emissions. Flights worldwide produced 915 million tons of carbon dioxide (CO2) in 2019.

Philippine Airlines and PAL express recognize the impact of our operations to the environment and the country. We have signified our commitment thru our environmental policy.

We are fully committed to protect the environment by reducing the environmental impact of our operations through the development of environmental management system.

We comply with the local and international regulatory requirements and develop environmental protection programs to properly implement the law.

We have also adopted various industry best practices to further enhance our programs and reduce our environmental impact.


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Energy Efficiency Our Policy Four Pillar Strategy Resource Management


52

Four Pillar Strategy Philippine Airlines and PAL express recognize that their operations contribute to climate change. As part of our responsibility, we have adopted IATA's Four Pillar Strategy to help achieve the targets to mitigate carbon dioxide emissions from air transport.

IATA's Three Targets The aviation value chain including airlines, airports, air navigations service providers and manufacturers has agreed to three sequential targets on climate change:

• An Average improvement in fuel efficiency of 1.5% per year from 2009 to 2020

• A cap on net aviation CO2 emissions from 2020 (carbon-neutral growth)

• A reduction in net aviation CO2 emissions of 50% by 2050, relative to 2005 levels.

IATA’s Four-Pillar Strategy Philippine Airlines and PAL express adopt IATA’s four-pillar strategy to lessen our operational environmental impact. The strategy includes:

Pillar 1: Improved Technology PAL and PALex continue to invest in a fuel-efficient and modern fleet.

PAL currently has six Airbus A350 that are more fuel-efficient, with lower carbon emissions and lesser noise compared to previous-generation aircraft. The Airbus A350 is also equipped with the most efficient aero-engine flying today. PAL also invested in New Engine Option of Airbus A321. With its new engines, the A321neo and A321neo SR generate less noise and carbon emissions while being more fuel efficient as against the previous-generation aircraft. PAL has also retired its last two Airbus A340 last 2019.

PAL express invested in procuring a quiet and fuel-efficient turboprop- DASH 8 - Q400NG aircrafts from the De Havilland Aircraft of Canada (formerly known as Bombardier).


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1 Improved technology, including the deployment of sustainable alternative fuels

3 Infrastructure improvements, including modernized air traffic management system

2 More efficient aircraft operations

4 A single global market- based measure to fill the remaining emissions gap


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Airline No. of aircraft as of

31 Dec 2019 Fleet Average Age

(in Years)

61 4.8

36 8.0

Four Pillar Strategy Pillar 2: Operational Measures PAL and PALex continuously improve our existing fuel efficiency programs. We adopt the industry's best practices in fuel and carbon emission reductions. PAL Group has invested in Rolls Royce Efficiency Management System to accurately measure performance of the implementation of its fuel efficiency initiatives.

PAL’s and PALex’s current key drivers on fuel efficiency programs include:


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Fleet

Modern and fuel-efficient fleet PAL invested in fuel efficient aircraft with latest engines such as Airbus A350 and A321neo. Currently, it has six A350, six A321neo and two A321neo SR.

PAL express invested in procuring 12 DASH 8 - Q400NG aircrafts from the De Havilland Aircraft of Canada (formerly known as Bombardier) which will eventually replace DASH 8 - Q300 and DASH 8 – 400 Classics. The first aircraft was delivered in 2017 and the last one on February 2020.

Flight

Zero Fuel Weight (ZFW) Planning Accuracy New procedures are in place ensuring that Planned and Actual ZFW would have minimal variance preventing over-fueling.

Single Engine Taxi-In (SETI) The current primary procedure for taxi-in that significantly reduces fuel consumption during taxi-in.

Data Analytics Use of Efficiency Management System to monitor and measure fuel efficiency.

Ground

Use of Ground Support Equipment instead of Auxiliary Power Unit (APU) during ground time Reduces the fuel burn of aircraft's APU.

