Philippine company Cebu Pacific secured a ten-year US $ 329 million loan facility last Friday. This is a major victory for the airline after 12 difficult months. At the same time, the airline is celebrating 25 years of flight. Cebu Pacific said Friday’s deal was a testament to the airline’s underlying strength and financial soundness.

Cebu Pacific has just obtained a loan facility of US $ 330. Photo: Cebu Pacific

Cebu Pacific sails in a hectic 2020

Cebu Pacific has not had an easy year. Around the same time last year, the airline was just days away from temporarily suspending all domestic and international operations. Three months later, Cebu Pacific was tentatively back in business, starting to operate a limited number of domestic flights. In July, the airline was considering international flights again, initially resuming services to Dubai.

“We are taking a conservative and agile approach to rebuild our international networkrk, ”said a Cebu Pacific spokesperson at the time.

In the first half of 2020, Cebu Pacific recorded a loss of US $ 187.2 million. The airline has yet to release second-half figures, but insiders predict an annual loss of around $ 515 million. Job losses at the airline last year exceeded 25% of the workforce.

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Cebu Pacific plane at the gate of Manila Airport. Photo: Cebu Pacific

But by the end of 2020, parts of the business were resuming in Cebu Pacific. While international operations remained in deep decline, domestic operations were almost back to 2019 levels. In December, Cebu Pacific flew to 78% of its regular domestic destinations with frequencies close to or equivalent to December 2019 levels.

Before the travel slowdown, Cebu Pacific had a 51% higher domestic market share. It was also the second largest international airline flying to and from the Philippines. Cebu Pacific held a 14.5% international market share, overtaken by local rival Philippine Airlines.

Taking international operations into account, Cebu Pacific is now flying at around 23% of its 2019 capacity levels. According to Cebu Pacific, a good balance sheet and strong liquidity have made it possible to reach 2020. Friday’s loan will further strengthen the financial ballast of the airline company.

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Philippine banks trust Cebu Pacific

The extension of the loan to Cebu Pacific was a group of local Philippine banks. The Development Bank of the Philippines has partnered with the Land Bank of the Philippines to lead the union. Other lenders are United Bank Corporation, Bank of the Philippine
Islands, Metropolitan Bank and Trust Company, and Union Bank of the Philippines.

Cebu Pacific says it is grateful for the union’s trust in the airline. Land Bank Chief Executive Officer Cecilia Borromeo said her bank fully supports the recovery of the aviation industry. Bank of the Philippines Islands President and CEO Cezar Consing Says;

“We understand how vital the survival of the airline is to our economy.”

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Cebu Pacific will use the loan to finance the capital and general expenses of the business. Photo: Cebu Pacific

Cebu Pacific will use the loan facility to fund capital expenditures and other general corporate purposes. The airline says the loan will also provide a cushion against unforeseen working capital needs that may arise from volatile fuel prices and exchange rates.

At the same time, in a slightly less lucrative deal, Cebu Pacific has also just signed a ground services agreement with Emirates subsidiary dnata. The ground services business will handle Cebu Pacific flights landing and turning around in Singapore and Melbourne. From Cebu Pacific’s perspective, like the loan deal, this deal is another step on the airline’s road to recovery.

After 25 years of flying, what’s next for Cebu Pacific? Post a comment and let us know

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