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Cebu Pacific to place $12-B order for 100-150 aircraft

Cebu Pacific to place $12-B order for 100-150 aircraft

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Landmark deal to be the single-biggest one in Philippine aviation history

By Tyrone Jasper C. Piad
Budget carrier Cebu Pacific—which is looking at almost tripling its passenger volume in the next decade—is making an aggressive move to order 100 to 150 new aircraft worth about $12 billion from either Airbus or Boeing as it gears up for the projected growth in air travel amid ongoing regional airport projects.
Michael Szucs, CEO of the Gokongwei-led airline, told the Inquirer on Tuesday that the order—the biggest one in Philippine aviation history—will be lodged on Friday to both jet manufacturers. However, only one supplier will be given the contract. Cebu Pacific wants to secure either Airbus’ A320 and A321 units or Boeing 737s.
“May the best man win. It will be a very competitive process that we will be running,” he said.
Proposals from Airbus and Boeing are expected to come in before the year ends. By the first quarter next year, Szucs said the airline would name the winner after evaluating which one would result in the “best economic outcome.” The first set of aircraft is expected to arrive as early as 2027 while the rest of the deliveries is slated to be completed by 2035. Should Boeing secure the contract, it will be the first time that Cebu Pacific carries this aircraft brand as it only currently deploys Airbus units.
Retirement
As Cebu Pacific takes in aircraft deliveries in the next years, some of its units will be retired.
It currently operates around 70 aircraft, which is expected to grow to 76 by the end of the year and to 91 by 2024. By 2035, Szucs said that Cebu Pacific could boost its passenger capacity to 60 million per year—which is nearly triple the 22 million projected for this year.
Mark Cezar, the airline’s chief financial officer, said the pre-delivery payment would be financed with operating cash flow while the balance would be settled through other means, including debt financing.
The carrier does not see the need to raise funds from capital markets for the order, he noted.
Szucs expressed optimism for the aviation sector as the government pushes for airport projects outside Manila, which are seen to further support air travel. “This is not just Manila, but the whole of the airport infrastructure around the country is getting an upgrade. It seems that the administration … is looking into making this happen,” Szucs said.
Alexander Lao, president and chief commercial officer of the budget airline, said they were looking at allocating a dozen aircraft for New Manila International Airport in Bulacan, which is undergoing development.
New bases
Lao said Cebu Pacific was also mulling over the establishment of bases in Kalibo and Bohol, among others, where airports are being upgraded. Apart from this, Szucs said the growing middle class and the young demographics of the country would drive the air travel demand. Despite the optimism, Szucs admitted that the supply chain issues could still adversely operations as five of its aircraft are still parked for maintenance. Service provider Pratt & Whitney (P&W), to recall, is having a hard time servicing maintenance amid the lack of spare parts.
To add fuel to the fire, P&W is recalling some A320neo (new engine option) units for inspection due to “rare condition in powdered metal used to manufacture certain engine parts.” Currently, the Gokongwei-led airline’s network covers 35 domestic and 23 international destinations. INQ