Aviation Leader Interview, Cebu Pacific CEO Mike Szucs

Transcript

Oriel Morrison:Hello and good morning everyone. It's wonderful to be back with you all again today. Did everybody have a good time last night?

Mike Szucs:Yeah.

Oriel Morrison:Yeah. Table over there did? Good to hear, good to hear. So if you had been with us last night, you would have seen Mike and I up on stage together. I'm sure everybody recognises the colour, that might— very on brand, Mike.

Mike Szucs:I'm instructed by the team.

Oriel Morrison:Congratulations on the award last night. Thank you very much. What does it mean to you?

Mike Szucs:Well, I think it, well, it means something for the team, I think, and something for the company, and it's recognition of all the work that they've done. So I think it's, I think it's great. It's actually— we've won quite a few awards this year, a number of number of different awards, whether it's sustainability, whether it's in the, just the overall growth of the business. It's, it's, it's good, it feels good, but I think the excitement really is about what's, what's coming up, what the potential is going forward with the potential for growth in the Philippines and how we put ourselves in the right place to make the most of it.

Oriel Morrison:So, but of course, out of those many awards that you've won, this is absolutely Oh, clearly, clearly.

Mike Szucs:I mean, this is, this is one to write home about.

Oriel Morrison:And I hope you did.

Mike Szucs:Yeah.

Oriel Morrison:All right, well, let's, let's talk about that. Let's talk about the Philippines, because you said last night that you're now in a position to capitalize on the growth of the Philippines, and you do expect, expect some significant growth to come out of the Philippines. Why? Why now?

Mike Szucs:I think the Philippines has always had great potential. For a number of reasons that I'll touch on, but I think it's the fact now that it's all coming together. But let's— I mean, let's look at some of the fundamentals of the Philippines. Well, it's 115 million people. It's a growing population. The demography is very good. It's a young population, increasingly educated, and increasing spending power coming off a low base. And then— but that really is the story then of a growing middle class. And when you look at what that means for air travel, and if you go anywhere around the world, that really is the key for growing air travel. And I mean, propensity to travel in the Philippines, just to give an example, where it sits today, it's trips per capita in the Philippines is 1/10 of where it is in Singapore. It's actually about a third of where it is in Malaysia. So it just shows the low base that it's coming off. So, you know, with the GDP growing, I mean, it's back on that treadmill again, 6% per annum, 5.5%, 6%.

Oriel Morrison:Yeah.

Mike Szucs:Inflation under control at about 2.5%, 3%. So the economic fundamentals are great. And so, yeah, it's going to grow. And we are doing our bit. We're putting the aircraft in. We grew over 20% in the first half of this year. And by the way, to put over 20% capacity in and then fill it, grow load factors and grow unit revenues, it shows that the demand is there. But I think the other things that are happening now, and it's— probably it's been a long time coming, but is the infrastructure's coming.

Oriel Morrison:Mm.

Mike Szucs:And so you— people talk a lot about Manila. Manila's been privatized. So Manila, Manila Airport itself, the existing one, is, is getting better to operate at, is becoming more efficient. There's a new one being built to the north of the bay. That's probably going to come on towards the end of this decade, which is great. That's going to unleash a new level of growth. And it's not like that one's going to come and then we close the existing one. That's going to be like the the Narita to the Haneda. So both airports will operate. But Manila's been spilling demand for probably over a decade. So that will require us to put significant fleet growth in. So Manila of itself is a great story. But when you look outside of the Philippines— I mean, outside of Manila— I mean, we've opened 2 new bases. And we've now got 5 bases around the country. We opened Iloilo and Davao. And that's very much a signal of our intent that it's not just about Manila. It's the rest of the Philippines as well. is, is going to grow. And so that's really, um, uh, the, the sort of the basis of what I think is going to be consistently growing air travel and, and a very strong story for the Philippines. Um, I mean, I'm, I'm from the UK, obviously. Um, I was back in the UK recently, and Philippines is some— is a place that people talk about.

Oriel Morrison:Mm-hmm.

