Tag: CEB

Philippine low-cost carrier Cebu Pacific Air is considering putting more aircraft in long-term storage, as it weighs a volatile demand environment amid the coronavirus pandemic.

The carrier has 14 aircraft in long-term storage at Asia Pacific Aircraft Storage in Alice Springs, Australia, says Alex Reyes, vice president for cargo at Cebu Pacific.

Cebu Pacific also operates Airbus A321neos. These comprise seven Airbus A321s, two A330s, four ATR72-600s, and one A320.

“We are looking to put more aircraft for long-term storage, but this is still under study given the volatility in market demand and travel restrictions,” says Reyes.

Cerium fleets data indicates that overall the airline has 30 aircraft in service and 23 in storage. It also has 56 aircraft on order from Airbus. These comprise 24 A321neos, 16 A320neos, and 16 A330-900s.

The airline’s in-service fleet comprises 12 A320s, seven A321neos, six A330-300s, and five A320neos.

“We have had positive discussions with Airbus and our engine suppliers regarding our pending orders,” says Reyes.

“The current plan is in line with our conservative forecast in the coming years, given our current situation. We will proceed as planned per our long-term vision, which includes the continuation of an orderly exit strategy of older aircraft that began before COVID-19.”

He adds that the airline continues to target sale & leaseback transactions, per its pre-pandemic plans.

Cebu Pacific has been working to restore flights after operating less than 10% of its domestic network from June to November. It is now operating 400-450 flights weekly to 28 domestic and eight international destinations.

In its third-quarter ended 30 September, Cebu Pacific and its units reported an operating loss of Ps6.7 billion ($139 million), reversing the Ps873 million quarterly operating profit it made last year.

Revenue for the period plummeted 89% to Ps2 billion, outpacing a 52% year-on-year decline in expenses. The revenue decline was led by a dramatic 97% drop in passenger revenue year on year.

Cebu Pacific Air has highlighted the bewildering array of coronavirus-related protocols as it works get passengers flying again.

In a virtual media roundtable, Cebu Pacific head of commercial Alex Reyes says travelers confront “a very complex situation” when making a decision about flying. As with many airlines, Cebu Pacific has a page listing testing and other requirements for various destinations, but it is extremely difficult to keep it fully updated.

“We try to capture all of the current regulations in place now,” he says. “It’s not perfect because the regulations are constantly changing…whether at the country level or even at the city level. They are constantly evolving and changing, as they react to the unique circumstances of their own locality.”

More often than not, he says, people still opt to buy a ticket, but there are travelers that are put off by the complexity involved in booking a flight and dealing with the correct testing protocols.

“I think the traveling public understands is that it is massively complex right now. Everyone is doing their part to try and make sure that yes, you can fly or no, you cannot fly. Or you get to fly as long as you do X, Y and Z.”

The key is making the process “clear and transparent” to travelers.

Covid-19 has hit the Philippines hard, including strict lockdowns earlier in the year that all but completely shut down air travel from mid-March to early June. According to the Johns Hopkins Coronavirus Resource Center, the country has 444,164 infections, second only to Indonesia in Southeast Asia.

Nonetheless, Cebu Pacific has been working to restore flights after operating less than 10% of its domestic network from June to November. It is now operating 400-450 flights weekly to 28 domestic and eight international destinations.

It has also relaunched services to leisure locations such as Bohol, Coron, Siargao, and Boracay.

On international routes, the only service operating at normal, pre-Covid-19 capacity is Manila-Dubai, operated daily with an Airbus A330. The carrier recently increased frequencies to Nagoya and Seoul Incheon, and will restart flights to Taiwan on 18 December.

Still, the low-cost carrier derived 66% of its third-quarter revenue from cargo. It has converted an A330 for cargo work and is carrying cargo on the seats of passenger aircraft.

In addition, the airline is conducting a trial where passengers are tested at Manila’s Ninoy Aquino International Airport before flights to the southern city of General Santos. From 3 to 14 December, passengers will undergo a free antigen test prior to boarding their flight. Only passengers who test negative will be allowed to board.

“It’s an approach we’re taking to assure the traveling public and local governments that we are not transporting any asymptomatic Covid-19 patients into their city or locality,” says Reyes. “It is another layer of protection to respond to the pandemic.”

After analyzing the results of the trial, the airline will consider rolling.

Cebu Pacific announced plans to raise up to $500 million in additional capital — by selling preferred shares and bonds — as it undertakes a restructuring exercise that sees it cut its fleet and network to cope with reduced travel demand.

The Philippine low-cost carrier discloses that it will raise up to $250 million in new convertible preferred shares and another $250 million in a private placement of convertible bonds.

Proceeds from the recapitalization exercise, subject to shareholder approval by November, will help strengthen the carrier’s balance sheet, it adds.

It also comes as part of a wider business transformation exercise that the carrier is undertaking.

Like many carriers in and around the region, Cebu Pacific has acutely felt the impact of the coronavirus outbreak, which has seen travel restrictions crimp demand.

It notes that it is only operating about 15% of pre-pandemic capacity. For the first six months of the year, Cebu Pacific reported a 61% year-on-year decline in revenue, at Ps17.3 billion ($357 million).

It also reported an operating loss of Ps6.29 billion for the quarter ended 30 June, widening the Ps693 million loss incurred in 2020’s first quarter.

“Due to this exceptional change in market conditions and industry dynamics, [Cebu Pacific] saw the urgent need to fast track its transformation. It is currently implementing a business transformation exercise that involves the right-sizing of network and fleet to meet new demand, and improvement of operations efficiency through process and policy enhancements and digitalization, among others,” the carrier discloses.

Cebu Pacific adds that since the start of the pandemic, it has been accelerating efforts in digitalization, “resulting in a significantly reduced unit cost, allowing the carrier to continue offering affordable air travel”.

“This capital raising exercise will provide the airline with the needed runway to withstand the financial challenges it faces as it slowly goes back to pre-Covid business levels and settles into the ‘new normal’,” it states.