Cebu Pacific bets on fuel-efficient fleet to navigate crisis
It was good catching up with Cebu Pacific’s executives, led by its CEO Michael Szucs, during a recent roundtable discussion with editors and reporters.
The hot topic was, of course, the current global oil crisis and how the budget carrier is navigating this present-day challenge.
Szucs said that overall, the COVID-19 pandemic was much worse. Cebu Pacific or CEB, he said, remains positive but noted that the current crisis is still quite difficult.
“We’re positive and upbeat for the long term, but boy, this is so annoying,” he said, recalling that back in February they were seeing growth coming into the second quarter, and the booking curves were looking great until the war erupted.
The war Szucs was referring to, of course, is the US and Israel’s conflict with Iran, which erupted on Feb. 28.
70-70-70
Fortunately for CEB, the airline has a current fleet that includes fuel-efficient aircraft.
As such, its biggest defenses lies not in cutting flights but in the aircraft it chose to invest in years ago, said its president and chief commercial officer, Xander Lao.
“The structural advantages that Cebu Pacific has are 70-70-70. So first of all, more than 70 percent of our jet fleet are Neos,” he said, referring to their aircraft from the Airbus Neo family.
Compared with older-generation aircraft, these planes burn 15 to 20 percent less fuel per flight, making them significantly more efficient and lowering the airline’s operating costs.
“So the cost per flight is clearly more efficient and we also have more space,” he said.
According to data from Airbus, the Neo family boasts the very latest neo engines, large sharklets and an innovative Airspace cabin.
Continuing on the 70-70-70 strategy, Lao said, “the second part is we are primarily domestic (in capacity).”
“So the Philippines, unlike other nations, is an archipelago. It’s extremely difficult to move from one place to another here. I mean there is alternate transport that will take you 12 to 14 hours to get from one point to another. So more than 70 percent of our network in terms of overall capacity is really just domestic,” he noted.
Furthermore, Lao said 70 percent of CEB’s routes are actually non-leisure, meaning they include business, or trade trips which are often more complex travel journeys and not just a linear round-trip.
Cutting expenses
Still, Szucs said CEB is reviving pandemic-era austerity measures, including voluntary pay cuts, which could reach as much as 50 percent for senior management, and may commence this month and run through November.
Employees can also take voluntary unpaid leaves, including pilots and cabin crew, to preserve cash as CEB braces for a challenging third quarter, he said.
Jet fuel
As for jet fuel prices, CEB CFO Mark Cezar said they are still elevated but down from all-time highs since peaking at $242 per barrel in late March.
Officials said CEB is taking proactive steps to manage rising fuel costs while continuing to offer competitive fares, leveraging its strong operational and financial fundamentals to sustain its operations.
“We will continue to invest in initiatives that strengthen CEB’s long-term resilience, as well as non-negotiable priorities: safety and operational integrity,” CEB said in its presentation during the roundtable discussion.
In all, Szucs is confident that with these measures and a strong balance sheet, CEB can ride out the current crisis.
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