Ghost Month: August 11 - September 6

*on buyback* Cebu Air, Inc.

Cebu Pacific spends P500 million monthly on excess fuel costs

BUDGET carrier Cebu Pacific spends roughly half-a-billion pesos per month on excess fuel costs. And, without the regulator’s approving its petition to reimpose fuel surcharge on its flights, it might have to continue to do so and such may take a toll on the company’s bottom line.

Lance Y. Gokongwei, the company’s chief executive, noted, however, that while his group is anticipating a favorable action from the Civil Aeronautics Board (CAB) in regard to its petition, the airline is also taking into consideration the economic impact of increases in airfares.

“The increase in fuel price has been rather significant so we applied for fuel surcharges. I think the government is concerned on inflationary effects so they have to study the petition,” he said in a chance interview.

Gokongwei described the losses from additional costs as “mounting.”

“Extra cost of fuel per month is about P500 million,” he said.

Data from the International Air Transport Association showed jet-fuel cost was at $89.9 per barrel as of July 27, flat from the preceding month, but 39.9 percent more than the year-ago price.

Fuel prices have gone from record lows in 2014 to four-year highs this year, as supplies from the Organization of Petroleum Exporting Countries (Opec) is deepening the supply cut, and drops in crude-oil production in Venezuela continues, among other factors.

Cebu Pacific petitioned in May the reimposition of fuel surcharge on its flights, ranging from P70 to P280 on domestic flights, and from P312 to P1,352 on international flights.

A fuel surcharge is a temporary relief granted to airlines to help them recover losses incurred from higher jet-fuel prices.

The regulator removed this component from ticket prices starting in 2015, as prices of jet fuel plummeted by as much as $40 per barrel in mid-2014, after the Opec decided to maintain current production levels despite a glut in the market.

When the regulator decided to scrap the fuel-surcharge fee on ticket prices in 2015, the average price of jet fuel was at $75 per barrel.

“If the government approves our petition, they have to justify it to the people,” Gokongwei said. “We are in constant dialogue with them.”

Cebu Air Inc.’s profits grew by 12 percent during said first quarter of 2018 to P1.44 billion despite posting flat passenger volumes.

In the same comparative periods, the company booked P18.62 billion in revenues, an 8.3-percent increase from P16.86 billion, while expenses rose by a faster 11.8 percent to P14.30 billion, no thanks to increasing prices of jet fuel in the global market.


...mataas ang fuel cost, mataas kasi dollar Tongue stay away muna

Cebu Pacific eyes China boost

CEBU AIR, Inc., the listed operator of Cebu Pacific, is looking to fortify its business in China as it looks to dedicate more flights there when it receives its order of new aircraft next year.

Cebu Pacific President Lance Y. Gokongwei told reporters on Tuesday the 10 planes it expects to be delivered by 2019 will be used primarily for international flights, specifically in China.

“There’s really a lot of interest from North Asia, especially Chinese, to connect to the Philippines. So I think there’s gonna be large opportunities to connect the secondary cities in China outside the Beijing, Guangzhou, and Shanghai,” he said.

The company is seeking connectivity to cities such as Chengdu and Xi An, but Mr. Gokongwei refused to disclose the number of locations they are targeting.

The local carrier said last week it is looking to add nine additional aircraft every year starting this year until 2022. It has so far ordered five Airbus A320neos, two A321ceos, 31 A321neos and six ATR 72-600s.

When the new routes to China launch, Mr. Gokongwei said the flights might have to be distributed to airports outside Metro Manila as the Ninoy Aquino International Airport (NAIA) currently suffers from overcapacity.

“I think Manila’s getting a little bit congested, so we are going to be adding significant capacity to Clark, to Cebu, and to other destinations,” he noted.

Aside from Cebu Pacific, Philippines Airlines (PAL) also said earlier it is boosting its business in China as it expects the market to be its fastest growing this year.

“Yung growth ng market ng tourist from China is the highest in terms of percentage growth. There was a time ata 50% eh, (The growth of the Chinese tourist market is the highest in terms of percentage growth. There was a time I think it reached 50%),” PAL President Jaime J. Bautista told reporters on July 17.

He noted that Chinese tourists are drawn to the Philippine islands and beaches, and this is fuelling the continuous rise of the market.

Meanwhile, aside from its plans for China, Cebu Pacific is also positive it will reach its target to fly 22 million passengers this year despite the six-month closure of Boracay as Mr. Gokongwei said the company saw “tremendous growth” in tourism, reaching double digits.

