Cebu Air bleeds P22.2-B in 2020 amid COVID-19 pandemic

Cebu Air Inc., the operator of budget carrier Cebu Pacific, bled financially in 2020 as the COVID-19 pandemic crippled the air travel industry.

In a disclosure to the Philippine Stock Exchange, Cebu Air reported a net loss of P22.2 billion last year, a reversal from the P9.12-billion net income in 2019.

“With health and safety concerns resulting in the decrease of passenger confidence and heightened travel restrictions, Cebu Air’s operational and financial performance were severely affected,” the airline said.

In 2020, Cebu Air said it only flew five million passengers, 78% fewer than in 2019; with a total of 41,804 flights, 71% lower year-on-year.

When the country was placed in an enhanced community quarantine (ECQ) in March 2020, airlines’ commercial operations were grounded.

Commercial operations resumed in June, albeit gradually, with most of the Philippines still in a general community quarantine (GCQ).

“This resulted in various requirements and processes from local government units, which continue to be a challenge not only for Cebu Air and other airlines, but for the traveling public as well,’ the airline said.

Pre-COVID-19, Cebu Air flew about 400 flights a day.

It flew at only an average of 47 flights a day in the third quarter of 2020, to 76 flights a day by December last year, which is about 20% of pre-pandemic levels.

This growth was primarily domestic-driven and supplemented by cargo operations, which performed better than expected, it said.

The airline’s revenues stood at P22.6 billion, down 73% from 2019.

Cargo operations contributed P5.4 billion, or 24% of the company’s total revenues last year, as cargo freighter and charter flights contributed to higher yield.

In addition to two ATR 72-500 cargo freighter aircraft, Cebu Air began utilizing its first A330 cargo converted aircraft in November 2020, which allowed it to carry more cargo on long-range flights.

Total operating expenses were reduced by 40% to P43.4B.

Fuel showed the steepest decline, as fewer flights were coupled with lower fuel costs.

Other operating expenses were likewise reduced as Cebu Air continued its rigorous cost reduction initiatives, including the right-sizing of its network, fleet, and manpower, while improving operational efficiencies through various digitalization efforts.

Despite the severe losses incurred in 2020, the airline announced the successful completion of two significant fundraising initiatives.

Its convertible preferred shares were successfully listed on the Philippine Stock Exchange on March 29, providing the airline with P12.5 billion in fresh capital.

Also, last March 5, Cebu Air signed a P16-billion, ten-year term loan facility with a syndicate of domestic banks, including the Development Bank of the Philippines, Land Bank of the Philippines, Asia United Bank Corporation, Bank of the Philippine Islands, Metropolitan Bank & Trust Company, and Union Bank of the Philippines.

“These fundraising initiatives not only provide Cebu Air with a cash runway of up to P28.5 billion, but also represent the confidence of its shareholders and these banking institutions in Cebu Air playing a vital role in the recovery of the travel industry, and the Philippine economy as a whole,” the airline said.

Proceeds of the fundraising activities will be used to strengthen Cebu Air’s balance sheet by providing liquidity to address its financial liabilities and working capital for general corporate purposes. — DVM, GMA News