Mike Szucs:I mean, more and more around the world, the Philippines is becoming— it's a, it's a great place of opportunity. And, uh, having been there for 10 years now, or almost 10 years, I, I can I can feel it and believe it. So it's a very exciting time for the country, I think. Great opportunity. And being an airline in that is exciting. And of course, we're a part, I think, of the story. We've got an obligation, I think, to help the country deliver to its potential because a part of the story is tourism. And of course—

Oriel Morrison:A big part.

Mike Szucs:A big, big driver of that is tourism. And, you know, we've got the most I think the best natural resources that are out there in terms of tourism. We've got the best beaches in the world, and we've got an amazing service culture from the Filipinos themselves. What has been missing is the alignment of all the infrastructure, whether that be the aircraft, the hotels, the airports, and it's starting to happen now. We've got a long way to go. I mean, interestingly enough, you look at tourism stats overall, just to give you an example of how much headroom we've got from an international tourism point of view, Tourism in the Philippines, we're number 1 in ASEAN for domestic tourism. I mean, so it's an enormous domestic market. But we're about number 6 or 7 in terms of international tourism within ASEAN. So it just goes to show how much potential there is if we get it right. And you see other countries that are doing it really well. China's obviously been doing it well for a number of years. Vietnam has really done well in the last few years, and you can see the growth that's happening there.

Oriel Morrison:Yeah.

Mike Szucs:So if we get this right, working with the Department of Tourism, Department of Transport, everyone else, if we line it up, then really great upside on the tourism part.

Oriel Morrison:So there's a number of issues that you've just talked about that I do want to touch on and bring up. But while we're talking about international, let's stay with that for the moment. What do you think is being— as you said, you know, Philippines has some incredible beaches. I'm not going to say the best beaches because I'm from Australia. But it absolutely—

Mike Szucs:I'm from the UK, so I can probably say that.

Oriel Morrison:Yes, you can do, unless you like stony pebbles.

Mike Szucs:Yeah, yes, of course.

Oriel Morrison:What do you think has been going on so far that international has not done better? Because as you say, there are just some incredible reasons to visit the Philippines.

Mike Szucs:Well, no, I think it is the infrastructure. Absolutely, it is the airports, and it is the hotels, and it's lining them up in the way I think that Vietnam is— Vietnam's doing a great job at the moment. There is no doubt how well they're aligning to capture tourism from around the region and beyond. And so I think it's a blueprint and an indication of what we can do. And as I say, we're doing our part. We're investing literally billions of dollars in aircraft over the next decade. But we need all the other parts to come together. But I think it is infrastructure.

Oriel Morrison:Mm.

Mike Szucs:There's nothing else to it. I mean, the other fundamentals, the natural advantages we have, People and locations are there to die for. So I mean, that's— it really is those other elements.

Oriel Morrison:What is your favorite place to visit in the Philippines?

Mike Szucs:I'm a regular at Boracay. Yeah, always, always. Yeah, the Boracay sunset. I mean, I'm sure a few people have been there. Yeah, there's nothing better. Sitting with a gin and tonic looking at the sunset in Boracay is—

Oriel Morrison:It's pretty spectacular.

Mike Szucs:Pretty spectacular.

Oriel Morrison:Yeah, yeah. Okay, so let's, let's move back just for a moment to the domestic side of the equation. You talked a little bit about expansion and what you've been doing there, and you have, you've been extremely busy over the last couple of years, but you've also talked about the fact that that pace, that speed of expansion is actually going to start to moderate.

Mike Szucs:Well, I think there's, I mean, there's a couple of aspects to touch on there. I think first of all, domestic is, is such a big part of our business, and for, I mean, a pretty obvious reason really. I mean, the Philippines is an archipelago, it's over 7,000 islands, and there's not a lot of other forms of public transportation. So there's not a rail network or anything else. So just for the 115 million people, those— that growing population, just for them to get around the country domestic, they need domestic air travel. And of course, low-cost carriers are perfect for that. I mean, we are an affordable, reliable, safe bus service in the sky. And that's, that's what low-cost carriers are all about. And, and we do that really well. So actually, domestic is about 70% of our seat capacity. So you're a low-cost carrier, but you're also a full-service carrier. It was pre-pandemic and it is, it is again now. So we spend an awful lot of time looking at the domestic side and we will continue to grow that. So the bases that we've developed, the 2 that we've added, Iloilo and Davao, they've got plenty of domestic links in there. So we're linking up some of the secondary cities within, within the Philippines. But of course we're adding on some international, international flights there as well. But domestic is a huge part of the story.

