Cebu Pacific’s net profit in Q1 dips 19.8% to P962M

MANILA, Philippines —The country’s largest airline Cebu Pacific felt the pinch of high fuel prices and stiffer competition in the first quarter as it posted less earnings despite a sharp rise in its passenger count.

On Tuesday, Cebu Pacific said its net income slipped 19.8 percent to P962.4 million at the end of the January to March period. Operating profits, which stripped out the company’s hedging gains for fuel prices, dropped 36.6 percent to P469 million.

The drop in earnings came as expenses for flying operations rose by 41.5 percent to P1.504 billion, Cebu Pacific said in a disclosure to the local bourse.

“Growth in flying operations expenses was primarily due to the increase in aviation fuel expenses,” the company said.

“Rise in aviation fuel expenses was further influenced by the increase in the volume of fuel consumed as a result of the increased number of flights year on year,” the company said.

“Flight deck expenses, owing to pilot costs, including training, also contributed to the increase in flying operations,” it added.

Aside from the rise of fuel prices, the Cebu Pacific said profits were also hit by high expenses linked to the growth of the company’s fleet. Aircraft and traffic servicing expenses rose 13 percent to P842.7 million in the three-month period, “driven by the increase in the number of flights flown in 2012, particularly to the surge in the number of domestic and international flights that went up by 24.4 percent and 7.2 percent, respectively from last year.”

“Landing and take-off fees and ground handling charges are significantly higher for international flights compared to domestic flights,” the company said.

Cebu Pacific said its revenues were higher by 24.2 percent to P9.34 billion in the period as it grew its passenger base and widened its share in the Philippine air travel market.

The company said its slimmer margins were also a result of its reduction in average fares for its flights. Cebu Pacific said its passenger volume rose to 3.4 million at the end of March, up from 2.8 million the year before.

This helped grow revenues from passenger operations to P7.19 billion for the three-month period, up by 14 percent year-on-year. The company said revenues would have grown by more if not for the 5-percent reduction in average fares.