Coronavirus scare takes toll on Cebu Pacific

The country’s biggest budget airline, Cebu Pacific Air, yesterday warned that it was bracing for a substantial adverse impact in terms of passenger volumes due to a sharp downtrend in travel caused by the coronavirus outbreak.

In an interview, Cebu Pacific CEO Lance Gokongwei said he expected the airline to experience a decline in net income as passengers cancel their trips to and from the Greater China region—a major source of sales for the carrier.

“We see a P3-4 billion hit if [the coronavirus outbreak] lasts six months based on previous experience with SARS in 2003,” he said, referring to the severe acute respiratory syndrome several years ago that also had a major impact on air travel.

“But we don’t think this will take as long as SARS as authorities are responding resolutely,” he added, referring to the efforts of governments around the region to contain the outbreak, including Chinese authorities’ decision to quarantine the entire city of Wuhan where the virus originated.

Gokongwei said the airline’s Greater China routes—which included Hong Kong, Macau and Taiwan—accounted for 13 percent of their aircraft capacity based on their upcoming summer flight schedules.

From an average seat load factor of 85 percent last year, Gokongwei said his managers were expecting this level to decline to as low as 30 percent over the next few weeks based on the cancellations they had been experiencing.

The airline offered full refunds to passengers choosing to cancel their travel plans as well as the option to rebook their flights at no cost.

To date, however, most passengers were deciding on outright refunds without rebooking their flights for the future.

“What we’re seeing now is there’s no incremental booking but everybody is refunding,” he said, adding that this travel downtrend would likely affect other markets, too, like Thailand, Korea, Malaysia and even within the Philippines.

In the first nine months of last year, Cebu Pacific saw its net income surge by 143 percent as earnings were lifted by strong passenger bookings and stable costs.

The airline said that net income from January to September hit P6.75 billion versus P2.78 billion the year before.

Cebu Pacific has been ramping up capacity to meet rising demand for air travel. Passenger revenue during the nine-month period went up 17.9 percent to P46.6 billion. Some 16.7 million flyers used the airline during the period, up 10.4 percent.