Cebu Pacific pins growth hopes on cargo business

BUSINESS
August 20, 2019

SHARE

CEBU PACIFIC operator Cebu Air, Inc. is looking to ramp up the expansion of its cargo business, banking on the continued growth of the logistics industry.
    
“The business plan is for the cargo side to grow faster than the overall passenger side. If we succeed in that, then of course, by definition, we will grow (cargo) to a bigger portion of the total (revenue) pie,” Alex B. Reyes, vice-president of Cebu Pacific’s cargo division, told reporters in the launch of its first all-cargo freighter Wednesday.
    
“We’re just responding to the demand in the market place. If we can supply it, then we’ll grow along with the demand in the market place,” he added.
    
The Gokongwei-led budget carrier draws its profits from three business segments: passenger, cargo and ancillary services. In the first half, revenues from the passenger segment grew 18% to P33.35 billion, from ancillary services by 23.8% to P8.52 billion, and from cargo by 7% to P2.84 billion.
    
Mr. Reyes said Cebu Pacific is optimistic on its cargo business, noting that the 7% revenue increase in the past six months shows its growth potential in the region.
    
He said despite the 5.4% decline in Asia-Pacific demand for air freight as of June — based on data from the International Air Transport Association (IATA) — Cebu Pacific was able to maintain its growth momentum during the period.
    
The company’s cargo business is still largely supported by the belly capacity of its Airbus fleet, but it is now exploring more opportunities, starting with all-cargo planes.
    
Cebu Pacific took delivery of its first all-cargo aircraft, a reconfigured passenger ATR 72-500, which it will start deploying next month. The next one is expected to arrive before yearend.
    
“The ATRs are supposed to supplement the total capacity that we have. But they’re still relatively small compared to the total network capacity,” Mr. Reyes said.
    
“The freighter is brand new to us in terms of operations. We don’t have experience yet operating an all-cargo aircraft. But this is the first step in that direction,” he added.
    
The ATRs will initially operate domestically, but the company aims to fly them within the region someday.
    
Cebu Pacific Vice-President for Commercial Planning Alexander G. Lao said the arrival of more Airbus planes and the operational launch of the ATRs in the remainder of the year prepares the company well for cargo expansion.
    
“The main portion of our cargo revenue business continues to be driven from the Airbus fleet, because that’s really a higher capacity aircraft in terms of both weight (and) volume, and the associated revenue with it,” he said.
    
“We believe that by the second half, we’ll actually grow much faster in terms of total seats and total flights than we did in the first half,” he added.
    
The new ATR freighter will fly out of Manila when it starts operations in September, but will be moved to the Sangley air base once it opens in November.
    
Cebu Air booked a net income of P7.14 billion in the first half of the year, up 116% due to an increased passenger volume and higher average fares.

RELATED ARTICLES

LEAVE A REPLY



Subscribe Now!

Receive email updates from Business Week.