Revenge travel fails to perk up profits of Cebu Pacific

LEADING budget carrier Cebu Pacific (CEB) will continue to rack up losses this year, despite a steady flow in domestic revenues with Filipinos going on revenge travel mode.

Mark V. Cezar, CEB Chief Financial Officer, made this confirmation to the BusinessMirror, saying, “We also need more international passengers,” adding that the higher fuel surcharge “cannot cover for the increased fuel prices and the weaker peso.” Earlier, CEB announced that it already reached 100 percent of its pre-pandemic capacity, adding flight frequencies in key domestic destinations like Cebu and Caticlan (Boracay). So far, the carrier has reached 88 percent of its pre-pandemic capacity for international flights, with Singapore, Dubai, and Bali as their most popular destinations.

Last year, CEB recorded some P25 billion in losses. Cezar said, “There’s dependency on fuel and forex, but yes, we’re still optimistic about registering a smaller loss [this year] than last year.”

Effective July 1, carriers are now allowed to impose a Level 11 fuel surcharge on booked flights, which translates to anywhere from P355 to P1,038 per passenger for domestic flights, and P1,172.07 to P8,714.84 for international flights, depending on the distance.

Previously the fuel surcharge was at Level 7, or between P201 and P769 per passenger. For CEB to have some breathing room in terms of its flying costs, Cezar said, ideally, the fuel surcharge should be at “Level 20,” or between P661 and P1993.

He noted at the end of 2021, jet fuel prices were at $80 per barrel. But as of June, CEB was paying $160 per barrel for jet fuel. Each barrel is equivalent to 159.1 liters. An A320 which has 180-seat capacity consumes 3,500-4,000 liters of jet fuel an hour, underscoring the increased cost of operating an aircraft.

While he declined to reveal their internal projection on the foreign exchange rate, he said, “We see further weakness [in the peso] for the end of the year.” The peso breached the P55 to the US dollar mark on June 29, closing at P55.06, its weakest since October 2005.

CEB held its first in-person news briefing on Wednesday, as it announced a new round of seat sales for both domestic and international routes starting July 7. Candice Iyog, CEB Vice President for Marketing and Customer Experience, said the carrier is offering a base fare as low as P188, one-way, for domestic destinations, and as low as P499, one-way, to international destinations.

The sale period is from July 7 to 11, while the travel period is from September 1, 2022 to January 31, 2023.

Despite the higher cost of operating aircraft  due to the increased fuel costs, the carrier is still offering affordable fares. “Part of our objective is to try and stimulate travel. We are still seeing lower fares compared to 2019,” said CEB Chief Commercial Officer Xander Lao.

CEB will take delivery of four more aircraft, A330neo, this year, after three were already delivered earlier. The new aircraft is more fuel efficient and offers a more efficient layout. The carrier has one of the youngest fleet in the world, said Iyog, with an average age of 6 years.

With the increase in both domestic and international flights, the carrier is now on a hiring mode, “for cabin crew and ground service agents,” she said.

Image credits: Nonie Reyes