“(There is) increasing interest from foreign tourists to visit the sights of the Philippines. I think the combination of increased capacity provided by the airlines, continuous low fares, as well as the increased interest arising from the growing economy and the marketing efforts of the various players, especially the government, will really propel growth,” he said.

The Boracay Island has been shut down by the government after a comment from President Rodrigo R. Duterte saying it has turned into a cesspool. Rehabilitation efforts for the tourist spot began in April and is set to end by Oct. 26.

Department of Tourism (DoT) Secretary Bernadette Romulo-Puyat told reporters despite the island’s closure, tourist arrivals in June increased by 11.35% from the same period last year. “Imagine, the closure of our number one tourist destination did not affect tourist arrivals. In fact, it increased. Imagine with the opening,” she said.

The government is targeting a total of 7.4 million tourist arrivals by year-end.

Cebu Pacific also announced it is partnering with the DoT for its sustainable tourism initiative that will begin in September. The project, dubbed “Juan Effect,” will gather stakeholders to work on a concerted effort to conserve the environment.

“Siargao will serve as the Juan Effect pilot module, wherein the airline together with the Department of Environment and Natural Resources, local government units and tourism associations, will work together to implement sustainable tourism action plans,” the company said in a statement.

Cebu Air saw its net income at P1.436 billion during the first quarter, up 12% from in the same period last year. It said in a regulatory filing that the increase was driven by higher revenue growth.


...dagdag eroplano? nice one Smile

Cebu Air adding 10 aircraft for North Asia

Cebu Air Inc., the operator of Cebu Pacific and Cebgo, is adding 10 aircraft to its fleet in 2019 for new international routes. 

“Next year, we’re adding 10 aircraft. So, we’re gonna start the new areas... North Asia, especially, Chinese... to connect to the Philippines,” Cebu Pacific president and chief executive  Lance Gokongwei said. 

“I think, there’s gonna be large opportunities to connect the secondary cities in China outside the Beijing, Guangzhou and Shanghai,” he said.

Gokongwei said the airline planned to fly to Chengdu and Xi An in China. 

Data from the Tourism Department showed the number of Chinese arrivals to the Philippines in 2017 rose 43 percent to 968,447. 

Cebu Pacific earlier said it was on track to meet the target of 22 million passengers this year on strong domestic economy. 

“I think the Philippine economy continues to remain very vibrant with increasing income. Likewise, increasing interest from foreign tourists to visit the sites of the Philippines,” Gokongwei said. 

“Even with closure of Boracay we’re seeing tremendous growth in tourism, double-digit so you can imagine the increase when it reopens,” he added 

Cebu Pacific is the market leader with a 42-percent of total seat capacity in Caticlan, the gateway to Boracay. This includes a 14-percent share of its turboprop subsidiary Cebgo and 28 percent of its main jet operation.

Data from the Centre for Asia Pacific Aviation showed about one million of the 6.6 million overseas visitors to the Philippines in 2017 stopped in Boracay. 

Boracay is popular with Chinese and South Korean visitors, the largest markets for the Philippine tourism industry. 
The carrier operates out of seven hubs in the Philippines—Manila, Clark, Cebu, Davao, Cagayan de Oro, Kalibo and Iloilo.

Between 2018 and 2022, the airline expects delivery of six additional Airbus A321ceo, 32 Airbus A321neo and eight ATR 72-600.


...share buyback resumption

Subject of the Disclosure
Cebu Air, Inc. to resume share buyback program

Background/Description of the Disclosure
1. Please be advised that Cebu Air, Inc. (“Company”) has decided to resume the share buyback program that was approved by the Board of Directors on February 28, 2011 involving up to Philippine Pesos: Two Billion (Php2,000,000,000.00) worth of the Company’s common shares. From 2011 up to present day, the Company has only bought back 7,283,220 shares costing Php529,319,321.

2. Similar to the terms and conditions set forth in 2011, the above-mentioned share buyback program shall continue to have the following terms and conditions:
a. The objectives of the share buyback program are to enhance shareholder value and to manifest confidence in the Company’s value and prospects through the repurchase of the common shares of the Company and through the return of a portion of the Company’s capital to its shareholders.
b. The share buyback program will not involve any active and widespread solicitation from the stockholders and will be implemented in the open market through the trading facilities of the Philippine Stock Exchange.
c. The share buyback program will not affect any of the Company’s prospective and existing projects and investments.
d. Any significant development in the share buyback program will be duly disclosed to the Securities and Exchange Commission and the Philippine Stock Exchange.


