Cebu Pacific to offer up to 40% of stock in IPO

Gokongwei-owned Cebu Pacific plans to undertake an initial public offering (IPO) of between 30 to 40 percent of its shares in three years’ time in order to improve the balance sheet of parent firm JG Summit Holdings.

Cebu Pacific (CEB) president Lance Gokongwei revealed that the country’s second flag carrier is looking at listing its shares in the local stock exchange by 2008. "We are looking at a free float of between 30 and 40 percent. It’s too early to tell though whether these will be primary or secondary shares," he said.

CEB, wholly owned by JG Summit Holdings, flew for the first time in March of 1996 or a little more than a year after the local airline industry was liberalized by government. It pioneered the low fare, great value strategy in the local aviation industry. A low-cost, no-frills carrier, CEB was later officially designated by Malacañang as the country’s second national flag carrier.

In 2001, CEB launched its international operations as it introduced its Manila-Hong Kong flights. The following year, it opened its Manila-Seoul flight as its second international destination.

At present, CEB has a total asset base of P9 billion, which includes two planes. The amount will exceed $500 million (around P28 billion) by 2007 when the airline completes its refleeting program which involves the acquisition of 10 Airbus 319s and four 320s, Gokongwei said.

Once the refleeting program is completed, CEB will have the youngest fleet in the Asian region, he added. The new aircraft are expected to cut by at least 20-percent CEB’s operating and maintenance costs while increasing passenger capacity.

During the first six months of the year, Gokongwei revealed that CEB incurred a slight‚ operating loss. "The situation is worse during the third quarter because these are traditionally weak months for the airline industry, being the rainy season," he said.

By next year, CEB projects a 20-percent increase in revenues as well as a 36 percent growth in passenger carriage currently are two million as the airline company recently undertook a strategy slashing its domestic rates by as much as 67 percent. This move, according to Gokongwei, will encourage more people to travel and to travel more often.

He said CEB’s offering of substantially lower fare follows studies that pre-selling seats at lower prices would generate higher revenues and make the company financial stronger. About 30 percent of one million seats of next year’s projected total overall capacity will be set aside for the low-fare promo.