Cebu Pacific’s refleeting program to lead to 18% passenger growth

Cebu Pacific Air Inc. expects its passenger load to grow by about 18 percent this year, outpacing the anticipated 12-percent growth in the domestic airline industry, on the back of an aggressive refleeting program.

Lance Gokongwei, president of both Cebu Pacific and its parent firm JG Summit Holdings, said by next year, a slower growth of about 15 percent in terms of passengers carried is expected, but would result in higher bottom line earnings for the airline company.

Cebu Pacific posted a net income of P480 million on revenues of P4 billion during the first half of 2004.

Early this week, Cebu Pacific said it is acquiring 12 new A319 aircraft from Airbus SAS estimated to cost about $660 million as part of the company’s refleeting program and in anticipation of growth in both the domestic and regional market.

Gokongwei told The STAR that the acquisition will be financed through internally generated funds, as well as financing from export credit agencies, and sale lease-back agreements.

He said Cebu Pacific will undertake a refleeting program starting Sept. 2005 to replace their existing fleet of DC9s.

"We are refleeting primarily because we decided that with an expected growth in the market, it would be good to get new aircrafts which are most cost efficient in terms of fuel and maintenance," he explained in an interview.

As part of the refleeting program, Cebu Pacific, which currently has a 38-percent share of the domestic market, will be retiring existing DC9s in the next 24 months. These aircrafts were acquired second hand and are between 25 and 30 years old.

The new aircrafts will service both the domestic routes and the regional destinations that include Hong Kong, Korea, and China.

He explained that the new acquisitions take into account not only the refleeting program but also the expected 10 percent annual growth in the market in terms of passengers carried.

Right now, Gokongwei said, Cebu Pacific has no new regional destinations in the pipeline. "But we are looking at expanding frequencies. We have yet to determine by how much which we will know when the new planes arrive," he said.

Cebu Pacific currently flies twice a day to Hong Kong, six times a week to Korea, and twice a week to Xiamen in China.