High oil prices gnaw at Cebu Air 2017 profit

The operator of budget airline Cebu Pacific Air saw its net income drop by almost 19 percent as rising oil prices cut into profit, offsetting gains from strong passenger demand.

Cebu Air Inc. said its net income in 2017 hit P7.9 billion, down 18.9 percent from P9.75 billion in 2016.

The decline came despite revenue growth for passenger and cargo services. Total revenue last year hit about P68 billion, up 9.9 percent.

Passenger revenue alone was up 7.2 percent to P49.93 billion as volume increased by 3.2 percent. Cebu Pacific and Cebgo flew over 19.7 million passengers last year. Moreover, it added more planes to fleet, which numbered 61 aircraft at the end of December 2017. Flights increased by 3.6 percent last year.

Overall, the average fare was up 3.8 percent to P2,529, Cebu Air said.

Cargo revenue, meanwhile, jumped 29.2 percent to P4.6 billion. Cebu Air’s ancillary revenues, referring to sales outside ticket revenue, rose 14.9 percent to P13.49 billion.

As noted, Cebu Pacific saw expenses increase. This was attributed to an expanding business. But fuel expenses, a major cost item for airlines, also cut into its bottomline.

Under flying operations, Cebu Air said expenses rose by 21.2 percent to P23.8 billion. Cebu Air said this was because aviation fuel costs jumped 23.9 percent to P19.59 billion. The weakening peso likewise magnified the problem since fuel is imported.

In its report, Cebu Air said expansion remained in the cards. By 2020, it would expand its fleet by another 32 planes.

It also announced its plan to launch direct flights between Manila and Batanes starting March 25, 2018. Frequencies on some international routes were also increased such as Manila to Bali, Hanoi, Osaka, Nagoya, Tokyo (Narita) and Sydney.—MIGUEL R. CAMUS