Cebu Pacific shares rise after acquiring AirSwift from Ayala Land

Shares of Cebu Pacific [CEB 36.10, up 0.8%; 33% avgVol] [link] traded higher after the PSE lifted its suspension at 10:30 a.m. yesterday following the close of CEB’s acquisition of AirSwift from Ayala Land [ALI 36.40 down 4.8%; 90% avgVol] for P1.75 billion. In its comprehensive disclosure, CEB said that it will “eventually add El Nido to its routes”, which will “[widen] its network and contribute to growth opportunities.” CEB said that it expects this acquisition to have a “material impact on the net assets and earnings per share of CEB.” AirSwift is a boutique airline with direct flights from Manila and Clark to El Nido, and from El Nido to Cebu, Boracay, Coron and Bohol.

 

MB bottom-line:  My first reaction to the possibility of this deal was that it didn’t seem to fit CEB’s general strategy of stuffing as many people into optimized Airbus A320s as possible, but I’ve since come around to see it as a no-brainer addition for CEB. The addition of these high-end routes to CEB’s network will allow CEB to offer complete itineraries to these in-demand locations, for domestic travelers and international travelers alike. Defensively, CEB’s purchase keeps these “jewel” routes out of the hands of its competitors like Philippine Airlines [PAL 5.21 unch; 76% avgVol] and AirAsia PH. With the government’s focus on tourism, this is a savvy strategic bet by CEB that should pay off in the years to come.

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