Cebu Pacific seeks fare hike

Cebu Air Inc., the operator of the country’s biggest budget carrier, is seeking to raise air fares on the back of skyrocketing fuel costs and the weakening of the peso against the dollar.

Lance Gokongwei, president of Cebu Air, said they have applied for regulatory approval to add fuel surcharges.

The company, which operates the Cebu Pacific brand, has been losing about P700 million a month as jet fuel prices soared to as high as $87 per barrel and the peso falling to 52 against the dollar.

“It’s costing us about P700 million more a month from a year ago,” Gokongwei said during the annual stockholders meeting of Cebu Air’s parent firm JG Summit Holdings late Monday.

Gokongwei said Cebu Air has applied for fuel surcharges with the Civil Aeronautics Board amounting to P70 to P250 for domestic flights.

“We have to become more efficient. We have applied for a fuel surcharge with the CAB. It’s still subject to CAB’s committee’s approval. There’s no date yet, but the fuel surcharge we’re asking for, domestic between P70 to P250 approximately, and this recovers just half of the increased cost we’re facing. We’re really trying to minimize costs,” he told reporters.

This developed as the company estimates a revenue loss of P500 million to P1 billion as a result of the six-month closure of Boracay.

Moving forward, the budget carrier would also continue with its digital transformation including the installation of the MAX Airport Suite of applications for increased productivity and enhanced customer experience.

Cebu Air’s net income reached P1.44 billion from January to March this year, up from P1.28 billion in the same period last year.

For JG Summit, the conglomerate is setting aside capital expenditures of P80 billion to this year, of which P30 billion will go to Robinsons Land Corp., P20 billion to JG Petrochemicals, P20 billion to Cebu Air and Universal Robina with P7 billion to P8 billion.

Gokongwei, now the CEO of the conglomerate from COO previously, is optimistic of the business environment but noted risks such as rising interest rates, fuel and commodity price risks, the weakening peso, intense competition and technological disruptions.

“We recognize that there are risks which we must consider as we run our businesses. Evolving regulations involving tax, labor, and the environment are realities that we continuously address and adapt to as we make our decisions. For example, the recent passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act had levied an increase in excise tax on sweetened beverages and petroleum products, among other things, and this elevates the cost base of conducting some of our operations,” Gokongwei said.