...avoid muna sa mga tinatamaan ng higher fuel costs Tongue

Rising jet fuel prices drag Cebu Air income lower in 2nd quarter

CEBU AIR, Inc. reported a 39% drop in net profit to P1.87 billion in the second quarter, weighed down by rising fuel prices and weakening of the peso.

In a regulatory filing, the listed operator of Cebu Pacific said its net income for the first six months fell 24% to P3.309 billion, from P4.334 billion recorded in the same period last year.

Second quarter revenues went up 4% to P19.57 billion, while the first-half tally increased 6% to P35.65 billion. Passenger revenues rose by 2% to P14.6 billion in the April to June, and by 6% to P28.3 billion in the six-month period.

“This increase was mainly due to the 3.7% increase in average fares to P2,734 for the six months ended June 30, 2018 from P2,637 for the same period last year,” Cebu Air said, adding passenger volume rose by 3% to 10.354 million in the first half.

However, expenses grew at a faster clip, jumping by 16% to P17.06 billion in the second quarter, and by 14% to P33.06 billion in the first half.

“The increase was mostly attributable to the rise in fuel prices in 2018 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 P51.98 per US dollar for the six months ended June 30, 2018 from an average of P49.93 per US dollar last year based on the Philippine Dealing and Exchange Corporation weighted average rates,” Cebu Air said.

An increase in the budget carrier’s seat capacity as a result of new aircraft also contributed to the higher expenses.

The bulk of expenses came from flying operations, which soared by 21% to P7.61 billion in the second quarter, and by 18% to P14.53 billion in the six months ending June.

Aviation fuel expenses surged 23% to P12.337 billion for the first half, as average jet fuel prices reached $84 per barrel during the period versus $63 per barrel in 2017.

In May, Cebu Pacific President and CEO Lance Y. Gokongwei said the budget carrier applied for a fuel surcharge of between P70 to P250 for domestic flights, adding the rising fuel prices is costing the company a P700-million increase in expenses every month. 


...ahhh ok Tongue

Cebu Pacific wants bigger slice of Australian market as it launches direct flight to Melbourne

CEBU PACIFIC on Tuesday launched direct flights from Manila to Melbourne, four years after the budget carrier introduced its Sydney route.

“Today, we became the only low cost carrier to operate regular flights between Manila and Melbourne, our second destination in Australia,” Candice Iyog, Cebu Pacific VP for marketing and distribution, during the inaugural ceremony held in Ninoy Aquino International Airport (NAIA) Terminal 3 on Aug. 14.

The Manila to Melbourne route flies thrice weekly from NAIA Terminal 3.

“This will enable more Australian travelers — from adventure-seekers to leisure tourists to families on holiday — to discover the paradise that is the Philippines. Many of us know that the beaches, the biodiversity and the natural attractions in the Philippines can rival those of Phuket, Pattaya, Bali or Koh Samui,” said Ms. Iyog during her remarks.

This is Cebu Pacific’s second Australian route after it first launched Sydney flights in 2014.

“Sydney is doing well. We’re actually flying the most number of passengers between Philippines and Sydney route,” Ms. Iyog said of the five times weekly route.

The Australian Bureau Infrastructure, Transport, Regional Development and Cities (BITRE), reported in April 2018 that Cebu Pacific is currently the market leader in Manila to Sydney non-stop passenger traffic in 2017 with 40% share against Philippine Airlines and Qantas which has 34% share each.

“If you look at our loads today and looking forward compared to how Sydney started, Melbourne is starting stronger than how Sydney started four years ago,” Ms. Iyog told reporters, noting the load factor of its inaugural flight to Melbourne stood at 88%.

“There’s also a lot of interest from Australians to come to the Philippines because we offer what Australians love: beaches, really cheap beer and a great outdoor experience. Manila is also a good jump off point to other destinations in Asia,” she added.

Amanda Gorely, Australian Ambassador to the Philippines told reporters there is “demand for other parts of Australia to have direct flights from the Philippines,” citing Adelaide, Perth and Darwin.

“We had officials from Darwin here earlier in the year looking at a possibility of having a direct flight,” Ms. Gorely said.


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