Low-cost airline Cebu Pacific outlines plans for expansion

The summit, which was organised by the European Chamber of Commerce of the Philippines (ECCP) and the Asian Business Aviation Association (AsBAA), in partnership with the Department of Transportation (DOTr), saw Cebu Pacific Air’s CEO Mike Szücs and president and chief commercial officer Xander Lao outlining their plans to key figures from the Civil Aviation Authority of the Philippines (CAAP), business leaders, and members of the diplomatic corps.

 

 

Historic fleet expansion

In a landmark move, the airline announced a US$24 billion purchase agreement with Airbus and Pratt & Whitney for up to 152 A321neo aircraft. The deal encompasses firm orders for 102 aircraft and 50 purchase options for the A320neo family, with deliveries expected to begin in 2029.

“The A321neos represent a significant change in our fleet strategy,” Lao explained. “Their larger capacity of up to 240 seats per aircraft allows us to operate more efficiently in slot-constrained airports across Southeast Asia.”

With Cebu Pacific’s fleet projected to reach 95 aircraft by year’s end, comprising both narrow-body and wide-body jets, the expansion marks a pivotal moment in the carrier’s history.

During a press conference following the memorandum of understanding signing, Szücs emphasised the strategic significance of the order.

“This milestone demonstrates our continued commitment to expanding air travel accessibility while supporting the Philippines’ overall economic growth and connectivity goals,” he said.

Rick Deurloo, president of Commercial Engines at Pratt & Whitney, emphasised that the GTF engine would provide significant opportunities for expansion while delivering “industry-leading fuel efficiency and sustainability benefits.”

 

Regional growth and infrastructure challenges

Despite the optimistic outlook, Szücs outlined several critical challenges facing the Philippine aviation sector. In his keynote address on “Philippine Aviation Industry Outlook,” he emphasised the need to look beyond Manila’s catchment area of 33 million people.

“It’s essential we realise that 76 million Filipinos live outside the Manila catchment area, and they also need better access to air travel,” Szücs noted.

He highlighted that regional cities such as Cebu and Davao are experiencing higher GDP per capita growth rates than the capital, presenting significant opportunities for expansion.

To capitalise on this potential, Cebu Pacific plans to establish new bases in Davao and Iloilo by the fourth quarter of this year. These expansions aim to enhance connectivity between regional hubs and international destinations, including Bangkok and Hong Kong.

The airline currently operates several routes in Thailand, including Clark-Bangkok (five flights weekly), Manila-Bangkok (twice daily), and Manila-Don Mueang (three flights weekly). The company will begin flying from Manila to Chiang Mai on October 30.

 

Market dynamics and challenges

Within the competitive landscape of Southeast Asian aviation, Cebu Pacific remains confident in its position.

“Competition is always good. We have one of the lowest cost bases in the region, and we are well-positioned to take advantage of that,” Lao affirmed.

He then emphasised his company’s commitment to connecting ASEAN’s primary and secondary cities with greater frequency and affordability rather than expanding its operation base.

Benoît de Saint-Exupéry from Airbus noted that low-cost carrier penetration is currently higher in Southeast Asia than in any other part of the world, validating Cebu Pacific’s growth strategy.

Meanwhile, while domestic tourism in the Philippines leads the region, the international tourism landscape remains challenging. According to the International Air Transport Association (IATA), the Philippines ranks sixth in Southeast Asia for international tourism, highlighting the pressing need for significant investments in airport infrastructure to accommodate anticipated growth across the Asia Pacific region.

Furthermore, despite current geopolitical tensions affecting demand for flights to China, Cebu Pacific sees substantial growth potential in the domestic market. “In 2019, the trips per capita in the Philippines stood at 0.6. We see a tremendous opportunity to increase that figure in the coming years,” Lao commented.

 

Focus on sustainability and digital innovation

Committed to achieving net-zero carbon emissions by 2050, Cebu Pacific is actively pursuing sustainable initiatives. These include using sustainable aviation fuel (SAF), electrifying ground service equipment, and partnering with South Pole to develop a roadmap for emissions reduction.

During the pandemic, Cebu Pacific also invested heavily in digital transformation, improving its online platforms and integrating e-wallet payments to enhance customer experience.

Highlighting the role of their fleet’s modern engines in reducing carbon emissions, Szücs noted the airline’s commitment to minimising its environmental impact. He emphasised that their investment in new, efficient aircraft is a crucial step towards achieving this goal.

The Airbus executive echoed Szücs’s statement, stressing its role in promoting the use of sustainable aviation fuel (SAF).

“While current availability remains a challenge, the industry is working hard to enhance production and reduce costs,” he said, emphasising the industry’s ongoing commitment to environmentally responsible aviation.

 

Looking ahead

As Cebu Pacific navigates the complexities of expansion amidst infrastructure challenges, the airline’s leadership remains focused on sustainable growth.

“By collaborating closely, we can address current challenges and unlock future opportunities, ensuring that Cebu Pacific remains the airline of choice in a growing market,” Szücs stated, while emphasising that the success of Cebu Pacific’s ambitious expansion plan will be heavily reliant on the Philippine government’s ability to address infrastructure constraints and the airline’s ability to maintain its low-cost model while expanding.