Cebu Pacific closes $25.83-M loan for Airbus purchase

Cebu Air Inc., the airline unit of tycoon John Gokongwei, has closed a $25.83-million loan from various export credit agencies for the purchase of one Airbus A319-100 in line with its ongoing refleeting program.

This was disclosed by Cebu Air’s parent firm JG Summit Holdings Inc. to the Philippine Stock Exchange yesterday. The airline company operates under the Cebu Pacific fleet.

JG Summit said it has agreed to be one of the guarantors for the transaction with export credit agencies Euler Hermes, Coface, and the UK’s Export Credits Guarantee Department.

Last month, Cebu Pacific, the country’s second largest airline in terms of fleet, sales and passengers, secured a $25.76-million financing agreement to fund the purchase of an Airbus A319-100, also from various export credit agencies, which weren’t identified. JG Summit also served as guarantor in the transaction.

The acquisition is part of the airlines expansion program as it aims to further strengthen its foothold in the industry.

Cebu Pacific positions itself as the first low-cost airline based in the country while serving regional destinations and eventually, other international routes.

Cebu Pacific has earmarked $500 million for the expansion of its operations through the acquisition of 12 brand-new Airbus 319 aircraft and lease of two A320s to complete its refleeting program aimed at overtaking flag carrier Philippine Airlines in the next five years.

Despite the huge investment, Cebu Pacific is expected to be profitable as the new refleeting program would reduce fuel operating costs. The 179-seater A320 aircraft is known for its low maintenance and fuel costs which would allow Cebu Pacific to continue offering its trademark value fares.

Cebu Pacific holds 38 percent of the market after only eight years of service.

With new planes in place, Cebu Pacific expects total passengers to increase to three million by the end of the year from an estimate of 2.5 million passengers last year. Of the projected passenger volume, 2.6 million to 2.7 million are expected to come from domestic flights.

Among the domestic routes being serviced by Cebu Pacific include the cities of Bacolod, Butuan, Cagayan de Oro, Cebu, Clark, Davao, Dumaguete, Iloilo, Manila, Kalibo, Puerto Princesa, Roxas, Subic, Tacloban, and Zamboanga.

Despite the prevailing difficult business environment, Cebu Pacific is optimistic it can sustain its profitability this year. It is looking at a 20 percent growth in revenues with the new aircraft.

Last year, the airlines posted a net income of P130.3 million or more than 19 times the P130.3 million reported in 2003. Revenues rose 21.6 percent to P7.41 billion from only P6.09 billion largely due to improved domestic operations.