2022 a turbulent year for Cebu Pacific despite travel boom

Cebu Pacific is not expecting a return to profitability in 2022 despite projections of a nearly five-fold increase in the number of passengers as flyers pursue their revenge travel plans.

Cebu Pacific chief financial officer Mark Cezar told reporters on Wednesday that operating expenses and the weaker Philippine peso remained a drag on earnings despite recent surcharges on fuel to offset rising oil prices.

Asked if parent firm Cebu Air Inc. would be profitable this year, Cezar said, “we don’t expect to be.”

“The triple whammy of fuel prices, weakening peso and interest rates rising had a significant weight on our financial performance,” he said on the sidelines of a media event.

“A lot of what the final number would be on the net loss or net income is dependent on those three factors,” he added.

Cebu Air saw losses widen to P24.9 billion in 2021 on lower passenger volume during the second year of the pandemic.

The surge in oil and other commodity prices is shrinking profit margins across a range of businesses, but airlines are particularly sensitive since fuel accounts for roughly half of their operating expenses.

This also comes as travelers make a strong comeback in 2022, pushing up demand for trips.

From 3.4 million passengers in 2021, Cezar said they were targeting to carry 16 million flyers this year. In 2019, Cebu Pacific served 22.5 million passengers.

100% domestic capacity

The budget airline announced on Thursday it had restored 88 percent of its prepandemic network, including international flights. It reached 100 percent of domestic prepandemic capacity last April.

Cebu Pacific now flies an average of 340 flights a day, covering 34 domestic and 18 international destinations. This is equivalent to roughly 64,000 seats offered in a day.

“We are pleased to see more people confidently flying again, not just within the Philippines but even abroad. This positive development has not only allowed us to carry more passengers, but also boosted our cargo service,” said Xander Lao, chief commercial officer at Cebu Pacific.

Meanwhile, Cezar said there were no fundraising activities planned for the year after Cebu Pacific raised capital at the height of the pandemic to strengthen its balance sheet. He said their P16-billion standby loan facility from government and private sector banks remained unused.

Candice Iyog, Cebu Pacific vice president for marketing and customer experience, said their ample financing and the restoration of more flights would ensure the carrier’s continued recovery.

“This makes us well placed to be able to get through,” she said.