Cancellations to dent Cebu Pacific growth
Credit to Author: ANGELICA BALLESTEROS, TMT| Date: Tue, 30 Apr 2019 16:23:23 +0000
SEVERAL flight cancellations announced by listed budget carrier Cebu Air Inc. is expected to temper its growth during the second quarter and full-year 2019, according to analysts.
Gokongwei-led Cebu Air, which operates under the trade name Cebu Pacific, announced on Tuesday a second round of cancellations, affecting more than a hundred domestic flights.
Aircraft shortage due to unscheduled technical repairs and increased flights from and to Manila were blamed for the cancellations.
The first wave of cancellations was announced on Sunday, involving at least 22 roundtrip flights.
Timson Securities Inc. trader Jervin de Celis said the cancellations would likely dent its second-quarter performance and marginally on its full-year growth.
“It might have an effect on [its April-to-June] performance, since this is a major disruption to the operations of the airline,” he said.
Philstocks Financial Inc. research associate Japhet Louis Tantiangco said the cancellations represented opportunity losses for Cebu Pacific.
“We’re still in a time where a lot of people are taking their vacation, and so to cancel and reduce flights could lead to a lot of missed opportunities to generate earnings,” Tantiangco said.
This will inconvenience customers, “which could drag [down] confidence [in] the company,” he added.
De Celis said, however, that he expected the company to recover in the coming quarters, due to higher fares and the increasing volume of passengers in time for the holiday season.
“They’re doing this to restore efficient operations and that might provide a cushion to whatever loss the company may suffer from the disruption,” he explained.
“New routes and fuel-efficient aircrafts should also offset the losses that the company might incur during this event,” he said.
Despite the announcement, Cebu Pacific’s share price remained up on Tuesday by 15 centavos or 0.18 percent to finish at P82 each amid the Philippine Stock Exchange index’s 0.71-percent gain.
To support its expansion plans, Cebu Pacific increased its flight frequencies and capacity for its Cebu and Clark hubs this year to support the Philippine tourism industry. Internationally, the company launched flights to Shanghai and China and added flights to Australia and Japan.
Cebu Air allocated $700 million in capital expenditures for this year, part of which will help finance aircraft acquisitions.
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