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Cebu Pacific raising P16 billion through loans

Budget carrier Cebu Pacific is raising funds through borrowings and stock rights offerings to sustain its operations in 2021, as it ended downsizing moves.

The carrier's listed operator Cebu Air told the local bourse on Friday, March 5, that its board approved a P16-billion 10-year term with various banks, including the Development Bank of the Philippines and the Land Bank of the Philippines.

Asia United Bank Corporation, Bank of the Philippine Islands, Metropolitan Bank & Trust Company, and Union Bank of the Philippines are also part of the effort.

"Our net debt-to-equity ratio is quite low. We have one of the stronger balance sheets, so we've seen the support of all banks," Cebu Air finance director Trina Asuncion earlier said in a briefing with reporters.

The loans are on top of the ongoing P12.5-billion stock rights offer by Cebu Air. A total of 328.95 million convertible preferred shares are offered to existing stockholders at P38 apiece, with a dividend yield of 6% per annum.

From January to September 2020, the Gokongwei-led budget airline saw losses amounting to P14.69 billion.

To weather the slump, the airline laid off 1,300 employees.

"We already completed our resizing of business operations last year.… This year, there are no discussions on this," said Cebu Pacific vice president for marketing and customer service Candice Iyog.

With travel confidence still low, Cebu Pacific is operating at only 23% of its pre-pandemic network and using just half of its 73-aircraft fleet. The rest of the planes are "indefinitely" being kept at the Alice Springs desert storage facility in Australia.

The airline, however, is expecting a few fuel-efficient aircraft to arrive in 2021, which are mostly, if not all, replacements for existing planes.

Asuncion said the budget carrier sees a U-shape recovery rather than a sharper rebound.

Iyog said they are already seeing some signs of recovery, as the Philippines has gradually reopened tourism sites for locals and scrapped bureaucratic travel requirements.

The aviation industry will continue to bleed cash in 2021, according to the International Air Transport Association, as travel could still be stifled by new mutations and variants of the coronavirus.

As losses mount, airlines have been aggressively putting out seat sales and venturing into related businesses to improve their bottom lines. – Rappler.com

Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.

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