Cebu Pacific needs $400M for fleet expansion

Cebu Pacific Air Inc., the airline unit of Gokongwei flagship firm JG Summit Holdings Inc., needs around $300 million to $400 million to beef up its current fleet as it aims to dislodge Philippine Airlines as the top airline in the country.

Cebu Pacific president and chief executive officer Lance Gokongwei said funding will come from a combination of internally generated cash and bank borrowings, guaranteed by export credit agencies.

Last year, Cebu Pacific entered into a purchase agreement with Airbus SAS of France for the acquisition of 12 A319s and the lease of two Airbus A320s to totally replace its existing fleet of DC-9 and B757 aircraft.

Gokongwei said Cebu Pacific will start operating the two Airbus A320s by June while the A319s are scheduled for delivery from September 2005 until 2007. The A319s will be configured in a 150-seater all-economy configuration.

The airlines is confident the purchase of new aircraft will further strengthen its foothold in the industry and improve its international operations. It currently holds a 38 percent share of the market.

With new planes in place, Cebu Pacific expects total passengers to increase to three million by the end of the year from an estimate of 2.5 million passengers last year. Of the projected passenger volume, 2.6 million to 2.7 million are expected to come from domestic flights.

Among the domestic routes being serviced by Cebu Pacific include Bacolod, Butuan, Cagayan de Oro, Cebu, Clark, Davao, Dumaguete, Iloilo, Manila, Kalibo, Puerto Princesa, Roxas, Subic, Tacloban, and Zamboanga.

Despite the prevailing difficult business environment, Cebu Air is optimistic it can sustain its profitability this year. It is looking at a 20 percent growth in revenues with the new fleet.

Last year, the airlines posted a net income of P130.3 million or more than 19 times than what was reported in 2003. Revenues rose 21.6 percent to P7.41 billion from P6.09 billion largely due to improved domestic operations.

Cebu Pacific is looking to further increase its domestic routes, particularly in the Visayas-Mindanao area. It is also considering flying to Singapore and other routes in China.

The airline is covering Hong Kong and Korea. It is also making chartered flights to the provinces of Xiamen and Guangzhou in China.

Also, Cebu Pacific was granted last year coefficients, or flight entitlements, to Nagoya, Japan.