Engineering

Optimized Engine Core Wash Shortened interval between core washes to maintain efficiency of our engines.

Optimization of Potable Water Loading Revise water loading orders to satisfy the historical water usage inflight based on routes and passenger load.

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Four Pillar Strategy Pillar 3: Improved Infrastructure PAL and PALex continue to work with Air Traffic Management for navigational improvements. We subscribed to Wind Updates to enable further optimization of flights especially for long haul flights. We are also currently streamlining the routes taken by our aircraft to shorten flight time.

Pillar 4: Global Market-Based Measure (MBM) In 2016, the International Civil Aviation Organization (ICAO) Assembly adopted the MBM scheme in the form of Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) to address CO2 emissions from international aviation.

CORSIA aims to stabilize net CO2 emissions from international civil aviation at 2020 levels by requiring airlines to offset growth of their emissions from international aviation. Philippines has voluntarily participated in the Pilot Phase of CORSIA. All operators in the Philippines including PAL and PAL express are required to monitor its CO2 Emissions for international flights starting 01 January 2019. By 2021, airlines are required to purchase and cancel “emission units” to offset the growth in CO2 emissions covered by the scheme for flights operated between volunteering states.

Other Environmental Measures

Ground Emissions In line with the aviation industry’s thrust for carbon neutral growth, and in support to the Department of Transportation’s plan to implement controls on greenhouse gas emissions, Philippine Airlines and PAL express have initially started replacing its transport shuttle buses to a more environment-friendly vehicle. We currently operate 16 units of COBUS used as airport shuttle bus. These transport vehicles are equipped with EURO V compliant diesel engines with low emission of gaseous and particulate pollutants. Further, these vehicles use fuel of EURO IV standard specifications with significantly low sulfur content. Staff are also encouraged to adhere to anti-idling engine by switching off the engines when not in use to conserve fuel and promote cleaner air.

Aircraft Noise PAL and PALex continue to modernize its fleet that emits less noise and complies with ICAO Chapter 4 Noise Standard.

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Resource Management Energy Consumption and Reduction PAL and PALex are committed to help the environment by implementing efficient use of energy and resources. Our environmental management system reviews the environmental objectives and target by reducing total energy (kWh) and total water (cubic meters) consumption by 5% from 2018 baseline. The ongoing conservation efforts on energy and water consumption in buildings, offices, facilities owned and operated by PAL and PALex are monitored by the respective Facilities Management team.

Energy Consumption (Electricity) In 2019, our energy consumption increased by 0.6 million kilowatt-hour (kWh) from 2018 due to increase in occupied areas. The total electricity consumption includes those in PAL and PALex major facilities, catering, and ground maintenance service providers.

We began shifting from fluorescent lamps to LED lights to improve our energy efficiency. In 2019, PAL Maintenance Base Complex has completed replacement of 25% of lights to LED. For PALex, a total of 3,362 of LED bulbs were replaced in the entire main hub expecting a 40% reduction in wattage compared to CFL tubes.

We have also adopted simple yet effective measures to further reduce energy consumption. This includes the setting of room temperature from 22°C to 25°C in all offices, regulating the time of turning on of office appliances and equipment, and conducting of regular preventive maintenance.

Energy Consumption (Gasoline and Diesel) In 2019, PAL and PALex used 148,708 liters of gasoline and 2.7 million liters of diesel for its operations. This serves as fuel for Company service vehicles, ground service equipment, and generator sets. This consumption only includes the gasoline and diesel supplied by PAL's Fuel Storage Facility in Pasay City.

Energy Consumption (Jet A-1 Fuel) With the increase in domestic and international flights of both PAL and PALex in 2019, the consumption of Jet A-1 fuel has likewise increased. To help achieve the aviation industry targets, PAL has adopted the four-pillar strategy of IATA which is discussed in pages 53 to 55 of this report. Fuel conservation measures are in place to ensure reductions in fuel consumption and carbon emissions.


