Cebu Pacific (CEB), the airline brand of the Gokongweis’ JG Summit Holdings Inc., expects revenues to grow 30 percent from P15 billion in 2007 to over P20 billion this year as the company expects a big boost in passenger load brought about by fleet expansion.
This year’s growth in revenues, however, is lower compared to the 50 percent increase in revenues in 2007.
“Remember that we are coming from a much smaller base in 2006, which accounts for the huge jump in revenues in 2007. In absolute amounts of increase, however, we should be bigger than last year,” CEB president and CEO Lance Gokongwei explained.
According to Gokongwei, 2007 posted record-breaking numbers both in terms of revenues and profits. “This year, we expect growth to continue.”
In terms of the number of passengers, CEB anticipates to carry over seven million passengers for its combined domestic and international operations as against five million in 2007.
Gokongwei forecasts the company’s recurring net income in 2008 to exceed last year’s P1.7 billion. “So far, the first quarter of 2008 has been good. Passenger growth for the first three months has been over 20 percent. Revenues have grown more than that at between 25 and 30 percent because of the huge growth in our international operations. In terms of recurring net profit, we expect to be higher than the P350 million in the first quarter of last year,” he pointed out.
CEB’s top executive, however, said he expects some “dark spots” within the year, especially with the prevailing uncertainty in terms of fuel prices which now account for 45 to 50 percent of operating cost compared to last year’s under 40 percent.
The company has, in fact, imposed an additional P100 fuel surcharge per ticket for domestic flights while the increases for the international flights will depend on the destination.
“We, however, see a huge jump in passenger growth in the second and third quarters of this year when the new planes arrive,” he said.
The company is investing around $300 million this year to bring in 10 additional aircraft. Four Airbus 320s will be on operational lease while six new turbo-prop ATR 72-500s which will cost around $120 million will be acquired and financed by a combination of internally-generated funds and export credit agency financing.
Four of the new ATRs will be arriving towards the end of the year while one Airbus 320 will be arriving in October.
Gokongwei said financing for this year’s expansion plan is already in place, which means that undertaking the earlier planned public listing of CEB is no longer a priority. “The planned initial public offering (IPO) is still on hold.”
The new turbo-prop ATR 72-500 aircraft will be used for smaller airports like Caticlan (Boracay).
Gokongwei said the ATRs will allow the company to serve more cities whose runways are too short for its Airbus fleet. The Philippines has 75 airports, of which only about 25 can accommodate CEB’s Airbus fleet.
Areas with smaller airports, like Caticlan, will likely experience a business boom as the 72-seat ATRs bring in more tourists and businessmen, he said. The Caticlan service started last Feb. 29, using CEB’s first ATR.
CEB announced earlier its acquisition of up to 14 ATR aircraft consisting of six firm orders and eight options. This is on top of the 20 Airbus jets worth $1.3 billion it announced last year.
The Toulouse, France-based regional aircraft manufacturer, Avions de Transport Regional (ATR) is the world leader in the 50 to 74-seat turboprop market.
CEB will take delivery of the first six ATRs in 2008 and four in 2009. CEB will also take delivery of four Airbus A320 aircraft in 2008, bringing CEB’s fleet to 25 by the end of 2008.
“From our current fleet of 15 Airbus aircraft, we could have a fleet of up to 50 aircraft composed of 32 Airbus and 18 ATR by the end of 2012 if all options are converted into firm orders,” Gokongwei pointed out.
CEB likewise expects a boost in its sales with its conversion to Navitaire’s New Skies hosted reservation services and SkyPrice revenue management system.
An integrated Web-enabled passenger management system, New Skies includes Internet booking, call center, real time reporting, ancillary revenue generation and airport check-in capabilities. The system is designed to help low-fare airlines make better inventory allocation decisions and maximize revenues.
“Over the past 12 months, we’ve experienced tremendous growth, both domestically and throughout Asia. Navitaire is the ideal technology partner to help enable our vision and support our rapid growth with innovative technology and tightly integrated products. We will now be able to offer our guests more services and options through our website because of the system’s flexibility,” Gokongwei said.
Navitaire’s reservation services now power 17 of the world’s 25 largest low-cost airlines, including Ryanair, JetBlue, Virgin Blue, AirTran Airways, GOL, and AirAsia. It provides services to more than 85 airlines worldwide. Navitaire is a wholly-owned subsidiary of Accenture.