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The Philippines' first budget airlines is counting on domestic demand

The Philippines' first budget airlines is counting on domestic demand

Cebu Pacific (Philippine Stock Exchange: CEB-PH) is set to achieve record results for the last financial year, said Lance Gokongwei, president and chief executive of the Philippines' first budget airline.

"We have about 58 to 60 percent of the domestic market now … And naturally, we benefited from lower oil prices, so we did very well last year," Gokongwei told CNBC's "Managing Asia."

Most of those record profits will be re-invested into acquiring planes with higher fuel efficiency, which will in turn result in more competitive airfares for Cebu Pacific customers, Gokongwei added.

The budget airline is part of JG Summit Holdings, the second largest conglomerate in the Philippines which began as a simple corn starch plant. As president and COO of conglomerate JG Summit Holdings, Gokongwei also holds various leadership roles in the JG Summit's fast-moving consumer goods and property arms.

As premium airlines in the region run into turbulence, Cebu Pacific is going all in with a twofold strategy aimed at improving competitiveness.

The first of those strategies involves working around the limited aviation infrastructure in the Philippines, which together with an uptick in air travel demand, has led to congestion.

"We have a limited slot situation in Manila. The airport there is quite slot-limited so our strategy is to up-gauge the existing slots we have by putting in larger aircraft," Gokongwei said.

Cebu Pacific will be ramping up productivity by replacing its existing Airbus 319 and 320 models with the Airbus 321neo. The 321 model has 230 seats compared to the existing 180 seats onboard the Airbus 320. The airline has committed $4 billion to a fleet upgrading program that would see it acquiring 46 new planes between now and 2021.

The airline's second strategy involves developing and investing in 5 additional hubs outside Manila, including Cebu, Davao and Ilo Ilo. Smaller aircraft will be used to provide direct access along those routes, Gokongwei said.

Giving Cebu Pacific an additional boost could be the Philippine President Rodrigo Duterte's plans to ramp up infrastructure spending. Gokongwei said there are plans to "build out the 5 airports outside of Manila."

"Before, travelling by air was considered something only the elite did and now, everyone in the Philippines has access to fly through democratized travel," Gokongwei said.



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