Industry giant Cebu Pacific, led by tycoon Lance Gokongwei, is wiping the slate clean on its balance sheet, gearing up for the purchase of brand-new Airbus planes worth as much as P1.4 trillion.
Cebu Pacific’s board approved a restructuring plan to reallocate accumulated resources and eliminate a deficit in its books.
The Philippine Stock Exchange temporarily suspended trading of Cebu Air Inc., the listed parent of Cebu Pacific, to allow investors time to digest the news.
Big picture
This is just routine financial housekeeping; Cebu Pacific hasn’t faced any recent financial danger, especially with the revenge travel trend showing no signs of slowing down.
Cebu Pacific has nearly P20.7 billion in paid-in capital, part of which came from proceeds from its P12.5 billion convertible share offer to investors in the midst of the pandemic.
The restructuring involves using this to eliminate accumulated losses of P16.3 billion. This will result in paid-in capital of about P4.4 billion, the carrier said in a stock exchange filing.
Expanded financial runway
Cebu Pacific is preparing its balance sheet to make room for additional debt and equity fund-raising given plans to order new planes.
That deal includes purchasing up to 152 Airbus narrow-body jets from Airbus worth $24 billion (P1.4 trillion) at list prices.
Cebu Pacific has placed a firm order for 102 A321neo planes, which can serve domestic routes and overseas destinations a few hours away. It also has an option to purchase 50 additional aircraft from the A320neo family.
Gokongwei, who is the chair of the airline, earlier told InsiderPH the newly-ordered planes will arrive from 2028-2035.
Long-term refleeting
In that same interview, Gokongwei maintained his bullish view on the industry, and the Philippines’ aggressive efforts to upgrade airports.
This includes the privatization of Ninoy Aquino International Airport and the ongoing construction of New Manila International Airport in Bulacan province, both spearheaded by conglomerate San Miguel Corp.
Gokongwei’s family conglomerate, JG Summit Holdings, also has direct exposure in airports through the Clark International Airport in Pampanga province.
