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Stock Commentary

Cebu Pacific Q3 profit: P1.3-B

Merkado Barkada
Cebu Pacific Q3 profit: P1.3-B

Cebu Pacific [CEB 32.75, up 1.2%; 165% avgVol] [link] reported a Q3 net income of P1.28 billion (+150% y/y) and a 9M net income of P5.0 billion (+141% y/y). CEB said that it recorded P23.3 billion in Q3 total revenue, up 39% y/y, and up 23% from CEB’s Q3 performance back in 2019 before the COVID pandemic re-arranged the face of the airline industry as we knew it. CEB flew 5.3 million passengers (+27% y/y) in Q3 on 35,000 flights (+18% y/y), with a seat load factor of 83.7% (+13% y/y). The international segment saw the greatest improvement, with a 228% increase in passengers flown to 1.3 million as compared to a 5% increase in domestic passengers flown to 4.0 million.



MB bottom-line: It feels almost sentimental to see CEB posting a substantial profit again after what COVID did to the airline industry across the world, and it feels wild for CEB to be joined by its main rival, Philippine Airlines [PAL 5.40, up 2.1%; 171% avgVol], in this turnaround to material profitability. Both CEB and PAL are noting significant upticks in demand for air travel, but it will be interesting to see how the ripples from the COVID catastrophe continue to impact the recovery of the two airlines going forward. CEB and PAL approached the COVID problem differently, with CEB raising capital internally and conducting a follow-on offering to stay afloat, and PAL basically dying and getting resurrected by a mountain of Lucio Tan’s personal cash. It will also be interesting to see if the demand continues to grow, and how the two management teams handle the global constraints on new airplanes, used airplanes, and airplane parts. It’s not like the old days when CEB and PAL could just predictably buy planes to establish new routes or maximize existing routes. Results will depend on the quality of the management team, and in particular, the quality of the operations group.

 

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

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