Consolidation inevitable in the Philippines but Cebu Pacific's market leading position is assured

Consolidation is emerging as an increasingly likely outcome in the crowded Philippines domestic market, where already fierce competition has further intensified with SEAir becoming the fifth LCC on trunk routes. SEAir over the last three weeks has launched several new domestic routes from Manila following the delivery of three A320 aircraft from its new part-owner, the Tiger Airways Group. The expansion at SEAir, which previously only operated small turboprops in the domestic market, is putting further pressure on yields which have already been on the decline as a result of rapid capacity expansion at LCCs Cebu Pacific Air, AirPhil Express, AirAsia Philippines and Zest Airways.

Domestic capacity in the Philippines surged by 20% in 1H2012, prior to the 31-Jul-2012 launch of SEAir's Manila-based narrowbody domestic operation. The new SEAir-Tiger domestic LCC operation now consists of 10 daily flights on seven trunk routes from Manila (the last of which is being launched on 20-Aug-2012). This results in over 21,000 additional weekly seats, equivalent to a 4% increase, to a domestic market which was already suffering from overcapacity.