Cebu Pacific delays IPO; ‘conditions not favorable’

BY RUBY ANNE M. RUBIO, BusinessWorld Senior Reporter GOKONGWEI-OWNED Cebu Pacific Air, Inc. has postponed its P17.4-billion initial public offering (IPO) to next year, hoping for better market conditions. In a telephone interview, JG Summit Holdings, Inc. Senior Vice-President for Corporate Planning Bach Johann Sebastian said the Philippine Stock Exchange has been notified of Cebu Pacific’s intention to list "sometime next year." "We have to watch the condition of the Philippine market. Nobody knows where the market will go. The market condition is not favorable for an IPO," he said adding this is solely the opinion of the Gokongwei-led firm. Cebu Pacific has already tapped UBS Investment Bank as sole international underwriter and book runner. It will also be the lead manager for the estimated 125.1 million shares that will be offered to international investors. The domestic underwriters are ING Bank N.V. and First Metro Investment Corp. Proceeds from the IPO are estimated to reach P15.4 billion, plus another P2 billion if the company exercises an over-allotment option. It intends to sell up to 205.4 million primary and secondary shares through a listing at the Philippine Stock Exchange at a maximum offer price of P75 per share. It will use the proceeds of the share sale to finance its fleet expansion program after completing a $670-million refleeting program in March that involved 14 brand-new Airbus aircraft that now fly to 20 domestic and seven regional destinations. Touted as the low-fare leader in the Philippines, Cebu Pacific entered the market in March 1996 and pioneered the "low fare, great value" strategy in the local aviation industry. Unicapital Securities, Inc. Research Head Ron Rodrigo said woes in the US market and economy have affected global financial markets. "It is the company’s prerogative... to go [for an] IPO. At the moment, investors are at a cautious stance. They are monitoring what is happening in the US. They look at it as guidance on what to do with their investments. It is a concern of some companies going public," he said. The Philippine Stock Exchange index (PSEi) remains flat as investors have stayed on the sidelines due to US housing market’s woes. Fares dropped On Thursday, Cebu Pacific dropped fares on all its domestic destinations to P1.00, for all flights booked Friday until Tuesday. The bookings will be valid for travel from Nov. 1 to Dec. 20, 2007. Including taxes, a one-way flight would cost only about P2,000. Cebu Pacific said it is allocating more than 100,000 seats for the sale, "to celebrate its market position as the number one domestic airline." Official traffic data from the Civil Aeronautics Board shows Cebu Pacific had almost 4 million passengers, ahead of flag carrier Philippine Airlines by 165,00 passengers from June 2006 to July 2007. Cebu Pacific Vice-President Candice A. Iyog said the promotion is a way to stimulate travel, and the company expects tickets to sell fast. Lucio Tan’s Philippine Airlines (PAL) is also expected to drop its own rates this quarter. The period from July to September is traditionally a slow travel season so airlines will have to offer some incentive to travelers, said PAL Spokesman Rolando G. Estabillo. "We still have to find out from sales how much it would be... [The P1.00 rate] is Cebu Pacific’s own promotion, let them be," he told BusinessWorld. PAL is still the top international carrier, flying 1.74 million passengers for the first six months of 2007. Cebu Pacific carried 452,933 passengers. However, PAL serves 30 destinations, while Cebu Pacific has 12. Year on year, Cebu Pacific nearly doubled its international passenger load, with the introduction of new flights earlier this year, such as the Manila-Jakarta route. Cebu Pacific is expecting the delivery of its 15th Airbus aircraft next month, and its first two ATR 72 aircraft in early 2008. The aircraft will be used to boost domestic and international fleets. — with Maria Kristina C. Conti/BusinessWorld