On Tuesday, Cebu Pacific announced a debt-to-equity conversion deal allowing 1Aviation owners to exchange their loans for ownership stakes.
While shareholders typically lend in proportion to their shares, Cebu Pacific has contributed a larger portion, now accounting for P113 million of the P150 million total debt.
After conversion, this will give Cebu Pacific a 60-percent stake in 1Aviation, while PAGSS and Cheng will own 40 percent.
Ground handling services are critical in the commercial aviation sector. Their services include baggage and passenger services, in-flight catering, and cargo handling.
Savings from integration
Cebu Pacific also expects to generate savings and operational efficiencies from this transaction.
“As a majority owner, CEB can integrate [1Aviation’s] services more seamlessly with its operations, creating synergies that could reduce operational costs and improve service quality, particularly in ground handling and logistical support,” the airline giant said on Tuesday.
Because of its partnership with Cebu Pacific, 1Aviation rapidly became one of the country’s biggest ground handling services in the Philippines despite its relatively short history.
What happened before?
Cebu Pacific established 1Aviation in March 2018 for its ground handling needs after President Duterte terminated the contract of industry leader Miascor Aviation Services, which was handling these services for the airline.
This was triggered by the viral case of luggage theft by six Miascor employees at Clark International Airport.
A few months after establishing 1Aviation, Cebu Pacific sold a controlling stake in the company to PAGSS.
At present, 1Aviation is present in 34 airports across the Philippines with over 6,200 employees.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.