Oriel Morrison:Yeah.

Mike Szucs:And if we look at where our growth is going to be as a network, as a carrier over the next 10 years, the first thing we will look at is to say which bit of domestic are we going to grow. Then we will look at the regional stuff, short-haul regional, so Singapores, the Hong Kongs, etc. And then occasionally we'll look beyond that into long-haul travel. So we've currently got 3 destinations in long-haul and maybe we'll add another 1 or 2 over the next 4 or 5 years, but they'll be few and far between. I mean, Australia does pretty well. You've got Melbourne and Sydney.

Oriel Morrison:Yeah.

Mike Szucs:But yeah, long haul's not really— it's an important— I mean, it's something for us, but it's not the core part of our business. Actually, domestic is more than anything else.

Oriel Morrison:So if you were going to add 1 or 2 more locations on the international long haul side, where would you look at?

Mike Szucs:Well, we— when we started off with the A330 operations, A330ceos they were, I think it was about 2013, '14 when they started. Actually, it was to serve the overseas Filipino workers. And it was good and successful for a time. And actually, it targeted a lot of the Middle Eastern routes, primarily the Middle Eastern routes, because obviously a big OFW population there. But actually, we learned from that that actually LCCs don't necessarily work well in long haul. So we pulled away from some of the— well, most of the Middle Eastern routes, with the exception of Dubai. Dubai's such a thick route, there's room for everyone. But it may well be that there's— there's enough demand, things going on there, that maybe one of those Middle Eastern routes will, will, will re-emerge. But as I say, it's not going to be a big sort of play for us in terms of we're then going to open up another 4 or 5. Our core is going to be around sort of domestic and short haul.

Oriel Morrison:So if those longer haul routes for you weren't working so well as domestic travel, what can you do to change that so that they work better?

Mike Szucs:Well, no, I think that— I mean, LCCs is the slam dunk winner as the formula for short-haul travel. It's been proven, and, you know, the best airline in the world for the last 25 years is Ryanair, and it keeps doing the same thing year in, year out, and does it better than anywhere, anyone else. And actually, it's particularly true in emerging markets where affordability is even more key. So low-cost carriers work really, really well in In short haul. The model, or the benefits of the model, start to break down to some extent. Some of the benefits disappear when you go to long haul. So let's give you an example. So we can turn an A330 maybe 20 minutes faster than anyone else because we're super efficient and we're all lined up. But the sector time to Dubai is 9 hours. So what's 20 minutes on a 9-hour sector? Oh, and by the way, the crew, when they arrive in Dubai, they have to get off and go into hotels. So again, we don't get that advantage over a network carrier. Plus you've got an awful lot of seats to fill in a part of the world that's a long way away where your brand might not be so strong. So you might want some feeder traffic as well. So you— there are elements here that are outside of the core benefits of being a short-haul LCC. So in a short-haul LCC, we're able to get increased asset turn. We can use our staff more efficiently. We can reduce costs in ways that actually you can't maintain those cost reductions when you go into long-haul. So your operating model, the advantages you have in the short-haul environment, they start to disappear when you go into long-haul. So yeah, so know what you're good at and stick to it. But there are some routes that work, but it's kind of hit and miss.

Oriel Morrison:So we'll keep an eye on those announcements over the next—

Mike Szucs:Well, yeah, absolutely. But you should ask the same question, you know, when an airline, when an LCC sits up here and says, you know what, we're going to back our business on long-haul travel, you should, you should call them out. Long-haul LCCs do not necessarily work. They really don't necessarily work. They do on a few routes.

Oriel Morrison:Okay, okay, well, we might swap positions for a while then.

Mike Szucs:Oh, absolutely.

Oriel Morrison:Um, so Mike, let's talk about the infrastructure side of things. Um, you talked a lot about the growth in the Philippines and how excited you are about that, and the, the fact that, you know, it hasn't grown, grown faster is largely in your area is largely to do with infrastructure. What exactly, in terms of numbers, is the new airport going to mean for you?