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2019 Jet A-1 Fuel Consumption

1.35 million-ton

2019 Diesel Consumption

103,727 Gigajoules

2019 Gasoline Consumption

4,987 Gigajoules

2019 CO2 Emissions from Purchased Electricity

13.8 million-ton

2019 Electricity Consumption

19.4 million kilowatt-hour

Resource Management Water Consumption In 2019, our water consumption increased by 9 thousand cubic meters (m3) from 2018 due to increase in meal production. The water consumption includes the consumption of PAL's and PALex's major facilities, including their respective fleets, catering and ground maintenance service providers. We also adopted simple effective measures to raise awareness in reducing water consumption such as placing signages across various areas about water conservation and regularly checking pipelines for leaks.

Effluents and Waste PAL and PALex had also implemented environmental protection programs to properly manage our solid and hazardous wastes and wastewater.

Effluent PAL has also invested in a Sewage Treatment Plant (STP) to treat the wastewater from its catering operations. In 2019, the STP was able to treat 1,350 cubic meters of wastewater. Wastewater reduction measures have been implemented inflight to reduce the wine disposal which is treated in the STP. Lavatory waste of aircraft is treated in the STP managed by Manila International Airport Authority.

Solid Waste In 2019, our solid waste generation rose to 524 tons compared from our 2018 generation. Main contributing factor is the increase in the number of flights, passengers, and meals produced in the facility. PAL and PALex implement waste management strategies such as waste reduction and segregation at source. PAL offices, led by Catering operation, are strictly monitoring its implementation. PAL cabin crew also started the implementation of inflight waste segregation in selected flight routes. All waste are segregated into different categories: Recyclable, Compostable, Food Waste, and Residual. Food waste and compostable materials are decomposed through bokashi and vermicomposting. Recyclable materials are recovered and sold to various recycling facilities and residual waste are disposed to a sanitary landfill.

Hazardous Waste PAL and PALex comply with the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990. Hazardous waste generated such as used lead acid batteries, busted fluorescent lamps, and used industrial oil are transported, treated, and disposed through a DENR accredited transporter and Treatment, Storage, and Disposal Facility (TSDF).


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2019 Hazardous Waste Generation

22.91 tons

2019 Treated Effluent

1,350 cubic meters

2019 Water Consumption

306,397 cubic meters

4,377 tons

2019 Solid Waste Generation

27% Recyclable Materials

9% Compostable

Materials

12% Food

Waste

52% Residual Waste


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Corporate Governance The Board PAL Holdings, Inc. (PHI), together with Philippine Airlines, Inc. (PAL) and Air Philippines Corporation (APC), recognize that good Corporate Governance is vital in its pursuit towards the continued growth and enhancement of the Corporation’s value, mainly for the benefit of its shareholders and stakeholders. To help them achieve their goal, the companies placed both men and women with vast and diverse knowledge, experience, competence, and expertise in their respective fields as part of its Board of Directors. The chosen members of the respective Boards, and its officers and employees, are committed to maintain a high level of corporate governance through the implementation of rigid internal control processes and enterprise risk management systems to continuously enhance shareholder value.

The members of the companies’ Board of Directors are elected during their respective Annual Stockholders’ Meetings. PHI’s Board is composed of nine (9) Directors, two (2) of whom are Independent Directors; PAL’s Board is composed of fourteen (14) Directors, four (4) of whom are Independent Directors; while APC’s Board is composed of six (6) Directors. Dr. Lucio C. Tan serves as the Chairman of the Board for all three companies.

It is the Board’s responsibility to foster the long-term success of the Corporation and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of the Corporation as a whole, including its Shareholders and Stakeholders. It shall ensure that all its actions are within its scope of power and authority as prescribed in its respective Articles of Incorporation, By-Laws, and in existing laws, rules and regulations.

