Cebu Pacific open to merger with PAL—president

MANILA, Philippines—Budget carrier Cebu Pacific, the largest airline in the Philippines, is open to mergers with other airlines including flag-carrier Philippine Airlines (PAL), its president said Thursday.

Speaking in a conference call from Manila, Cebu Pacific president Lance Gokongwei said his airline had a “strong balance sheet” compared to rival carriers.

Asked if he was considering a merger with PAL, he said: “We are not in any current discussions with Philippine Airlines but… if the opportunity arose, I would certainly look at it.”

Regarding possible consolidation in the industry, Gokongwei said he believed many of Cebu Pacific’s competitors, which he did not name, needed additional capital from their owners to stay in the air.

“Cebu Pacific continues to operate in a profitable manner. We are able to make money and fund our growth plans,” he told reporters.

Gokongwei said higher fuel prices and other increased costs had lowered the airline’s profits in 2011 but stressed it still posted positive figures.

Net profits in 2011 amounted to 3.62 billion pesos ($85 million), a 48-percent fall compared to 2010, company figures showed.

However, total revenues in 2012 rose 16.7 percent to 33.9 billion pesos while total passengers increased 14 percent to 11.9 million.

Gokongwei forecast that total passengers would rise to 14 million this year.

Last month, a PAL spokeswoman confirmed that the loss-making flag carrier was in talks to sell part of its stake to local conglomerate San Miguel.

PAL, majority owned by Philippine tycoon Lucio Tan, suffered a 1.45-billion-peso pre-tax loss in the three months to December 2011, its listed parent firm, PAL Holdings, reported.

PAL was forced to cancel many flights during that quarter amid a wildcat strike as airline management outsourced 2,600 jobs in in-flight catering, airport services and call centre reservations in an effort to cut costs.

PAL had a near-monopoly on the domestic aviation market two decades ago but has since been overtaken in number of flights by Cebu Pacific.

Although some budget carriers in Asia are reportedly cutting back, Cebu Pacific is still pushing through with its plans to begin long-haul flights by next year using Airbus A320 aircraft, Gokongwei said.

He said this service would cater to the estimated 10 million Filipinos working overseas, particularly those traveling to and from the Middle East, Australia, North Asia and Europe.