Gokongwei’s Cebu Pacific ramping up fleet expansion to recover ‘lost’ market share

Font Size

CEBU PACIFIC aims to have a total of 83 planes by end-2022. Company handout

By Denise A. Valdez, Reporter

CEBU PACIFIC is allocating between $650 to $700 million to fund its acquisition of new aircraft this year, as it aims to recover “lost market share” over the past two years.

Lance Y. Gokongwei, president and chief executive officer of the budget carrier, said the company is keen on expanding its fleet and expects to receive 12 new planes this year.

“I would say we have 12 deliveries this year and… we’ve already secured financing for the first seven or eight. So, it’s only the back three or four that we’re arranging financing now…,” he told reporters at the launching of its new Airbus A321neo (new engine option) in Makati City.

“The $650-700 million that I indicated for financing is actually the capital expenditure number. I don’t know the exact financing number, but definitely the $650-700 million will be funded from internally generated funds from some borrowing,” he aded.

Cebu Pacific has a fleet of 71 aircraft as of end-2018 and aims to receive six Airbus A321neos, five A320neos and one ATR 72-600 by end-2019.

Mr. Gokongwei said the new aircraft will help the company “increase capacity in key markets or even launch new routes,” with the goal of growing capacity from low to mid-teens for 2019. The airline is looking to fly to new cities in India, Russia, Northern Japan and Australia.

He noted that Cebu Pacific was not able to keep up with the growth in passenger demand in recent years, causing the budget carrier to lose “a little bit of market share particularly outside in Clark and in Cebu where we didn’t grow as fast as we wanted to.”

“But I think the next three years you’ll see us clawback a lot of the share we’ve lost, and also we want to introduce a lot of new routes that we haven’t been able to because we didn’t have enough aircraft,” Mr. Gokongwei added.

Mr. Gokongwei is optimistic about the airline’s prospects this year, after its bottomline suffered last year due to soaring jet fuel prices and the weakening of the peso against the US dollar.

“We think 2019 looks significantly brighter, because first and foremost, I think fuel prices have stabled, the peso is strengthening. But equally important is we haven’t been growing as fast the last two years. This year we’ll add 11-12% more seats, and when you have that amount of seat increase, we’re going to see economies of scale that it will benefit the airline and our unit cost,” he added.

For the first nine months of 2018, Cebu Air said its net income dropped 36% to P2.781 billion as the growth in expenses outpaced revenues.

Cebu Pacific aims to have a total of 83 planes by end-2022, comprised of eight Airbus A330s, 18 A320ceos (current engine option), five A320neos, seven A321ceos, 27 A321neos, 16 ATR 72-600s and two ATR CF.

It targets to fly 22.5-23 million passengers in 2019 with a load factor of mid- to high-80s. The target last year was to fly 22 million passengers, and Mr. Gokongwei said they achieved “over 20 million” end-2018.