Cebu Pacific open to merger with PAL: Gokongwei

Rappler.com
Despite previous remark that the budget airline Cebu Pacific in legacy carrier Philippine Airlines (PAL), Lance Gokongwei says he will "look" at a deal if there's an opportunity

Cebu Pacific president and CEO Lance Gokongwei. Photo from AFP

MANILA, Philippines – Budget carrier Cebu Pacific is open to a merger with other airlines including flag-carrier Philippine Airlines (PAL), its president said Thursday, March 15.

Speaking in a conference call from Manila, Cebu Pacific president Lance Gokongwei said his airline had a “strong balance sheet” compared to rival carriers.

Asked if he was considering a merger with PAL, he said: “We are not in any current discussions with Philippine Airlines but… if the opportunity arose, I would certainly look at it.”

Regarding possible consolidation in the industry, Gokongwei said he believed many of Cebu Pacific’s competitors, which he did not name, needed additional capital from their owners to stay in the air.

“Cebu Pacific continues to operate in a profitable manner. We are able to make money and fund our growth plans,” he told reporters.

Previously, Gokongwei said they are not interested in PAL since they are already comfortable with the success of their business model as a low cost carrier.

PAL is a legacy carrier and in a sector that is not considered a growth area in the aviation industry.

Fuel prices

Gokongwei said higher fuel prices and other increased costs had lowered the airline’s profits in 2011 but stressed it still posted positive figures.

Net profits in 2011 amounted to P3.62 billion ($85 million), a 48% fall compared to 2010, company figures showed.

However, total revenues in 2012 rose 16.7% to P33.9 billion while total passengers increased 14% to 11.9 million.

Gokongwei forecast that total passengers would rise to 14 million this year.

Last month, a PAL spokeswoman confirmed that the loss-making flag carrier was in talks to sell part of its stake to local conglomerate San Miguel.

PAL, majority owned by Philippine tycoon Lucio Tan, suffered a P1.45-billion pre-tax loss in the 3 months to December 2011, its listed parent firm, PAL Holdings, reported.

PAL was forced to cancel many flights during that quarter amid a wildcat strike as airline management outsourced 2,600 jobs in in-flight catering, airport services and call centre reservations in an effort to cut costs.

PAL had a near-monopoly on the domestic aviation market two decades ago but has since been overtaken in number of flights by Cebu Pacific.

Although some budget carriers in Asia are reportedly cutting back, Cebu Pacific is still pushing through with its plans to begin long-haul flights by in 2013 using Airbus A330 aircraft, Gokongwei said.

He said this service would cater to the estimated 10 million Filipinos working overseas, particularly those traveling to and from the Middle East, Australia, North Asia and Europe. – Rappler.com, Agence France-Presse