Cebu Pacific sees bump in ’14 passenger traffic

FILE PHOTO

MANILA, Philippines—Cebu Pacific, the country’s biggest budget carrier, will get a lift in terms of passenger traffic this year with the acquisition of Tigerair Philippines and as it increases capacity to serve new routes, its top official said.

Cebu Pacific CEO Lance Gokongwei told reporters last week that the acquisition of Tigeriar Philippines, completed in February, would allow Cebu Pacific to fly about 17 million people this year, up 18 percent from 14.4 million in 2013. Without the acquisition, Gokongwei said Cebu Pacific would have grown passenger traffic by 4 percent this year.

“The economy is robust. We see opportunity for growth across [international and domestic] markets,” Gokongwei said.

The airline, a unit of JG Summit Holdings Inc., bought 100 percent of Tigerair Philippines for $15 million from shareholders that included Singapore’s Tiger Airways.

Gokongwei said the company would achieve the “break even” point on the acquisition by the summer season of 2015.

Cebu Pacific, which already cornered half of all domestic flights in 2013, was on track to expand its long-haul business in the Middle East and make its debut to Australia over the next two years, Gokongwei said.

The airline mainly competes with flag carrier Philippine Airlines and the local units of Malaysian budget carrier AirAsia in the country.

Gokongwei was more cautious on plans for Europe and United States, following the dual announcement last week that Cebu Pacific was given clearance by the European Union and the United States Federal Aviation Administration restored the country’s category 1 rating.

Right now, Cebu Pacific’s long-haul operations are limited to Dubai using its Airbus A330 planes, whose 11 to 12-hour range places mainland Europe and the west coast of the US out of reach for now.

Among domestic carriers, only Philippine Airlines directly serves Europe via non-stop flights to London.

“We still have a lot of work to do. We are still going to open up Middle East and Australia in the next couple of years. These require a lot of investments,” Gokongwei said.

He said the airline could capitalize on Europe flights through commercial agreements with carriers serving those markets as he cited intense competition with subsidized gulf carriers.

“Middle eastern carriers are not pushovers. They are fantastic carriers and fantastic competitors,” said Gokongwei, adding that potential markets include London, Amsterdam and Paris. Such agreements, however, would require the approval of regulators, including the Civil Aeronautics Board.

Longer-range planes are not yet on the horizon for Cebu Pacific, which is acquiring another 50 planes from European manufacturer Airbus S.A.S through 2021, Gokongwei said. It had 48 planes last year and plans to end 2017 with 62 planes, comprised of mid-range A320s and A321s and A330s, briefing materials posted on its website showed.

Gokongwei was mum on whether Cebu Pacific would modify orders to acquire or lease planes with extended range, saying these are “long-term decisions” that needed to be studied closely.

Cebu Pacific is currently the only profitable domestic carrier, having posted a net income of P511.9 million in 2013. That figure was 85 percent below the previous year mainly due to foreign exchange losses. Increasing demand for budget travel boosted revenues to P41 billion, up 8 percent last year.