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2011 ‘a difficult year’ for Cebu Pacific

Rappler.com
Spiraling price of jet fuel, which accounts for chunk of an airline's operating costs, dragged down profits of Cebu Pacific in 2011

MANILA, Philippines – Lance Gokongwei, president and CEO of local budget airline Cebu Pacific Air, said the year 2011 was “a difficult year” for the aviation industry as jet fuel prices, which account for a chunk of operating costs, spiraled.

“We will have our profits reduced in 2011 primarily due to higher oil prices,” Gokongwei told reporters at the groundbreaking of its flying school on Tuesday, January 24.

In 2011, average jet fuel price rose by about 39% to $127.5 per barrel from $91.4 in 2010, according to International Air Transport Association (IATA), an international industry trade group of airlines.

Other airlines, including Southwest Airlines and Jet Airways, have announced that their 2011 financial performance was dragged down by soaring jet fuel.

Cebu Pacific will announce its 2011 financial results on February 15.

Still profitable

Gokongwei said Cebu Pacific will still report a higher 2011 revenue after carrying 11.94 million passengers during the year.

“We do expect to show healthy profit and still be one of the most profitable low-cost carriers in the entire world,” said Gokongwei.

The budget airline continued to dominate the local market with 9.22 million domestic passengers, or an increase of 12% from 8.23 million in 2010.

The growth was attributed to cheaper fares, increase in seat capacity as new Airbus A320 units were utilized, and the mounting of additional flights to key destinations.

Load factor, or the measure of how full the flights are, stood was at 88% in 2011, or 2 percentage points higher than in 2010. This was also two points higher than the industry’s average load factor for both domestic and international routes.

The budget carrier is targeting to fly 14 million passengers this 2012 by operating more routes and adding more frequencies.

Debt for planes

To support its expansion and keep fuel costs down through more efficient aircraft, Cebu Pacific is taking delivery of 4 Airbus A320’s this 2012. Two will arrive in March, one in September and another in November.

Gokongwei said they borrowed from foreign banks to partly finance the new planes.

“We are borrowing around 85%, probably $150-$160 million. We signed up with banks but they are guaranteed with credit export and import agencies,” the airline executive said.

On Tuesday, January 24, it also broke ground for a new aviation training facility in Clark in Pampanga to ensure supply of qualified pilots. – Rappler.com