Cebu Pacific income dives in 2018

Cebu Air reported its net income plunged 50.6% to P3.9 billion in 2018, from P7.9 billion in the previous year, due to the “challenging macro environment.”

In a statement over the weekend, the operator of Cebu Pacific noted the high fuel prices, volatile Philippine peso, rising interest rates, increased competition, six-month closure of Boracay, and operational limitations of key airports as factors that affected its bottomline last year.

Airlines around the world took a hit from rising jet fuel prices last year, which only started going down in the fourth quarter, based on data from the International Air Transport Association (IATA). The average price of jet fuel during the nine-month period was at $85.37 per barrel, 36% up from $62.89 per barrel in the same period in 2017.

Adding to Cebu Air’s problem is the weakening of the Philippine peso, which recorded an average of P52.66 per dollar in 2018, a steep decline from the P50.40-per-dollar it recorded in 2017.

But despite the slump in its net income, Cebu Air said its revenue grew by 9% to P74.1 billion in 2018, driven mostly by its cargo business which posted a 19% growth. Passenger revenue was also up 9% to P54.3 billion in 2018.

“Despite the pressures posed in 2018, we remained resilient. We were able to expand our network by upgauging our flights touching congested airports,” Cebu Pacific Chief Operations Officer Michael Ivan S. Shau was quoted as saying.

In aviation, “upgauging” is a strategy used by airlines to increase capacity by replacing smaller planes with larger ones.

Cebu Pacific said it ferried 20.3 million passengers last year, 2.7% higher than the previous year.

The budget carrier said it is hopeful it will bounce back in 2019 with the acquisition of fuel-efficient planes and opening of new routes.

“We will continue to pursue our fleet upgauging strategy and invest in the latest aircraft technologies, as well as develop secondary hubs like Cebu and Clark. We will also continue to grow our cargo business with the incoming ATR freighters as well as continue our digital transformation for us to be more agile and adaptable to changing customer expectations,” Mr. Shau said in the statement.