*on buyback* Cebu Air, Inc.

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Cebu Pacific eyes Zamboanga-Sandakan route

DAVAO CITY — Cebu Pacific is looking at flights between Zamboanga City in Mindanao and Sandakan in Sabah among the new routes that will be served by the new aircraft that will be delivered beginning November.

“The launching of the Zamboanga-Sandakan route is still in the pipeline,” Cebu Pacific Director for Corporate Communications Charo Logarta-Lagamon said in an interview.

“But nothing is final yet because as we know it is also a matter of making sure that all the other requirements to operate commercial air service like for example the customs, immigration, and for quarantine. Although the Zamboanga-Sandakan ferry is available already, but for air travel the requirements are stricter,” she added.

Cebu Pacific has an order of 32 Airbus A321neo, five A320neo, two A321ceo (current engine option) and six ATR 72-600 aircraft.

Ms. Lagamon said they expect to receive eight to nine new planes annually until 2022.

The budget carrier is also eyeing the development of more routes within the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).

“The challenge is how do you develop the routes within BIMP-EAGA because our economies are so similar, even for tourism it’s the same… nonetheless the desire is there and everyone wants to push for more air routes, particularly Indonesia, they really want to push,” Ms. Lagamon said.

She said there is really a demand, noting Cebu Pacific’s existing flights to Bali and Jakarta have an average seat load factor of about 77% to 78%.

One strategy for developing new international routes is using Cebu as a hub with the expansion of its connections to other local airports.

Cebu Pacific currently flies from Cebu to Japan, Singapore, Hong Kong and South Korea.

“Let us say you are flying from Davao and you want to go to Japan, you go via Cebu, you just have to change aircraft in Cebu and you have the options how long you want to stay in Cebu… The connecting flights are more flexible and the fare is cheaper easily by about 15%, if bundled,” she said.

She explained that other international airports like the Francisco Bangoy International Airport in Davao City still does not generate enough passenger traffic to merit new international routes.

“The flights need to be as full as possible and for Davao alone, it is not enough to fill up the flights, so what we did, we are developing our Cebu hub because most people in VisMin (Visayas-Mindanao) would prefer flying to Cebu than in Manila,” she said. 

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Cebu Pacific expands contract with AFI KLM

CEBU PACIFIC said on Wednesday, it is expanding its contract with aircraft maintenance provider Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) to cover 39 more planes.

Its listed operator Cebu Air, Inc. said in a statement it wants its seven A321ceo (current engine option) and 32 A321neo (new engine option) to be part of the component support deal.

“Operations under significantly extended contract will partly take place in Singapore at Singapore Component Solutions (SCS), a local joint venture between AFI KLM E&M and Sabena technics. The array of services provided under the long-term contract includes component repairs from Europe and Singapore, as well as access to local spares pool,” it said.

The budget carrier and AFI KLM E&M first signed its deal last year to only cover its Airbus A320 fleet.

Cebu Pacific is currently increasing the number of its aircraft, with orders of 32 A321neo, five A320neo, two A321ceo and six ATR 72-600 aircraft expected to arrive until 2021.

Its fleet currently consists of 67 aircraft: 36 Airbus A320s, five A321ceos, eight A330s, eight ATR 72-500s and 10 ATR 72-600s. 

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...earnings report, high fuel prices and falling peso

Cebu Air swings to P518M loss in Q3

CEBU AIR, Inc. swung to a P518.4-million net loss in the third quarter from a P42-million profit a year ago, amid the continued rise in fuel prices and weakness of the Philippine peso against the US dollar.

In a regulatory filing, the operator of budget carrier Cebu Pacific said third quarter expenses grew by 19% to P16.8 billion, outpacing the 10% growth in revenues to P16.2 billion.

The bulk of expenses came from flying operations, which surged 35% in the July-September period to P7.4 billion due to higher jet fuel prices and a weaker peso.

For the first nine months of 2018, Cebu Air said its net income dropped 36% to P2.781 billion. Revenues grew by 7% to P54 billion, but expenses swelled by 16% to P49.9 billion.

Flying operations expenses rose 24% to P22 billion for the nine months ending September, driven by a 28% increase in aviation fuel expenses to P18.721 billion.

Cebu Air said this was due to “the increase in jet fuel prices as referenced by the increase in the average published fuel MOPS price of $85.37 per barrel in the nine months ended September 30, 2018 from $62.89 per barrel in 2017.”

“The increase in fuel cost was further augmented by the weakening of the Philippine peso against the U.S. dollar as referenced by the depreciation of the Philippine peso to an average of P52.51 per US dollar for the nine months ended September 30, 2018 from an average of P50.24 per US dollar last year based on the Philippine Dealing and Exchange Corporation (PDEx) weighted average rates,” the Gokongwei-led company said.

It was only in September when the Civil Aeronautics Board (CAB) approved the implementation of fuel surcharge for airlines to help them recoup losses from the rising world prices of jet fuel.

Cebu Air posted 28% higher net foreign exchange losses of P421.47 million in the third quarter, bringing the nine-month loss to P2.006 billion due to the depreciation of the peso against the dollar.

Rising interest rates also weighed on the company. Cebu Air recorded a 49% increase in interest expenses to a P591 million in the July to September period. This pushed the nine-month interest expense 47% higher to P1.55 billion.

Cebu Air said its average air fares went up by 5% to P2,617 for the January to September period, from P2,483 average fare during the same period a year ago.

Passenger volume inched up 1.6% to 15.106 million in the first nine months of 2018, versus 14.87 million a year ago. 

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