MANILA, Philippines — The country’s biggest carriers Cebu Pacific and Philippine Airlines (PAL) will raise their capital expenditures next year to fund some of the largest fleet expansions to date in Philippine aviation.
Cebu Air Inc., the parent of low-cost carrier Cebu Pacific, will hike its capex guidance by almost a fifth to P50 billion in 2024 from P42 billion this year, mainly for the addition of 16 aircraft to its fleet.
Likewise, Cebu Pacific will place a firm order next year for the acquisition of up to 150 jets from either Airbus or Boeing in a transaction that could possibly reach $18 billion at list prices.
Cebu Pacific CEO Michael Szucs said the airline expects to end 2024 with a fleet of 92 aircraft, made up of 66 narrow-body, 10 wide-body and 16 turboprop. However, the carrier will ground at least 20 of them to make way for the repair of their jet engines.
As such, Szucs underscored the importance of expanding the fleet at a time when demand for air travel is going up and jets are being recalled for maintenance.
Cebu Pacific operates an average of 2,730 flights every week, of which 2,240 are domestic and 490 are international.
Cebu Pacific chief finance officer Mark Julius Cezar also said that the airline next year would pay the pre-delivery cost of the 150 jets that it is set to procure from either Airbus or Boeing.
The airline, owned by the Gokongweis, plans to source the pre-delivery payment straight from its cash flow and may secure loans from local and foreign banks to finance the remainder.
“It is not well known outside of the aviation industry, but in aviation it is well known that we are one of the most sought after credits in the world,” Cezar told The STAR.
As such, Cebu Pacific is confident that it can bankroll what is set to be the largest order book for a Philippine carrier in history. The airline is recovering financially from the pandemic, gaining a profit of P5.03 billion as of September to reverse a net loss of P12.05 billion a year ago.
Flag carrier PAL, for its part, is in the process of drawing up its spending guidance for 2024, but also projects an increase to pay for aircraft deliveries and to upgrade amenities and services. The airline is working with Airbus on two orders: first, for 13 narrow-body units and second, for nine wide-body jets.
PAL president and chief operating officer Stanley Ng said the aircraft orders would be funded by a combination of debt, equity, and leases as part of efforts to balance PAL’s finances.
“We will have about 79 aircraft by the end of this year, and we are in discussions with aircraft leasing companies and financial institutions to help us finance the purchase of new aircraft,” Ng told The STAR.
“We are currently working on our budget for 2024, [but] we are expecting additional investments into our business,” he said.
Ng also confirmed that PAL will introduce new routes next year, and this expansion is part of the reason the airline will increase its budget. Business class lounges will also be upgraded, and PAL is set to open its biggest one soon at the Terminal 1 of the Ninoy Aquino International Airport.
PAL is awaiting the delivery of 13 A321neos – valued at $129.5 million each – that were ordered prior to the pandemic. It is also investing an estimated $3.2 billion to acquire nine A350-1000s that will be deployed for long-haul services to North America and, eventually, Europe.
Both Cebu Pacific and PAL expect prices of jet fuel to stay elevated in 2024 as a consequence of geopolitical tensions in Ukraine and, recently, in Gaza.