Phugoid mode is a lowly damped, low-frequency oscillatory motion representing vertical translation usually related to kinetic and potential energy interchange. MIL-F-8785C standard has ruled out qualitative specification requirements on measurement of flying and handling qualities of piloted aircraft. For phugoid mode, these requirements lie in the value of its damping ratio. Small aircraft is sensitive to atmospheric conditions and poor phugoid mode performance is observed in many unmanned aircraft. This paper discusses the effect of airspeed and altitude to phugoid mode of small, unmanned blended wing-body (BWB) aircraft named Baseline-II E-2. Baseline-II is a low subsonic, remotely-piloted UAV used to study the behaviour of a BWB-type aircraft. The case presented here is an E-2 version in which a specifically-designed canard is incorporated as its longitudinal control surface. Five Category B flight cases (airspeeds) per altitude-case, and three altitude cases (low, medium and high) are studied. Model-N dynamic model is introduced here to become the basis of flight simulation. The model is compared to models derived by other authors and approximation equations. The mean of simulating phugoid behaviour is using state-space representation of the aircraft using Matlab SIMULINK. The computations show that Baseline-II E-2 undamped natural frequency of phugoid mode is inversely-proportional to airspeed and reduces as altitude increases. These have adverse effect on its damping ratio that increases near parabolically when the aircraft flies faster, and reduces when it climbs up. The cause of these trends is looked into in detail and issues concerning Baseline-II E-2’s unsatisfactory and unstable phugoid mode oscillation at low speed are addressed.