Wednesday, 18 February 2009

Cebu Pacific forecasts P25-B revenues in 2009

The Manila Bulletin

Cebu Pacific (CEB) expects to thrive in the global economic crisis, hauling in P24 to P25 billion revenues and a "much better bottomline" this year from around P19.5 billion revenues and a loss in 2008, President and CEO Lance Y. Gokongwei told yesterday’s press conference.

After jet fuel prices went down from 60 percent of the carrier’s cost in 2008 to only 30 percent this year, CEB scrapped the surcharges on all its international fares effective today (February 18, 2008) to stimulate demand.

Jet fuel accounts for the single biggest cost of CEB, up to two-thirds. Hence, when oil plunged from $ 140 a barrel last year to the current $ 60 a barrel, CEB was able to scrap the US$ 40-75 per way fuel and insurance surcharge it slaps on fares.

The move will slash CEB’s year-round fares by as much as 17 percent, leaving passengers to pay just the fare and government taxes.

Now, the carrier is offering a system-wide sale of over one million seats effective today until the allotment is sold out. The promo fare is P1,999 one way from Manila to Bangkok, Hong Kong, Ho Chi Minh, Kaohsiung, Kota Kinabalu, Kuala Lumpur, Macau Singapore and Taipei; Clark to Bangkok, HK, Macau and Singapore as well as Cebu to HK for travel between May 1 to December 31, 2009.

This year, "We intend to achieve an 80 per cent load factor and add routes with either the same or increased frequencies for 2008," Gokongwei noted. "In times of financial crisis, Low Cost Carriers like CEB will prevail."

People having less money and scrimping customers dampening demand for travel do not faze CEB. "Our business model is to make flying a habit, so in tough times, we make flying more affordable. We see a lot of corporate business this year as companies become more conscious of meeting their travel budgets," he explained.

CEB fell 300,000 passengers short of its 7 million passenger target for 2008 because it was forced to increase fares in response to the fuel price increase.

Still, last year’s total of 6.7 million passengers represented a 23 per cent growth from 2007’s 5.5 million total passengers and almost 46 per cent share in the domestic market.

"For 2009, CEB targets to carry 9 million passengers, of which 6.8 million are domestic and 2.2 million are international," Gokongwei forecasted.

And while CEB expects a 2008 operating profit, it anticipates a loss after foreign exchange losses and hedges, the President admitted. "We expect to have positive bottomline and do much better this year."

In addition, CEB has drastically reduced its capital expenditures from over USD$ 200 Million last year to only $ 60-70 million in 2009. Although it is adding 6 aircraft for 2009 four ATR 72-500s and two airbus A320s, the last two are leased and do not go into CEB’s books.

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