Education and Training To ensure that incoming Directors are appropriately apprised of their duties and responsibilities prior to their assumption of office, each Director shall undergo an orientation program to allow them to be fully informed of the Company’s business, corporate structure, vision, mission, Articles of Incorporation, Code of Business Conduct, and Ethics and all other matters necessary for the effective performance of their functions. Said orientation program likewise includes SEC- mandated topics on Corporate Governance.

Moreover, Management Officers receive appropriate orientation on their respective duties and responsibilities as management executives when they are first appointed as such. This ensures that incoming Senior Management Officers are familiar with the Corporation’s business and governance processes. Each Director and key Officer is also required to annually attend a training program/seminar on Corporate Governance where relevant and necessary topics are discussed to ensure that they are continuously informed of the developments in the business and regulatory environments, including emerging risks relevant to the Company as well as Corporate Governance matters including audit, internal controls, risk management, sustainability, and strategy.

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Energy Efficiency

Other Essential Topics Corporate Governance Data Privacy and Security Our People and Values Labor Management Practices Social Responsibility

Corporate Governance Internal Control The Board oversees the establishment of an internal control system to ensure that:

• the Corporation is properly and effectively managed and

supervised; • the Management actively manages and operates the Corporation in

a sound and prudent manner; • the organizational and procedural controls are supported by

effective management of information and risk management reporting systems;

• there is an independent audit mechanism to monitor the adequacy and effectiveness of the Corporation’s governance, operations, and information systems, including the reliability and integrity of financial and operational information, the safeguarding of assets, and compliance with laws, rules, regulations, and contracts.

Internal Audit Internal Audit provides an independent objective and risk-based assurance within the Corporation in order to add value and improve the Corporation’s operations. It examines and evaluates whether the Corporation’s controls and processes, as designed by Management, are adequate, efficient, and functioning in a manner that ensures programs, plans, goals, and objectives are achieved; and that the employees’ actions are in compliance with policies, code of conduct, standards, procedures, and applicable laws and regulations. This will help the Corporation accomplish its objectives by providing a systematic and disciplined approach for the evaluation and improvement of the effectiveness of risk management, control, and

governance processes. Internal Audit has an independent status and the Head reports functionally to the Audit Committee and administratively to the CEO.

Whistleblower The Group has a Whistleblower Program and Covered Persons and Stakeholders are encouraged to come forward and raise serious concerns about any and all actual or perceived wrongdoing, malpractice or risk involving the Group. Reports may be made through email add [email protected], mobile number 0917-508-8942, or landline 83510454.

Enterprise Risk Management An Enterprise Risk Management Committee (ERMC), which consists of the Board of Directors, was created precisely to aid the Board in fulfilling its risk oversight responsibility by leading the Company’s strategic direction in the management of material business risks; overseeing the establishment and implementation of a risk management framework; and reviewing the effectiveness of that risk management framework in identifying and managing risks and controlling internal processes.

In executing its duties, the ERMC shall have unlimited access to Senior Management. It likewise has the Board’s authority to seek information it requires from employees and external parties; obtain outside legal or other professional advice at the expense of the Company; and ensure that Company officers attend Committee meetings, as necessary.

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Corporate Governance An Enterprise Risk Management (ERM) Group was likewise formed within PAL and PALex, consisting of executives and officers from various departments in the Company. The ERM Group shall assist the ERMC in performing its responsibility of institutionalizing a sustainable risk management process within the Company.

Code of Business Conduct and Ethics The Group promotes and upholds the highest standards of ethical behavior among its directors, officers, consultants, employees, suppliers, trainees, and third-party agents (Covered Persons). The Code of Business Conduct and Ethics (Code) sets the expectations of acceptable behavior and serves as guidelines for Covered Persons to make ethical decisions; act for the best interest of the Group in the course of their work; and exercise proper conduct towards its customers, competitors, vendors, regulators, and each other.

