Cebu Pacific reports 86 pct drop in first-quarter profit

By Lorenz S. Marasigan, BusinessMirror

Posted at May 16 2014 08:16 AM | Updated as of May 16 2014 04:16 PM

MANILA -- Foreign-exchange losses, coupled with higher operating expenses, weighed on budget carrier operator Cebu Air Inc., sending the firm's bottom line in the first quarter lower by more than a third.

Net income dropped sharply by 86 percent to P164.2 million in the first three months of the year from the P1.2 billion booked in the same period in 2013. This, as revenues grew by 12 percent to P10.5 billion while operating expenses rose by 22 percent to P11.3 billion.

The growth in the firm’s expenses was mainly due to the group’s expanded operations with the launch of long-haul services in October 2013 and expansion in seat capacity caused by the acquisition of new aircraft.

The increase in expenses was also reinforced by the weakening of the Philippine peso against the greenback which averaged to P44.88 per US dollar at end-March, from last year’s P40.70.

This resulted in a net foreign-exchange loss of P193.7 million during the period. The firm’s major exposure to foreign-exchange rate fluctuations is in respect to US-dollar denominated long-term debt incurred in connection with aircraft acquisitions. Cebu Pacific added eight more planes last year, increasing its fleet to 51 aircraft at end-March. This includes the three brand-new Airbus A330 aircraft the airline acquired last year.

The increase in aircraft resulted in a spike in its capacity to service its passengers, adding more seats to its current offering. As this developed, Cebu Pacific will launch direct flights between Cebu and Tandag, the capital city of the province of Surigao del Sur, on June 29. Tandag will be the airline’s 34th domestic destination. “We’re very proud to be soon launching Cebu-Tandag flights, as part of our continuous commitment to enable everyJuan to fly.

We hope that with direct air services to Tandag and our trademark lowest fares, we can further stimulate travel and trade to Surigao del Sur, for the benefit of the local economy,” said Candice Iyog, Cebu Pacific vice president for marketing and distribution. To introduce the new route, Cebu Pacific will offer a P1 seat sale for the Cebu-Tandag flights until May 16, or until seats last. This is for travel from June 29 to December 15.