Rising fuel costs result in slight loss for Cebu Pacific in 2005

Cebu Pacific, the Philippines’ second-largest carrier, registered a slight loss last year due largely to higher fuel costs, company president Lance Gokongwei said.

"It’s a loss in 2005 but we don’t have the final numbers yet," Gokongwei revealed following the launch of the Go! MasterCard Rewards program, a joint venture among Cebu Pacific, the Robinsons Retail Group, and Metrobank Card Corp.

He disclosed that fuel costs went up last year by as much as P600 to P700 million. Because of soaring fuel expenses, Cebu Pacific has acquired new and more fuel-efficient aircrafts that are expected to bring down fuel cost beginning this year.

From January to September last year, Cebu Pacific posted a net loss of P77.3 million, compared to a profit of P418.4 million in the same period in 2004.

But the airline’s chief executive expects earnings to improve this year after it introduced a new fleet and offered discounted rates to boost passenger traffic. "We are aiming to be profitable this year," said Gokongwei, also president of holding company JG Summit.

For January and February this year, air traffic has been growing by 15 to 18 percent, and based on forward bookings, the number of passengers can grow by 18 to 20 percent, Gokongwei said. The revenue growth, however, will be lower than 18 to 20 percent because of the differences in ticket prices.

Cebu Pacific earlier embarked on an ambitious refleeting program. As of December last year, the company had six new aircrafts. "We will have six more between June and September this year," Gokongwei said. Two more will be delivered before February 2007 to complete the program that will make Cebu Pacific’s fleet the youngest in the region.

As the new planes come in, the company will be adding more flights to and from Korea and Japan and serve new domestic and international destinations, such as China.

Cebu Pacific now has almost 80 flights daily to 16 domestic destinations and a fleet of two new Airbus A320s, four new Airbus A319, 6 DC9s which will be replaced by September this year, and two Boeing 757.

The new aircrafts are expected to cut by at least 20 percent the carrier’s operating and maintenance costs while increasing passenger capacity.

Cebu Pacific general manager Bong Mojica said the airline’s load factor is now about 70 percent from a low of 60 percent in 2005.

According to Gokongwei, the increased traffic beginning this year will be largely due to a recent move to slash Cebu Pacific’s domestic airfare rates by as much as 67 percent, a move it expects will help the company realize a 20 percent growth in revenues and a 36 percent increase in passenger carriage starting next year.

Cebu Pacific has also slashed its international air fares beginning with its Hong Kong flights.

Historically, the growth for Cebu Pacific in terms of passenger carriage since 1996 has been 16 percent. With the reduced rates, the company is now targeting a 36-percent growth. Load factor is likewise expected to increase from 65 percent to date (around two million passengers) to 75 percent.

Gokongwei earlier revealed that they have set aside more than a million seats for the Go! fares, or about 30 percent of total overall capacity this year. Of the one million seats (based on the 2006 seating capacity of between 3.5 to four million), more than 300,000 seats will be available at the lowest advertised fare levels.

Cebu Pacific’s offering of substantially lower fares follows studies that pre-selling seats at lower prices would generate higher revenues and make the airline company financially stronger.

Meanwhile, Cebu Pacific denied that they have given a firm commitment to participate in the planned test run to be conducted by the Manila International Airport Authority on the controversial Ninoy Aquino International Airport (NAIA) Terminal III at the start of this year’s second quarter.

Mojica said that while they have received the invitation of MIAA to participate in the test run, they have not given word that they will be joining the exercise if MIAA will be able to hold one in the near future.

"We have received the invitation, I believe they invited all the other airlines in NAIA. We have not agreed to anything so far," Mojica told The STAR.

He pointed out that aside from the known obstacles facing government, particularly MIAA, in their planned opening of the terminal for commercial operations, details of the test run remained unclear for their group to decide whether to participate.

"We will wait for further developments first," Mojica said. — With Rainier Allan Ronda