Cebu Pacific expands single-aisle horizons to Australia

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February 11, 2019
Cebu A321neo Perth
Cebu's first A321neo. Photo: AIrbus

Australian cities such as Perth and Cairns, as well as destinations in Japan and India, are on the radar for Philippines budget carrier Cebu Pacific as it expands its fleet of Airbus A321neos.

Cebu, which already flies direct to Sydney and Melbourne from Manila, is stepping up its re-fleeting program and took delivery of the first of 32 A321neos at the end of January.

It expects at least five more of the longer-range, fuel-efficient planes during 2019 to support its expansion plans.

Cebu is known for packing seats into its bigger Airbus A330s and has followed that strategy with the smaller plane.

The budget carrier has opted for the Airbus Cabin Flex fuselage modifications to give the A321neo 236 ergonomically-designed Recaro seats, slightly below the 244-seat Airbus maximum.

It expects and Pratt & Whitney  GTF-powered planes to achieve a 20 percent savings in fuel costs as well as other advantages such as a significantly reduced noise footprint and lower maintenance requirements.

The January delivery brought the total size of its fleet to 72 aircraft, including 43 Airbus A320s and A321s, eight A330s and 20 ATR turboprops.

While the airline also has mid- and long-term plans for widebody aircraft, its primary focus is currently on the neos.  It is looking to grow its fleet to 83 aircraft in 2022, with 27 of those neos.

“This year, we’re taking in 12 new aircraft, (the) bulk of it will be the A321neo,’’ Cebu vice president Lance Gokongwei told AirlineRatings.

“We are continuously studying new routes and destinations, especially with the A321neo that has Northern Japan, India, and other cities in Australia like Perth and Cairns within its capabilities, but plans are not concrete for now.

“While the A321neo will give us the capability to possibly service a direct route from the Philippines to Perth, we will make announcements on new routes and destinations in due time.”

Cebu is the Philippines’ biggest carrier by passengers carried and claims a roughly 50 percent market share in terms of domestic travel and cargo.

Competitor Philippine Airlines (PAL) is also expanding and received a boost in January when Japan’s All Nippon Airways announced it would invest $US95 million to a 9.5 percent stake in the Filipino carrier. PAL is already using the A321neo to service Brisbane.

READ: Japan’s ANA to buy a 9.5 percent stake in Philippine Airlines.

However, Cebu is unfazed by the deal and Gokongwei says it is good for the Philippines aviation industry.

Gokongwei said the two had been partners for many years, including on code-sharing flights, and the investment was something Cebu had factored into its strategy.

The low-cost carrier was also looking at tapping opportunities in Japan after establishing an office there in 2018.

“As for the Philippines, we firmly believe that despite the massive growth in Philippine aviation over the past 20 years, there is still much room for expansion,” Gokongwei said.

“Less than 50 percent of the Philippine population have traveled via air, as compared with Malaysia or Singapore.

“People here are used to taking the bus and the boat–whereas air travel can be exponentially convenient and not as expensive as it used to be.”

The airline executive sais there was still “much room”’ to develop Clark International Airport, the former US air base, as a secondary domestic hub.

“There is also strong demand for inbound flights from North Asia into Cebu, which we have turned into our beach hub as we fly to key island destinations from there, ‘ he added.

A key to Cebu’s low-cost model is the ability to offer fares that are up to 40 percent lower than those of its competitors, partly through its investment in new and more efficient aircraft and technology.

But it isn’t all smooth sailing: net income for the airline’s first nine months of 2018 fell 36 percent to 2.78 billion pesos as it grappled with higher fuel costs and a weakening currency.

“Despite challenges brought on by volatile fuel prices and the foreign exchange of the Philippine Peso, Cebu Pacific has managed to keep sound fundamentals,’’ Gokongwei said.

“Revenues have been growing by 12 percent annually for the past eight years and we have maintained healthy operating margins.”