THE CIVIL Aeronautics Board (CAB) will not penalize Cebu Pacific for its spate of flight cancellations in two weeks from end-April to early May, but is requiring the budget carrier to submit a concrete plan of action to prevent recurrence of the problem.
In a May 10 report to the Department of Transportation (DoTr), the CAB said it “is of the impression that there is no basis for the imposition of penalties for now, or at the least, imposing a penalty may be premature at this stage as the event is still unfolding and the objective sought to be achieved by the cancellations is yet to unravel.”
“[T]he Board recommends… that Cebu Pacific be required to submit within 30 days a concrete plan detailing the corrective actions that it is undertaking… and that Cebu Pacific be sternly warned and admonished to exercise such diligence necessary to maintain the stability and reliability of the air transportation service…”
In a statement Wednesday, Transportation Secretary Arthur P. Tugade said: “We are hoping that Cebu Pacific will immediately comply with the order to resolve this issue… [M]oving forward, we aim to have more substantial actions so that our passengers will not have to suffer.”
Cebu Pacific cancelled 172 one-way domestic flights from April 28 to May 10 — equivalent to about 14 out of its 400 flights a day or 3.5% of the daily total.
This move led to a two-part hearing with the CAB on May 2 and 6 during which representatives of the carrier said “adverse operational conditions” that weighed on its on-time performance led to its decision to cancel flights.
Shares of Cebu Pacific operator Cebu Air, Inc. dropped 1.2% to end P82 apiece on Wednesday, in line with a general weakness at the bourse that saw the Philippine Stock Exchange index slash 0.92% to end 7,576.71, although the services sectoral index under which the budget carrier is listed gained 1.6% at closing — making it the only sub-index to go up that day.
In an e-mailed statement, the budget carrier said it will comply with the CAB directive. “We are also reviewing our internal processes and procedure to make every effort to improve our service to our passengers.”
The CAB said in its report that it believes the scale of cancellations by Cebu Pacific is “not extremely high, considering the global ‘tolerance level’ that can go as high as two percent.”
“[I]t is the Board’s position that the scale of the cancellations vis-a-vis the surrounding circumstances are not so massive as to warrant a full-scale investigation,” it said.
“The degree of harm caused by the cancellations of the riding public was deemed to be not severe because most of the passengers were given refunds, rebooked, or given seats in other airlines and given other amenities in accordance with the Air Passenger Bill of Rights, and more.”
The CAB agreed that the reason given by Cebu Pacific for its flight cancellations — to “create space” to achieve better on-time performance — was valid.
“Cebu Pacific is a low-cost carrier, and characteristically maximizes use of its physical assets and human resources more than legacy carriers do… This is the reason why (on-time performance) is very important for low-cost carriers… A low (on-time performance) will mean it is not utilizing its resources properly, and results in added costs,” the regulator said.
It also looked into possible internal reasons that may have caused Cebu Pacific’s low on-time performance, following earlier reports that pointed to manpower issues such as absenteeism and crew poaching.
“As far as crewing is concerned, the CAAP (Civil Aviation Authority of the Philippines) constantly grilled Cebu Pacific about their compliance with CAAP regulations, and the latter consistently affirmed their compliance,” it said.
“[T]he Board seemed to admit that no airline — a low-cost carrier, at that — would in their right mind cancel flights on a whim and deal with the consequences. As stated elsewhere, a plane on the ground means money out of the bank,” it added.
“… [I]t is deemed, especially in the light of mitigating circumstances, that the financial losses incurred by Cebu Pacific arising from flight cancellations, but itself, would serve as an economic disincentive for Cebu Pacific to commit further lapses…” — Denise A. Valdez