San Pedro: Taming the Tiger

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By Arnel San Pedro

Check and Balance

Sunday, January 5, 2014


LOCAL carrier Cebu Pacific was reportedly in talks with TigerAir Philippines for the possible acquisition of the latter amid the increasing dominance of Low-Cost-Carriers in the Asia-Pacific region, now with a combined fleet of over 900 aircraft and 1,500 aircraft orders in place.

A positive outlook is seen for some 47 existing LCCs currently operating in Asia. These LCCs are expanding and increasing flights all around Asia-Pacific amid intense competition being brought up by existing and upcoming start-ups in the region. It was reported that LCCs now account for 15 percent of the region’s fleet and slightly over 20 percent of seat capacity but approximately 50 percent of orders.

These positive developments had been gaining momentum amid the fierce competition in the airline industry, the rising cost of aviation fuel, and restrictive aviation policies of the governments.

Many airlines in Asia had attempted to strengthen their positions by acquiring other airline companies which was made evident with AirAsia Philippines and Zest Air team-up last year, rebranding the airline AirAsia Zest with a cliché that “It is the way to Fly.” The acquisition holds specific advantages in areas of market share, efficiency and dynamism. AirAsia had since relocated to the Ninoy Aquino International Airport after the strategic alliance with Zest Air.

And now comes Cebu Pacific with unconfirmed reports that it intends to buy TigerAir Philippines, which is currently making a stronger presence in the Clark airport and the encompassing communities.

"Cebu Pacific is in talks with TigerAir and other parties" for possible acquisition, according to JG Summit Holdings Inc. Senior Vice-President and Chief Strategist Bach Johann M. Sebastian. "Cebu Pacific is always looking at opportunities like this -- especially TigerAir -- but nothing is definite at this time.” Sebastian foresees the acquisition will mean “more market share, more sales and more profit."

And what kind of rebranding will CebPac use in the event of an acquisition? Well, ‘Cebu Pacific Tiger’ is not bad. And how will the possible acquisition affect TigerAir Philippines’ operations in Clark? Will CebPac pull out as well like AirAsia Philippines did?

Reports have it that Cebu Pacific’s net income fell 70.8 percent to P664.081 million as of September 2013 from P2.274 billion in the same nine months in 2012. Revenues grew 9.7 percent to P30.582 billion from P27.872 billion, while expenses kept up with an 8.0 percent rise to P28.409 billion from P26.313 billion.

These figures were anchored to increased flights, higher depreciation and amortization cost with the arrival of new aircraft, higher interest expense and foreign exchange loss due to weakening of the peso against the dollar.

Published in the Sun.Star Pampanga newspaper on January 06, 2014.

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