Cebu Pacific sees profitability despite high fuel costs

Reuters

Posted at Jul 21 2011 06:20 PM | Updated as of Jul 22 2011 02:20 AM

MANILA, Philippines - Cebu Pacific, judged as the world's fifth most profitable budget airline, said on Thursday its current ranking showed the sustainability of its business strategy as it seeks further growth despite high fuel costs and tougher competition.

Cebu Pacific flew over 3.1 million passengers from April to June, 15% more than a year earlier. It is targeting 12 million passengers this year, up 14% from last year.

The country's low-cost airline ranked fifth in net profit and eighth in operating profit, according to the July issue of Air Transport World, a monthly magazine on global airline and commercial air transport manufacturing.

"This is quite an achievement since it shows CEB's (Cebu Air) financial management and sustainability as a business," Candice Iyog, the carrier's vice president for marketing and distribution, said in a statement.

The rankings, based on data for the most recent fiscal year, put Ryanair at the top spot in net profit, followed by Southwest Airlines.

Malaysia's AirAsia ranked third while southern England-based carrier EasyJet was at fourth spot.

Cebu Pacific, operated by Cebu Air Inc., has lost about 24% this year, underperforming the broader market's 7% gain. It has dropped 32% since its market debut in October as the country's largest public offering.

Its shares have been battered on worries rising fuel prices would dent earnings. The airline also faces tougher competition ahead as the government forges air deals that would allow foreign budget carriers greater access to the country.

Cebu Air, a unit of local conglomerate JG Summit Holdings Inc., competes with flag carrier Philippine Airlines locally and with Singapore's Tiger Airways and AirAsia in the region.

Early this month, Cebu Air chief executive Lance Gokongwei said he expects full-year net profit to be lower compared to 2010's P6.9 billion on higher fuel costs.

But he said net profit in the second quarter was likely to exceed its net income of P1.2 billion in the first quarter, after it raised fuel surcharges in late March.

The company plans to expand operations in the region, particularly North Asia, as it more than doubles its fleet in the next 10 years with a $3.8 billion order of 37 planes from Airbus, a unit of France's EADS.

It is set to receive 18 A320s from the second half of this year up to 2014.