Cebu Pacific in talks with Ayala Land for acquisition of AirSWIFT

Cebu Pacific [CEB 29.40, down 1.7%; 266% avgVol] [link] confirmed a report that it is “currently engaged in exploratory talks” with Ayala Land [ALI 31.90, up 0.6%; 111% avgVol] over the potential acquisition of AirSWIFT, a self-described “boutique” airline servicing vacation destinations like El Nido, Boracay, and Coron. CEB said that talks are still in the “proposal” stage, and that it is “always on the lookout for opportunities to grow and expand its newtork, including partnership with other parties.” The original reporting quoted sources as saying that a deal might be closed in “one to two months or earlier”, and CEB neither confirmed nor denied this timeline in its clarification.

MB bottom-line: Couple of things here. First, is that I appreciate the Gokongwei Family’s willingness to buy, sell, and partner with some of the other major oligarchical families in the country. One of the most frustrating aspects of doing business here is the tribalization of transactions to the point where most things are just transfers of financial nutrients through the family-owned corporate centipede (yes, like THAT human centipede movie). Second, it will be interesting to see how this potential acquisition plays out for CEB in terms of corporate strategy. It’s clearly part of some move to increase CEB’s exposure to domestic tourism, but I wonder if it could also be part of a plan for CEB to foster a high-value business segment. CEB’s whole strategy as a budget carrier is to slam as many humans into a plane as possible, but in configuring its business plan around this volume approach, it knowingly turns its back on the opportunity to collect high-margin fares from passengers willing to pay more for service upgrades (first class, business class). I am not familiar with these routes, but I’m curious to see how they might integrate into CEB’s overall plan and what it might say about how CEB’s management team is trying to play out the next couple of years during this ongoing shortage of new planes and parts.

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