Low-cost carrier Cebu Pacific posted an 85 percent plunge in net income for 2013 to P512 million from P3.57 billion in 2012 due to foreign exchange losses.
The peso exchange rate against the US dollar in December last year weakened to P44.395, from P41.05 in December 2012. As of March 6, 2014, the rate stood at P44.77.
“In terms of financial performance, we are likely to see the first half of this year significantly worse than the first half of last year, due primarily to the effects of forex, international competition, some long-haul losses as well as the acquisition of Tiger,” said Lance Gokongwei, chief executive officer and president of Cebu Pacific.
Gokongwei added that, “we expect the second half to be better, due to the benefits of integration with Tiger and the alliance we have with Tiger Singapore will improve our long haul operations, as well as continuing improvement in our assets utilization and construction.”
The budget carrier’s outstanding debt, pre-delivery payments, fuel purchases, leases and some maintenance expenses are all pegged to the US dollar.
The strategic alliance between Tigerair and Cebu Pacific allows both companies to leverage on their extensive networks spanning from North Asia, the Association of Southeast Asian Nations, Australia, India, all the way to the Middle East.
As part of the alliance signed on February 10, 2014, Cebu Pacific agreed to acquire 100 percent of Tigerair Philippines, including the 40 percent stake of Tiger Airways Holdings Limited. Total consideration for the deal is $15 million.
Tigerair Philippines’ current fleet of five aircraft will be gradually returned and replaced with aircraft from Cebu Pacific’s fleet.
The budget carrier will take delivery of three A330 aircraft in 2014 that will be used for Saudi Arabia and Australia flights.
Passenger load factors were seen improving from 36 percent in October 2013 to about 60 percent in January to February 2014.
Next month the carrier will start flying to Narita and Nagoya in Japan. Other airlines are also increasing their networks, increasing total seat capacity for Philippine Japan routes.
“The balance sheet of Cebu Pacific remains healthy and we have secured financing for aircraft deliveries for 2014,” Gokongwei said.