Monday, September 01, 2008 Carrier defers IPO due to volatility in market
DESPITE growth in the airline industry and competition, budget carrier Cebu Pacific has decided to defer plans for a P13-billion initial public offering (IPO) of stock.
Cebu Pacific president and chief executive officer Lance Gokongwei said the decision was prompted by the volatility of the market and the high prices of fuel.
“Given the state of the market in the country and globally, as well as the very difficult situation with fuel prices, it would be inappropriate to raise money in the public market at this juncture,” he told reporters in a press conference last week.
He assured, though, that Cebu Pacific is performing “quite well” despite the high prices of fuel, as manifested in its expansion plans for its Cebu hub.
“At this time, there (is more) frequency (in) more routes than 10 years ago. This is a result of competition and we welcome this. So we continue to be aggressive, particularly (with) our hub in Cebu,” he said.
Cebu Pacific flies to 24 cities in the Philippines and 16 destinations in Asia. It’s fleet is expected to grow to 25 this year and 31 next year with the delivery of new aircraft.
More routes
“We expect that over time, additional ATRs (aircraft) will enable us to consider additional routes. There is no reason not to add more routes for Cebu once the ATRs have arrived,” Gokongwei said.
The son of the business tycoon John Gokongwei Jr., Lance said the market, in general, is “vibrant” as manifested by the rapid development of business process outsourcing companies, tourism services and increasing remittances from overseas Filipino workers.
“(But) the global airline industry is under siege. Fuel is up 80 percent and our cost of operation is up 30 to 40 percent. But we cannot just raise prices by 30 or 40 percent. In many cases, the airline companies have to shoulder the costs, so we take steps to be efficient,” he said.
Apart from investing $40 million for two ATRs and expanding the Cebu Pacific hub in Cebu this year with the opening of more routes, Gokongwei said JG Summit—through its property development arm Robinsons Land Corp.—has several projects lined up in the province.
Robinsons Land Corp.’s projects in Cebu include the AmiSa, a five-hectare beach-front project in Punta Engaño, Lapu-Lapu City and Robinsons Cybergate Cebu at Fuente Osmeña, Cebu City, which will house business process outsourcing companies and retail shops. Robinsons Land is also planning the development of a four-hectare property at the North Reclamation Area in Cebu City. (NRC)
