CEB logs net profit in Q1, up 81.4%

Cebu Air, Inc. (CEB) reported yesterday a net income of 14.037-billion earnings, up 81.4%, on 116.106 billion revenues in the current year’s first quarter, up 13.4%, compared with the same period in 2015, as the flag carrier added more flights and hauled in more passengers and cargo.

Passenger revenues grew 11.2% to 112.022 billion in the three months of 2016 due to the 13.0% increase in passenger volume to 4.8 million, driven by the increased number of flights.

In all, the number of CEB’s flights went up by 1.8% year on year as it added more aircraft to its fleet. CEB added one more aircraft, bringing its fleet to a total of 55.

The slight decrease in average fares by 1.6% to 12,486 for the three months of 2016 for the same period last year partially offset the increase in revenues.

Cargo revenues grew by 163.882 million or 8.3 % following the increase in the volume of cargo transported in 2016.

CEB incurred operating expenses of 111.888 billion for the first quarter, higher by 4.6% for the comparative period in 2015, driven by its expanded operations, growth in seat capacity from the acquisition of new aircraft and the weakening of the Philippine peso against the US dollar.

The increase was however partially offset by the substantial drop in fuel costs compared to the same period last year due to the sharp decline in global jet fuel prices.

Aircraft and traffic servicing expenses increased 21.9% to 11.587 billion as a result of the overall increase in the number of flights flown, with more international flights operated for which airport and ground handling charges were generally higher versus domestic flights.

International flights increased by 10.3% year on year with the launch of new services to Doha, Qatar last June, 2015, Fukuoka, Japan in December, 2015 and Guam, the airline’s first US destination, this March, 2016.

Meanwhile, CEB is selling four Airbus A319 planes to Las Vegas-based low-cost airline, Allegiant Air, which is transitioning to be a majority Airbus carrier by the end of 2016.

CEB has signed a forward sale agreement with the subsidiary of Allegiant Travel Company (ALGT) covering the sale and will deliver the aircraft within the next two years.

Allegiant is focused on linking travelers in small cities to world-class leisure destinations. It offers industrylow fares on an all-jet fleet while also offering other travel-related products such as hotel rooms, rental cars and attraction tickets.

Beginning with one aircraft and one route in 1999, the company has grown to over 80 aircraft and more than 300 routes across the country with base airfares less than half the cost of the average domestic roundtrip ticket.

For CEB, the sale is part of its fleet upgrading.

“Between 2016 and 2021, we are anticipating the delivery of 30 Airbus A321neos, for long-range capability, and 16 ATR 72-600 turboprop planes, for better inter-island connectivity,” announced CEB President and CEO Lance Y. Gokongwei.

CEB currently operates one of the youngest fleets in the world, with an average age of 4.82 years. Its 57-strong fleet is comprised of 7 Airbus A319, 36 Airbus A320, 6 Airbus A330, and 8 ATR 72-500 aircraft.

As part of its conservative fleet renewal program, CEB will be taking delivery of 30 brand-new Airbus A321neo aircraft, the largest model in the A320neo series.

The A321neo incorporates new engines and wing-tip devices called Sharklets, which could deliver fuel savings of 20 percent and additional payload or range capability.

The aircraft has a flying radius of over 6 hours and can be configured to have up to 240 seats, allowing CEB to access new markets in the Indian subcontinent and Australia.

CEB also ordered 16 ATR 72-600 turboprop aircraft, to meet increasing demand in the Philippines for interisland services.

The ATR planes enjoy a high reputation not only for versatility but also for their ability to operate on short runways. These planes will enable CEB to expand its operations on several smaller airports in its home country, and to contribute to the development of regional transport, trade, and tourism.

“This agreement to purchase additional aircraft from Cebu Pacific is an important step in our long-term transition to a single fleet type,” according to Jude Bricker, Allegiant Travel Company Chief Operating Officer.

Allegiant previously agreed to purchase six Airbus A319 aircraft from CEB, with three remaining deliveries scheduled to occur later this year.

The younger A320 family aircraft will help Allegiant to increase operational efficiency in the coming years.

The enhanced operating economics of the aircraft will also open up new growth opportunities for the company by making longer routes and off-peak flying profitable.

CEB offers flights to an extensive network of more than 90 routes on 64 destinations, spanning Asia, Australia, the Middle East, and USA.