Cebu Pacific eyes investment in Zest Air

MANILA, Philippines—Gokongwei-led Cebu Air Inc., operator of budget carrier Cebu Pacific, has indicated preliminary interest in investing in Zest Airways of the Zest-O group of businessman Alfredo Yao.

In a disclosure to the Philippine Stock Exchange on Thursday, Cebu Air said it had been “approached to indicate its interest in this opportunity.”

“However, any interest which the Company may have at this point is at best indicative and non-binding,” the company said, adding that it was not doing any due diligence audit on ZestAir.

It was earlier reported that Malaysian carrier Air Asia was in talks to invest in ZestAir.

This developed as the airline industry was seen headed for tough times within the next three to five years as oversupply is building while yields are falling amid cutthroat competition and some structural constraints, a research by CIMB of Malaysia said.

In a September 15 report titled “A Shakeout in the Philippines?,” CIMB said smaller players like SEAir/Tiger, Air Asia Philippines and ZestAir may be at risk of years of losses from a pricing war. “To survive, they need to merge, either between themselves, or with the dominant two players,” the research said.

The CIMB report noted that competition was heating up with new entrants AirAsia and Tiger Airways getting into the market alongside ZestAir’s aggressive expansion and the rejuvenation of PAL/ AirPhil Express.