Cebu Pacific to spend $1.4B for 22 new A320 planes

Cebu Pacific will expand its fleet in the next five years to meet growing demand for low-cost air travel, its top executive said on Tuesday. Lance Y. Gokongwei, president of Cebu Pacific operator Cebu Air, Inc., said in a press briefing the airline would buy 22 brand-new Airbus A320 until 2014. "We are buying 22 more new aircraft and by 2014, we will have a fleet of 51 aircraft and the largest A320 fleet in the Philippines. The aircraft will start arriving between 2010 and 2014," Gokongwei said, citing the need to increase capacity due to rising demand. Cebu Pacific will spend $1.4 billion for the new aircraft. The company may also buy seven more airplanes, he said. Cebu Pacific has a fleet of 33 aircraft ranging from A320s to propeller planes. Gokongwei said the new aircraft would be deployed to existing routes, as well as to new domestic and international routes being planned. The airline will be flying to Pagadian soon and is awaiting official notice for more flights in the Asia-Pacific region, executives said. Cebu Pacific said the purchase of new aircraft would be covered by internally generated funds and export credit. Proceeds from the sale of shares to the public for the first time may also be tapped, but the aircraft purchase won’t depend on the stock exchange listing. "The purchase doesn’t depend on the [initial public offer]. It’s actually a combination of funding strategies. We will reconsider the IPO after the elections, but there really isn’t a definite timeline on that," Gokongwei said. When Cebu Pacific receives all 22 new aircraft, the airline will become one of the largest low-cost fleets in the region. Cebu Pacific carried 8.7 million passengers last year with a load factor of 79 percent, 30 percent higher than 6.7 million passengers in 2008. In the first quarter, the carrier flew 2.4 million passengers. The company earned P3.26 billion last year, wiping out P3.25 billion in losses in the prior year. "We are well on our way to exceed our target of 10 million passengers this year with the strong demand we are seeing for both domestic and international flights. We are also expecting an increase in revenues," Gokongwei said. Last month, Cebu Air deferred its P12-billion listing given election jitters. Cebu Pacific is eyeing almost P12 billion in net proceeds by listing 235.562 million shares at a maximum price of P95 each. Documents showed the carrier needed to make P9 billion in advanced payments to increase its fleet to 49 by 2014. Cebu Pacific’s press briefing came a day after Tan-led Philippine Airlines, Inc. announced the retrenchment of 3,000 ground workers under a plan to outsource three noncore units to cut burgeoning losses. — Emilia Narni J. David, BusinessWorld