Covered persons have the responsibility to uphold the Group’s standards. Any violation of the Code shall be dealt with in accordance with the procedures and reporting guidelines put in place, without prejudice to the requirements of due process.

Conflict of Interest A conflict of interest arises in any situation wherein a Covered Person is in a position to exploit a corporate benefit in some way for their personal benefit such as:

• when the covered person can directly or indirectly benefit from the transaction;

• when the covered person can directly or indirectly influence the transaction for which he/she can have personal gains; and

• when the covered person accepts, whether directly or indirectly, payments, commissions, rebates, services, or gifts of more than nominal value or improper favors from suppliers, contractors, sub- contractors, customers, clients, or other entities with which PAL or PALex does business.

Covered Persons should: • avoid involvement in actual or potential situations wherein conflict

of interest is present or where it may arise;

• always put the interest of PAL or PALex above all and not engage in transactions that will be detrimental to the PAL Group

• seek authorization when publishing books, articles, or papers relating to the Company’s business or based on covered person's knowledge or information acquired by being in the Group.

Duty to Disclose Covered Persons who have personal or pecuniary interest on any enterprise with which the Group has an existing or intended transaction shall fully disclose the relevant facts of the situation to the Chairman of the Board, in the case of the directors; and to the President and Chief Operating Officer (COO), and the Group Head and Department Heads, in the case of employees.

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Data Privacy and Security Data Privacy Program PAL and PALex handle numerous employee and customer personal information. The information are collected from various touch points, including our ticket offices, our contact center, our website, our applications, and our offices. Both airlines have established a Data Privacy Policy to show that we recognize and value privacy rights.

A Data Protection Officer has been appointed to each airline to ensure that we are compliant with the Data Privacy Act of 2012. Compliance Officers for Privacy were also appointed to help the Data Protection Officers ensure that the Data Privacy Act is complied with by everyone in the organization. We have established reporting and complaint- handling mechanisms and have conducted regular briefings for new employees as well as refresher programs for existing employees to ensure the policy is understood so that disclosure to unauthorized entities are avoided.

For 2019, both airlines have zero substantiated complaints raised to the National Privacy Commission.

Data Security Program We recognize the risk for Loss of Data, Data Breaches, Malware Attacks, Employee Data Theft, and System unavailability. While there has been no reported incident of data breach in 2019, we recorded 23,150 malware occurrences and 440 phishing incidents. Policies and procedures have been developed to mitigate and to address such risks. The PAL Information Security Manual is in place to guide employees' behavior pertaining to the security of our data, assets, IT systems, etc.

Data Privacy and Security for Customers We have established appropriate physical, technical, and organizational security measures to protect the personal information provided to us. We use several security techniques including secure servers, firewalls, and encryption in safeguarding the storage of data. These safeguards are regularly reviewed to protect against unauthorized access, disclosure, and improper use of Personal Information, and to maintain the accuracy and integrity of the data. We will adapt and implement the necessary changes in security measures to ensure continuous integrity of Personal Information.

Data Privacy and Security for Employees We use employees’ personal information for a variety of personnel administration and employee, work, and general business management purposes, including: 1) administration of payroll; 2) improvement, maintenance, and administration of employee benefits; 3) management of work and employees; 4) operation of performance and salary reviews and the Company’s IT and communications systems; and 5) compliance with record keeping and other legal obligations. The Company has security measures in place which ensure the confidentiality of the information contained in our databases. These measures are reviewed and regularly upgraded in line with technological developments.

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Our People and Values


STAR (Shining Through Appreciation and Recognition) Awards is the employee recognition program of PAL and PALex. It aims to acknowledge employees who exemplify our Company’s values. The award categories are Pilot of the Year, Flight Purser of the Year, Cabin Crew of the Year, Sales Frontliner of the Year, Airport Frontliner of the Year, Manager of the Year, Assistant Manager of the Year, and Individual Contributor of the Year. The process leading to the determination of winners involves rigorous validation, evaluation, interview, and deliberation.

