Cebu Pacific sets $600-M fleet expansion program

Gokongwei-owned airline company Cebu Pacific expects to spend another $600 million over the next five to six years to acquire 10 more new aircraft as part of a continuing plan to expand its service to more parts of the country and the world.

CEB president Lance Gokongwei said the amount is on top of the ongoing $670-million refleeting set to end in early 2007. Already, CEB has 12 brand-new Airbus Planes servicing 20 domestic and six regional destinations even as it is awaiting the delivery of two more in January and February next year.

Gokongwei said he expects CEB to perform better this year compared to last year both in terms of revenues and profitability, on account of the more efficient fleet brought about by the recent refleeting program and the strengthening of the foreign exchange rate.

"We see CEB having a 20 to 25 plane operation in the next five to six years. We expect the market to continue growing and there will be plenty of room for a full-service carrier (such as competitor Philippine Airlines) and a low-cost carrier such as us. The market has great potential. In fact, an average Filipino travels one-third less than the average Indonesian," Gokongwei pointed out.

He said it is still too early to tell how the acquisition of the 10 additional planes will be financed. The 12 brand-new planes acquired under the refleeting program ending early next year was financed by export credit agencies while two are leased planes. Gokongwei said using the same mode of financing for the expansion program is possible.

But Gokongwei revealed that CEB is undertaking an initial public offering (IPO) either next year or in 2008 to raise capital for further expansion, create a public market for the company, and enable some of its employees to own part of the company.

The airline is now flying to four regional destinations, which include Hong Kong, Singapore, Bangkok and Kuala Lumpur from Manila, and has introduced flights from Davao and Cebu to Hong Kong and Singapore. Gokongwei said they are looking at additional routes within the four-hour flying radius in North Asia (such as China, Taiwan, and Korea) and other countries in Southeast Asia.

A plan to fly to Japan has been shelved in the meantime as it will involve a bigger aircraft. There are reports that PAL is seeking approval to use CEB’s Japan frequency, even as the latter has asked the Civil Aeronautics Board (CAB) for more time before the frequency is given up.

Offering long-haul flights, Gokongwei said, is not part of CEB’s business model, even as he explained that short-haul flights are more suited for low-cost carriers.

Now on its 11th year, CEB finally grabbed the number one slot for the first time from Oct. 1 to 15 this year in terms of flying the most passengers, operating the most number of flight frequencies and routes, and flying to the most number of domestic destinations.

Latest market share report for the period covering Oct. 1 to 15, 2006 showed that CEB has a domestic market share of 45 percent and is ahead of its closest competitor (PAL) by one market share point. CEB had 149,000 passengers during the two-week period.

CEB is also now offering the most flights at 624 a week, 26 percent more than PAL’s 424. It also flies to more domestic destinations at 20, compared to its nearest competitor at 19, and more routes at 24 in the Philippines compared to PAL’s 18.

CEB has the newest fleet in the Philippines, with the average age of its 12 aircrafts at 12 months, which is also one of the youngest in Asia.

Meanwhile, Gokongwei reported that the number of CEB’s passengers (both domestic and foreign) in September this year grew by 108 percent compared to the same month last year. CEB’s domestic passenger level grew 97 percent in the same month (which he attributed largely to increased capacity of the planes) compared to the total market growth of 40 percent.

"It took us 10 years to get to number one. This is indeed a milestone in the history of Cebu Pacific and much of the credit must go to the CEB team who has worked tirelessly for the past 10 years. Now we are number one in the Philippines and hope to do the same for the region," Gokongwei said, even as he anticipates keeping the number one slot for the rest of the year.

He emphasized that the airline now offers an unbeatable combination of the lowest fares, the most number of domestic destinations and routes, the most flight frequencies, on-time flights, and the newest planes in the country. "Since the launch of our ‘Go’ fares last November, we have seen how this has influenced air travel and encouraged more people to fly. Our end-September reports show that total domestic travel was up by almost 40 percent compared to the same period last year and we believe that there’s still more we can do for the industry and the growing Philippine economy," he added.

CEB’s top executive also noted: "As we expand our operations and open new routes, both domestic and regional, we will continue to offer the lowest fares in the destinations we fly to. Tens of thousands of people are flying for the first time and that makes both our passengers and the airline very happy."

Since June, CEB has added five more domestic destinations, even as it resumed last week its Manila-Singapore flights and operationalized its Manila-Kuala Lumpur service.

CEB is also flying to Bangkok from Manila beginning Dec. 14, 2006 four times a week using one of its brand new aircrafts with a special introductory rate of only P1,999 one way. The Manila-Bangkok seat sale will run from Oct. 18 to 25 only and is good for travel from Dec. 14, 2006 to Jan. 31, 2007. CEB will be operating from the new Suvarnabhumi Airport, Bangkok’s new international airport which started operations last Sept. 28 and is currently the largest airport in the world, with the longest runway and tallest control tower.

Gokongwei said the Manila-Bangkok service is the third international destination opened by the airline this year as part of its regional expansion program. "This response to our entry to these new regional markets has been very encouraging. We’re creating a lot of excitement in the travel industry and getting a lot of requests to open more markets. With the opening of our service to Bangkok, we hope to further stimulate travel for both the business and leisure sectors to the benefit of both countries," he noted.

Meanwhile, CEB will start flying a direct service to Kuala Lumpur, Malaysia four times weekly starting Nov. 30, 2006 with a special introductory rate of P1,499 one way. The seat sale will run from Oct. 11 to 18 only and is good for travel from Nov. 30 to Jan. 31, 2007.

"We’re proud to be the only Filipino carrier operating on the Manila-Kuala Lumpur route," Gokongwei said, even as he revealed plans of providing lowest cost direct flight from KL to Manila.