Feb 2007 > Cover Story Back to latest issue

Cebu turns up the heat

Tom Ballantyne 

It came as no surprise to Philippine Airlines management when Cebu Pacific announced its biggest-ever seat sale to more than 200,000 travellers in November, offering US$20 one-way fares to four of its Asian destinations and just $2 to all domestic destinations. The fare blitz had been underway for months, with a regular stream of specials at home and abroad.


Cebu Pacific president and chief executive, Lance Gokongwei: has positioned Cebu Pacific to cater for cost-conscious business travellers

The offers are attracting big business. Cebu services 20 domestic destinations and has recently been on a regional expansion drive. Originally flying only to Hong Kong and Singapore, it spread its wings to Kuala Lumpur in November, Bangkok in December and Jakarta in January.

Domestically, the carrier now has a 45% market share, compared with PAL’s 43%. In October, Cebu recorded its highest passenger loads – domestic and international – in the airline’s 11-year history. It carried a total of 366,284 passengers, 111% higher than the same month in 2005. Domestic traffic hit 318,632, also a record and 108% higher than October 2005. Little wonder president and chief executive Lance Gokongwei is flying high.

“The steady growth of passenger loads can be attributed to Cebu’s aggressive pricing strategy, continuous expansion and opening of new routes, as well as its high quality product offering,” he said.

“Now that we are offering to the public the newest planes, lowest fares, the most domestic flights, routes and destinations, we can see that people are indeed flying more and possibly flying for the first time.”

More serious for PAL appears to be the inroads Cebu is making in the corporate market, even though it has no business class. According to Cebu’s head of sales, Edwin Bautista, the number of companies holding corporate accounts had increased by more than 300% by the end of October 2006, compared to December 2005.

Flexibility was the key to the corporate product, he said. “In addition, we have a fleet with an average age of less than nine months, which once again makes our corporate offering very competitive.

“We are seeing a change in the needs of the business traveller, where business travel no longer means flying business class. Nowadays, we see that companies are becoming more practical and value conscious. Many savvy chief executives and chief financial officers in both the public and private sector are realizing that a real easy way to improve the bottom line or to stretch the budget further is to travel with Cebu.”

Cebu continues to grow. It now operates 12 new A320s and two more will be delivered in early 2007, completing a $670 million re-fleeting programme. And as PAL introduces more new A320 family aircraft of its own and offers business class on all domestic routes, the battle for the corporate dollar is set to intensify. Whether it is Cebu that is right with its all-economy strategy, or PAL with its comfortable offering, only time will tell.

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