We often receive feedback from customers who experience random acts of Buong-Pusong Alaga (BPA) care of PAL and PALex employees. These "acts of BPA" are featured through the Company's various internal communication platforms to recognize employees and encourage others to do the same.

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Thumbs Up is the program that strengthens the culture of recognition in the organization and enables our leaders, within their respective units, to give prompt recognition for notable acts of deserving employees who make an impact to the division or department.

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Labor Management Practices We recognize two local labor unions: (1) Philippine Airlines Employees’ Association (PALEA) for the rank and file ground employees, and (2) Flight Attendants’ and Stewards’ Association of the Philippines (FASAP) for the cabin crew. In addition, we also recognize foreign labor unions in the United States, Singapore, and Japan. We also ensure the timely conclusion of different Collective Bargaining Agreements (CBAs) to achieve sound and lasting industrial peace.

All employees benefit from a harmonious labor management relationship. This harmonious relationship between the labor and management leads to increased efficiency, which, in turn, leads to higher productivity and growth. The Human Capital Department ensures that regular communication is observed between various unions and employees to maintain a harmonious relationship. We sit down in the union negotiations scheduled by both parties to discuss and arrive at agreements that are amenable and beneficial to both labor and management. On an average, there are 12 consultations conducted annually concerning employee-related policies.

Aside from the direct consultations, management also seeks to further improve its relationship with the employees through employee engagement activities and townhalls. Employee engagement activities such as sports, health and wellness, among all others help employees pursue their interests while being in the Company. Quarterly townhalls are also held for management to update everyone on the initiatives of the Company as well as to serve as an avenue for everyone to raise their concerns to management

“12 consultations conducted annually concerning employee- related policies“

The spirit of respect and collaboration harmonized the relationship between labor and management in navigating the aviation industry. In the end, this kind of relationship aids the Company in addressing the operational and strategic concerns of the business.

We comply with existing Labor Laws, Collective Bargaining Agreements, as well as Company Policies and Procedures. Labor and management conducts regular dialogue to discuss and clarify certain concerns of employees. This is key to ensuring a positive work environment. It is also management's way of showing that it values its employees. We also strive to maintain the timely conclusion of the different collective bargaining agreements.


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Corporate Social Responsibility

The Philippine Airlines Foundation, our corporate social responsibility arm, extends humanitarian assistance for the welfare of the underprivileged communities in the Philippines. In pursuing its objectives, the Foundation continued to make use of the Airline’s transport capacity to serve the neglected sectors and disaster-stricken areas in the country.


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Humanitarian Cargo Grant

The Foundation’s Humanitarian Cargo Grant helps provide aid to disaster-

stricken and neglected areas by facilitating the airlift of essential supplies and

relief goods.

The Foundation, in partnership with the Tan Yan Kee Foundation and PAL’s Human Capital Department, also extended assistance to the victims of the Taal Volcano eruption in January 2020 by distributing relief goods to more than 1,500 families in Batangas who were left homeless.


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The Foundation has flown donations for communities who were affected by different types of calamities including Typhoon Haiyan (Yolanda) in Tacloban, Bohol earthquake and Zamboanga crisis in 2013, Marawi siege in 2017, earthquakes that struck Cotabato and other parts of Mindanao in 2019, etc.


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PAL Foundation flew and distributed relief supplies for victims of one of the world's most powerful tropical cyclones, Haiyan that hit Visayas region in 2013

PAL Cotabato personnel accepted relief supplies from PAL Foundation and other generous donors for the victims of earthquake that struck Cotabato and other regions in Mindanao in 2019

PAL Cagayan staff received boxes of donations from PAL Foundation and other donors for the victims of Marawi siege 2018.


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Corporate Social Responsibility Medical Travel Grant

The Foundation’s Medical Travel Grant program helps

transport underprivileged patients afflicted with serious

diseases, and their escorts, to destinations in the

Philippines and abroad for the appropriate free medical

treatment.

