Cebu Air—controlled by billionaire Lance Gokongwei and his family’s JG Summit—plans to gradually expand and renew the company’s fleet over the next five years amid signs travel and tourism is staging a post-pandemic recovery.
“While we remain conservative in our 2022 fleet growth, over the next five years, we will have 48 deliveries and 35 exits, ending 2026 with 87 aircraft,” Gokongwei, CEO of Cebu Air—owner the Philippines’ largest carrier Cebu Pacific—said Wednesday at the company’s annual shareholders meeting.
Cebu Air has earmarked 32.8 billion pesos ($625.8 million) in capital expenditures to support the renewal of Cebu Pacific’s fleet, which stood at 74 aircraft as of end-2021, Gokongwei said. The company has said it aims to replace its older planes with the more fuel-efficient Airbus A330 neo jets.
The airline is upgrading its fleet amid a surge in travel demand as governments around the world relax Covid-19 restrictions. Cebu Pacific carried over 2 million passengers in the first quarter, up 272% from the year ago, the company said yesterday when it announced its latest quarterly results.
While revenue increased 148% to 6.7 billion pesos in the first quarter, bolstered by increased passenger and cargo traffic, Cebu Air’s net loss widened to 7.6 billion from 7.3 billion pesos in the previous year due largely to higher jet fuel expenses and unrealized mark to market losses from its convertible bonds.
“For the rest of 2022, Cebu Pacific sees a better business outlook driven by domestic recovery and re-openings of international destinations,” Cebu Pacific said in a statement. “However, it remains cautious of the risks presented by increasing jet fuel prices and interest rates and depreciation of the Philippine pesos versus the U.S. dollar.”
The rising cost of oil and the depreciation of the peso also dragged Cebu Air’s parent JG Summit into the red, with a 2.8 billion peso net loss for the first quarter. The group’s petrochemical business posted a net loss of 2.1 billion pesos during the quarter due to higher raw materials prices.
“For the first quarter of this year, we have seen that the reopening of the economy has positively impacted most of our subsidiaries, with our overall revenues exhibiting quarter-on-quarter and year-on-year improvements,” Gokongwei, who is also president and CEO of JG Summit, said in a statement. “However, market volatility with the increasing prices of oil and key input costs, coupled with peso depreciation have affected out profitability and we expect these to linger and pressure on our margins.”
JG Summit, one of the biggest conglomerates in the Philippines, also has interests in food and beverage, banking, real estate and utilities. The business was founded by the late billionaire John Gokongwei in 1954 as a corn starch factory. After Gokongwei passed away in 2019, his six children—Lance, Robina, Lisa, Faith, Hope and Marcia—inherited his fortune. The siblings had a combined net worth of $4 billion, placing them at No. 4 on the list of the Philippines’ 50 Richest when it was last published in September last year.