CEBU AIR, Inc. saw its net income fall 19% to P7.91 billion in 2017, as expenses rose on higher fuel prices and the peso’s depreciation against the US dollar.

In a regulatory filing, the listed operator of budget carrier Cebu Pacific said revenues went up 9.9% to P68.03 billion for the year ending Dec. 31, 2017, from P61.9 billion recorded in the previous year.

Cebu Air attributed the increase in revenues mainly on a 7.2% jump in passenger revenues to P49.93 billion last year. Passenger volume grew 3.2% to 19.7 million in 2017, as the Gokongwei-led company increased the number of flights by 3.6%.

Cargo revenues rose by 29.2% to P4.60 billion in 2017, after higher cargo volume and yield.

Ancillary revenues went up 14.9% to P13.49 billion, driven by a 3.2% increase in passenger traffic and 11.3% rise in ancillary revenue per passenger. Cebu Air attributed this to “improved online bookings, pricing adjustments and introduction of new ancillary revenue products and services.”

However, Cebu Air saw a 16.6% surge in operating expenses to P57.9 billion in 2017.

“The increase was primarily due to the rise in fuel prices in 2017 coupled with the weakening of the Philippine Peso against the US Dollar as referenced by the depreciation of the Philippine Peso to an average of P50.40 per US Dollar for the year ended Dec. 31, 2017 from an average of P47.50 per US Dollar last year based on the Philippine Dealing and Exchange Corp. (PDEx) weighted average rates,” the company said.

“The growth in the airline’s seat capacity from the acquisition of new aircraft also contributed to the increase in expenses,” it added.

The bulk of expenses came from flying expenses, which rose 21.2% to P23.86 billion in 2017. Cebu Air said this was due to a 24% surge in aviation fuel expenses to P19.6 billion, as jet fuel prices increased to $65.31 per barrel for the 2017, from $52.83 per barrel in 2016.

Aircraft and traffic servicing expenses jumped 17.2% to P7.706 billion, after Cebu Air added more domestic flights and increased frequencies on existing routes.

Among the domestic routes opened in 2017 were the Zamboanga-Cagayan de Oro, Zamboanga-Cotabato, Cebu-Masbate, Davao-Dumaguete, Davao-Tacloban, and Manila-Siargao routes. Cebu Pacific also increased frequencies in the Manila-Sydney route, as well as for flights to Nagoya and Narita in Japan and Hanoi in Vietnam.

“Higher expenses were also attributable to operating more flights using the bigger Airbus A330 aircraft for which airport and ground handling charges were generally higher compared to other aircraft types,” the company said.

Between this year and 2022, the budget carrier expects delivery of 47 brand new aircraft, composed of seven Airbus A321ceos, 32 Airbus A321neos, and eight ATR 72-600s.

Cebu Air recorded foreign exchange losses of P797.98 million in 2017, due to the weakening of the peso against the US dollar.

“The Group’s major exposure to foreign exchange rate fluctuations is in respect to US Dollar denominated long-term debt incurred in connection with aircraft acquisitions,” it said.

Shares for Cebu Air were down P3.90 or 4.15% to end at P90. — Patrizia Paola C. Marcelo