LONDON – One of the Philippines’ largest privately owned airlines is bullish about the air travel market and is upbeat about the recovery. Owner, CEO, and billionaire Lance Gokongwei plans to expand and renew the company’s fleet over the next five years in light of the global recovery of travel and tourism.
Airbus NEO Family To Power Cebu Pacific
Gokongwei, the airline’s Chief Executive Officer, stated during the company’s annual shareholder’s meeting, that Cebu Pacific has allocated a capital expenditure (CAPEX) budget of 32.6 billion Philippines pesos to replace its fleet. The CAPEX budget is significant as this will be financed by the sale and leasebacks of newer aircraft coming into Cebu’s fleet.
The airline’s CEO stated that Cebu Pacific will welcome three Airbus A320neos, one Airbus A321neo, and three Airbus A330neos to replace the current four Airbus A320ceos and four Airbus A330ceos. It looks like the airline will be aiming for an all ‘NEO’ flight after all, despite the ‘ceo’ variants not being too old or nearing their end of serviceable life.
Gokongwei said that the airline will receive 48 more aircraft to replace its outgoing 35 aircraft. This means that Cebu Pacific will have a total of 87 aircraft by 2026.
The fleet plans may look very bullish but are in fact very conservative and cautiously optimistic. Gokongwei, CEO of the airline said at the company’s annual shareholder meeting: “While we remain conservative in our 2022 fleet growth, over the next five years, we will have 48 deliveries and 35 exits, ending 2026 with 87 aircraft.”
It seems that the low-cost carrier is aiming for an all NEO fleet, as the company has set aside 32.8 billion pesos ($625.8 million) in CAPEX this fiscal year to finance the revamping of the airlines fleet, which totals 74 aircraft as of the end of this year.
The airline’s CEO remains committed to replacing older aircraft with the more fuel-efficient NEO jets (both A330NEOS and A320NEOs).
Airline Continues To Bounce Back From COVID-19
The airline remains confident in the uptick in the post-covid recovery as governments around the world, especially in South East Asia and the Asia Pacific are relaxing their travel restrictions. Cebu Pacific welcomed over 2 million passengers in 1Q2022, an increase of 272% from last year in the same quarter.
CEO Gokongwei stated that “For the first quarter of this year, we have seen that the reopening of the economy has positively impacted most of our subsidiaries, with our overall revenues exhibiting quarter-on-quarter and year-on-year improvements.” Nevertheless, he did mention that there are headwinds ahead, such as the commodity prices, which may derail recovery after all: “However, market volatility with the increasing prices of oil and key input costs, coupled with peso depreciation have affected out profitability and we expect these to linger and pressure on our margins.” This indeed has caused the airline a widening loss of 7.6 to billion from 7.3 billion Pesos.
In fact, the rising oil price caused Cebu Air’s parent company JG to summit into a 2.8 billion peso loss in the 1st quarter, questioning the plans for fleet renewal is appropriate at this moment. Nevertheless, airlines revenue jumped 148% to 6.7 billion pesos in 1Q2022, due to increased both passenger and cargo traffic.
With Cebu Pacific Airline eyeing an all NEO fleet, will the commodity crisis derail the billionaire’s plan?
