050307: Cebu Pacific net income soars to P134M in 2006

By Zinnia B. Dela Peña
The Philippine Star 05/03/2007

Cebu Pacific, the airline unit of tycoon John Gokongwei’s JG Summit Holdings, posted a net income of P133.9 million last year or more than 36 times the figure reported in 2005, as its passenger load went up.

Based on JG Summit’s annual report filed with the Philippine Stock Exchange, Cebu Pacific is now the group’s second largest revenue contributor, posting a 24 percent growth from P7.81 billion to P9.72 billion in 2006.

JG Summit attributed the significant income growth to Cebu Pacific’s successful shift into a true low-cost carrier model which enabled it to stimulate passenger traffic growth with its increasingly popular "Go" fares and Internet booking engine.

Cebu Pacific launched the "Go" fares in an effort to drive additional demand for air travel as its refleeting project continues to add capacity.

More than a million seats were offered at fares below current levels — about 30 percent of total overall capacity for 2006.

The offering of substantially lower fares resulted from studies that pre-selling seats at lower prices would generate higher revenues and make Cebu Pacific financially stronger. Lower fares would also promote local tourism and even closer family ties since travel to the provinces will become very affordable.

Other factors that contributed to the increase was more fuel efficient aircraft fleet, better aircraft utilization, a dramatic increase in the number and profitability of its international routes.

"The competitive position of the airline continues to strengthen as Cebu Pacific acquired a major chunk of the market share in domestic routes during the year," JG Summit said.

Cost of services and operating expenses also went up relative to higher revenue. Aside from this, the airline recorded expenses related to retirement of its Boeing 757 amounting to P502.8 million, part of which is loss on aircraft lease and write-down of aircraft parts and equipment amounting to P309.8 million during the year.

Finance costs recognized during the year amounted to P538.8 million, offset by a higher foreign exchange gain amounting to P631.2 million in relation to its foreign-denominated obligations.

Cebu Pacific maintains a fleet of 12 Airbus aircraft (10 A319-100 and two A320-200) with a fleet age of less than 11 months as of end-2006. All of these aircrafts are owned except for two A320-200 which are under operating lease. The airline’s two leased Boeing 757-200 aircraft are sub-leased to another airline.

The airline offers domestic service between 20 cities: Manila, Cebu, Iloilo, Davao, Cagayan de Oro, Tacloban, Kalibo, Bacolod, Zamboanga, Roxas, Butuan, Dumaguete, Puerto Princesa, Cotabato, Tagbilaran, Clark, Laoag, Dipolog, General Santos and Legaspi.

Cebu Pacific launched its international services in November 2001 in Hong Kong and was able to expand its network to Singapore, Kuala Lumpur, Bangkok, Jakarta, Incheon and Pusan..

 

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