Cebu Pacific confident of return to profit this year

MANILA, Philippines — Leading low-cost carrier Cebu Pacific is riding on the resurgent demand for air travel and the declining price of jet fuel to end 2023 in the green, allaying concerns it will record another year of losses.

Its operator, Cebu Air Inc., said it intends to wipe out its capital deficiency this year by maximizing the use of its fleet to raise additional revenue, with the demand for flight services recovering.

In particular, Cebu Air targets to operate an average of 3,000 flights per week within the second quarter from just 2,600 flights a week in end-2022.

Down the line, Cebu Air expects macroeconomic conditions to pave its flight path back to profit, especially as prices of jet fuel are decreasing. In 2022, jet fuel prices averaged $126.65 per barrel with the supply chain pressured by Russia’s invasion of Ukraine.

Since then, jet fuel prices have gone down to $106.49 per barrel in the first quarter of 2023. Cebu Air also benefits from the peso’s recovery to the 55 to $1 level after hitting an all-time low of 59 to $1 in October 2022.

“Higher utilization of existing aircraft, together with improvement in both capacity and seat load factors driven by higher bookings, support the outlook for improvements in Cebu Air’s revenues and profitability margins,” the company said in a regulatory filing.

“Macroeconomic conditions are likewise supporting the corporation’s recovery to profitability,” the airline added.

Further, the Gokongwei-led carrier maintains a pool of financing sources where it can draw from to support the recovery of stockholders’ equity back to positive territory.

In 2021, Cebu Air issued 328.95 million convertible preferred shares at an offer price of P38 per piece. At least 313.04 million of those shares remain outstanding as of 2022.

Likewise, the International Finance Corp. made a $250-million investment in Cebu Air in 2021 through the issuance of convertible bonds. To date, the securities remain with no conversion yet from any of the bondholders.

“With all these initiatives, Cebu Air is confident that recovery to positive stockholders’ equity is imminent and forthcoming,” Cebu Air said.

Cebu Air posted a capital deficiency of P3.32 billion in 2022 after liabilities swelled to P147.02 billion, as the airline closed the year with a net loss of P13.93 billion in spite of the recovery in passenger demand.