Cebu Pac sees 2-digit hike in seat capacity

MANILA, Philippines - Publicly-listed low-cost carrier Cebu Air Inc. (Cebu Pacific), the airline arm of businessman John Gokongwei, still sees a double-digit expansion in seat capacity this year despite the collapse of the talks for the sale of its10 aircraft to US-based low-cost carrier operator Allegiant Travel Co.

Cebu Pacific president and chief executive officer Lance Y. Gokongwei informed the Philippine Stock Exchange (PSE) that the budget airline has called off talks with Allegiant Travel Co., owner of Allegiant Travel Air which serves domestic tourism routes in the US, after both parties failed to reach an agreement on certain terms of the transaction.

 “It is unfortunate that we were not able to finalize the sale agreement. We have been unable to agree on certain conditions that would have made the transaction workable, both operationally and financially,” Gokongwei said.

It would be recalled that Cebu Pacific announced in July last year that it entered into a deal with the Nasdaq-listed company for the sale of its entire fleet of 10 Airbus A319. Under the deal, the 10 aircraft were supposed to be delivered over a 15-month period to Allegiant Travel Co. starting March this year.

 “The potential transaction was made public on July 30, 2012 after the signing of the letter of intent,” he added.

The supposed sale of Cebu Pacific’s oldest and smallest fleet of 10 A319 jet aircraft was part of the airline’s efforts to upgrade to a bigger and newer fleet including A320s.

Despite the collapse of the talks for the sale of the aircraft, Gokongwei said the airline is looking at a double-digit growth of between 10 percent and 15 percent in seat capacity due to its ongoing re-fleeting program.

“Without the A319 sale, our current fleet expansion plan, which includes delivery of eight Airbus A320 aircraft over the next two years will enable us to grow seat capacity by an average of 10 to 15 percent per year, which is in line with our demand outlook for air travel in the Philippines, allowing Cebu Pacific the flexibility to accommodate the growing demand for air travel in the Philippines,” he said.

Cebu Pacific currently operates a fleet of 40 aircraft with an average age of 3.6 years consisting of 10 Airbus A319s, 22 Airbus A320s, and eight ATR-72 500 aircraft. It is spending close to $1 billion next year for its re-fleeting program.

Between now and 2021, it would take delivery of 19 more Airbus A320 and 30 Airbus A321neo aircraft orders. Cebu Pacific is likewise exploring options to advance the delivery of Airbus A320 orders scheduled for delivery between 2015 and 2016.

The airline intends to begin long-haul services in the third quarter of this year with the delivery of up to eight Airbus A330 aircrafts with a range of up to 11 hours serving markets such as Australia, Middle East, parts of Europe, and the US.

Presently, Cebu Pacific flies to 19 international destinations: Bangkok, Beijing, Brunei, Busan, Guangzhou, Hanoi, Ho Chi Minh, Hong Kong, Incheon, Jakarta, Kota Kinabalu, Kuala Lumpur, Macau, Osaka, Shanghai, Siem Reap, Singapore, Taipei and Xiamen.It also serves 32 domestic destinations.

Its main competitor, national flag carrier Philippine Airlines (PAL) of airline and tobacco magnate Lucio Tan and diversified conglomerate San Miguel Corp., is also in the midst of a re-fleeting program through the acquisition of 100 new aircraft.