Travel boom: Cebu Pacific flies record passengers, earns P1.3 billion in Q2

MANILA, Philippines – It looks like travel is stronger than ever before, as Cebu Pacific reports flying its highest passenger count ever in a quarter.

The low-cost carrier carried six million passengers in the second quarter of 2024, the most passengers it has flown in a single quarter in its history. The figure is 10% higher than the same period last year. It’s also higher than the 5.5 million passengers that they flew in the first three months of 2024.

What’s driving the surge in travel? It’s partly seasonal and partly an expansion of flights, with Cebu Pacific pointing to “summer traffic from April to May, the school break in June, and additional frequencies in high-traffic destinations such as Cebu, Davao, and General Santos.” Cebu Pacific also had strong travel demand to Hong Kong, Japan, Vietnam, and Australia.

Due to the high passenger count, most of Cebu Pacific’s P26.1 billion revenue in Q2 came from its passenger business, which earned P18 billion and grew 13% year-on-year. It also saw a 16% revenue growth for its ancillary business (P7 billion), and a 59% revenue increase for its cargo business (P1.4 billion).

However, though revenues in Q2 2024 were higher than Q2 2023, net income was a different story. Net income from April to June 2024 only hit P1.29 billion, not even half of the P2.64 billion that the Gokongwei-backed airline earned in the same period last year.

Part of the reason for the decrease in net income came from the company’s other expenses. In Q2 2024, Cebu Pacific recorded foreign exchange losses of P605 million (versus a loss of P289 million in Q2 2023), greater financing costs of nearly P780 million (versus P656 million), and higher aircraft leasing expenses of P869 million (versus P479 million).

Nevertheless, Cebu Pacific is optimistic about its future growth, so much so that it signed a binding agreement to buy up to 152 Airbus aircraft worth P1.4-trillion, which could go down as the largest aircraft order in Philippine history. The historic deal is expected to be finalized by the third quarter of 2024.

Cleaning up losses

In the meantime, Cebu Pacific is tidying up its books through a quasi-reorganization. The budget airline wants to eliminate its deficit – which has accumulated to P16.269 billion over the years – against its additional paid-in capital of P20.658 billion. That effectively takes away the stain of big losses from its financial statements.

“The equity restructuring is intended to zero out the deficit as of December 31, 2023,” Cebu Pacific explained in the notes to its financial statement for Q2 2024. “The equity restructuring will not involve a change in the par value of the Parent Company’s shares nor will it require an infusion of any additional paid-in capital; neither will the equity restructuring result in any change in the number of Parent Company’s issued, outstanding, or listed shares.”

Like other airlines, Cebu Pacific struggled mightily during the pandemic, with net losses hitting nearly P25 billion in 2021 and P14 billion in 2022. The budget carrier managed to return to profitability in 2023, recording a full year net income of P7.9 billion in 2023. (READ: Back to the skies: PAL, Cebu Pacific earn big off revenge travel in 2023)

“This has been a very important quarter for our airline, marked by significant achievements and crucial milestones. We’ve set new highs in terms of passengers flown, finalized our quasi-reorganization, and made the historic order of up to 152 aircraft from Airbus,” said Cebu Pacific chief executive officer Michael Szucs said in a statement on Wednesday, August 7. – Rappler.com