The Foundation also flies volunteers to serve the poor

and underserved communities in the country. The

Foundation has flown an average of 60 patients per year

for life-saving surgeries in Manila and abroad.

John Rey Yabut, a young boy from Mindanao, is one of PAL Foundation's Medical Travel Grant beneficiaries who had completed a craniofacial operation in Manila.

#RPRSNTPinoy!

The Foundation’s flagship CSR program, #RPRSNTPinoy!, encourages

talented young people to enhance their artistic or athletic talents and skills

and showcase them in the world stage as the Best of the Filipino. The aim is

also to inspire other youth to aspire for excellence and actualize their

potential. Travel assistance was provided to about 300 underprivileged but

outstanding Filipinos who represented the country in global competitions in

the fields of sports, arts, academics, etc.

Street kids turned into award-winning global ballet dancers with support from PAL Foundation through its flagship CSR program, #RPRSNTPinoy


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ese gles

es,

ms ent

ur,

and

Corporate Social Responsibility Environmental Awareness PAL Foundation together with PAL and PALex have also supported various projects of the Tan Yan Kee Foundation including tree planting and other activities with farmers, in partnership with the Safety and Inflight Catering offices. The Foundation is also a regular supporter of the advocacies of major Philippine broadcast networks (e.g., ABS-CBN) covering child protection, disaster assistance, and education support programs.

The Foundation is involved in various environmental protection programs. Among th programs are the preservation of Philippine Ea and their habitat, a program with the aim to provide sustenance to surrounding communiti and various environmental awareness progra initiated by the PAL and PALex Safety Departm including the International Coastal Clean-up, a program for saving the world’s oceans and important waterways, and the annual Earth Ho an activity which promotes awareness of the environmental effects of energy consumption recycling programs.

PAL Foundation and PAL and PALex employee volunteers, in partnership with Tan Yan Kee Foundation (the foundation of the


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PAL and PALex employee volunteers, together with PAL Foundation, participate in the annual International Coastal Clean-up activity held in Las Piñas/Parañaque (right photo) and Pasay (left photo) in 2017 and 2018 respectively.

Lucio Tan Group of Companies), participated in a tree planting activity in Northern Luzon in 2017.

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PAL Foundation facilitated the transport of two Philippine Eagles, Geothermica and Sambisig, to Singapore in June 2019 for the promotion of wildlife conservation.

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In January 2019, PAL express Inflight Team collaborated with the show Kapuso Mo, Jessica Soho of GMA 7 to delight Xiona, a young girl with a rare medical condition that makes her skin rough, flaky, and darker. Her dream of being a flight attendant was granted as we let her experience flying the Flag for a day. This heartwarming episode aired in the same month.

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In September 2019, the Inflight Team hosted an educational event for Our Lady of Perpetual Help College Students and Faculty, providing industry familiarization and inspiration in a fulfilling and heartwarming whole day of mentorship and fun interaction.


Last October 2019, the Inflight Team helped college students from the Philippines State College of Aeronautics (PHILSCA) with their project by entertaining interviews and providing mentorship.

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Material Topic Disclosure Index

SEC Guidelines Disclosure Title Page Reference and Remarks

Social

Health and Safety Substantiated complaints on products or services

Customers' Safety p. 38

Occupational Health and Safety

Safe Man-Hours, No. of work-related injuries and illnesses

Occupational Health and Safety, p. 39

Employee Management

Employee Training and Development Training Hours for PAL and PALex Employees p. 50

Environment

Resource Management

Resource Management

Energy Consumption (Electricity) p. 56 Energy Consumption (Gasoline & Diesel) p. 56 Energy Consumption (Jet A-1 Fuel) p. 56 Water Consumption p. 57 Effluents and Waste p. 57 Effluent p. 57 Solid Waste p. 57 Hazardous Waste p. 57

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