Cebu Pacific raises fares, flags potential capacity cuts amid Middle East conflict
By Julie Zhu
HONG KONG, March 23 (Reuters) - Philippine budget carrier Cebu Pacific CEB.PS on Monday said it raised all-in average fares by as much as 26% and may cut capacity in the third quarter as soaring jet fuel costs triggered by the U.S.-Israeli war on Iran threaten to erode profitability.
Here are some details:
Cebu Pacific management told an earnings call that all-in average fares for March through May were running roughly 20% to 26% higher compared with early March levels, saying the airline had to make adjustments "in light of this fuel spike."
The carrier said it had secured jet fuel supply through the end of April and was working to lock in requirements for May and beyond, adding there were no imminent flight cancellations.
Management said the airline was fully unhedged against fuel price movements, noting that no Philippine carrier currently holds fuel hedges. It said it would revisit hedging strategies once prices normalised, targeting a jet fuel price range of between $80 and $90 per barrel before rebuilding hedge layers.
Despite the fare increases, management said second-quarter demand remained resilient on both domestic and international routes. It flagged a potential shift in travel patterns, with some passengers opting for intra-Asian destinations rather than longer-haul travel to Europe.
Capacity growth in the first quarter came in ahead of expectations at around 10% year-on-year and the carrier said it was seeking to maintain growth of roughly 12% to 15% through the second quarter. It said its Dubai service had been suspended until mid-April, while its Riyadh operations were continuing.
Management said it would reassess third-quarter capacity depending on the duration of the fuel price shock and the availability of jet fuel supply.
Management said capital expenditure for the year remained at 35 billion Philippine pesos ($579.8 million), with 95% to 96% tied to aircraft deliveries and financing largely in place, but noted that the volatile environment may require a review of the capex plan.