Mike Szucs:Oh gosh, in terms of what, the, the new one in Manila?

Oriel Morrison:The new one in Manila.

Mike Szucs:So look, I— when we look at the new one in Manila, and this is again part of, part of the order, when the new one arrives in Manila, it's not like we're going to take our fleet out of the existing Manila and move it over to the new one. We've got to have the ability to increase our fleet Significantly just to go and make sure we can put a footprint down in the new one. And that's really what a big part of the fleet order is about so that when the new one arrives, whether it's '29 or in 2030, we will very rapidly be able to go and establish, you know, maybe 10 aircraft there from day one or from, you know, certainly within the first year so we can put a footprint down there. One of the things we do have about the order though is we have the ability to defer it. So, you know, We've got plenty of flexibility. So if, for example, the airport arrives in 2031, we're not going to be stuck with all these aircraft arriving, we've got nowhere to put them, because we can actually defer it and bring them in in 2031. But it is going to be very, very significant growth just coming from Manila. But outside, even if that Manila airport doesn't get built, and every indications are that it will, we still would anticipate considerable growth through the Philippines anyway. with the development of the other airports. So there's privatization going on in a number of the airports in the Philippines now. I mean, already there's been some that have been privatized, but that's going to be an ongoing progression. With that will become modernization, new terminals, lengthened runways, and so that of itself is going to give us an opportunity to grow. So even, even if the new Manila doesn't come, we would still anticipate growing in the sort of 6 to 9% sort of category for the next 10 years anyway. And that's kind of where we've pitched. So when we did our fleet order, I mean, people go, it was— how do you explain your fleet order, Mike? It's anywhere between 70 and 152. Yeah. So if Manila doesn't arrive, the new Manila doesn't arrive, then we'll probably be towards the 70 end. But if the new Manila does arrive, then we'll be towards 152.

Oriel Morrison:Do you think you'll reach 152?

Mike Szucs:Oh, I think we'll— but before we get there, we'll need some more. That would be my sense. I mean, all the indications are that are on the upside rather than on the pessimistic side. So yeah, I mean, we, we're not going to be doing any— for any OEMs out there, we're not going to be doing any fleet campaigns for the next year or so. But at some point within a few years' time, we'll then need to look beyond. The fleet order stretches out to 2034, 2035 with the options. But I mean, with backlogs as they are with the OEMs at the moment, you really have to be ordering. Yeah.

Oriel Morrison:So barring engine issues, which we'll talk about in just a moment, barring that and of course another COVID, what would derail those forecasts for you?

Mike Szucs:What would derail those? Look, I, I think the, the low end of the growth trajectory profile that I've given is actually 70. I think if we look at the 70 aircraft, I think, I think it's probably about— that would be in That would imply about 3% or 4% growth over the next 10 years on a compound annual growth rate, which is very, very, very low for an emerging market like the Philippines. So it's difficult to see a scenario— and I've got to touch wood when I say this— but it's difficult to see a scenario where we would be having more capacity than we can deal with. I think that's fair to say. And it's not just us. I don't know if Anand's here, but Anand was from Airbus. I mean, Airbus are out there, I mean, they think we've under-ordered. Now, of course they'd say that because they want us to order more along with Philippine Airlines, but I mean, generally all the statistics point to, first of all, Southeast Asia itself being the growth, or the biggest driver of growth in aviation probably over the, certainly over the next decade or so, and within Southeast Asia, the Philippines is within the top 1 or 2. in terms of that growth. So it's not just us saying that, it's the Airbuses, the Boeings, and they spend a lot more time studying that sort of stuff even than we do.

Oriel Morrison:Do you have any concerns over politics, geopolitics in the region specifically, I suppose, you know, coming from the US?

Mike Szucs:Well, I think the— I mean, what's going on, I mean, I keep losing track of what's going on in the tariffs. I mean, I think it's a kind of almost a pointless exercise trying to keep pace with what the changes are in terms of the tariff situation. From a Philippine point of view, Philippine economy point of view, we're not big exporters to the US anyway, so I mean we're exporters of services and people, but so the tariff impact to us is not great in terms of the economics. Where I think tariffs is coming in, and well it's still not clear, but what does that do to the supply chain in terms of slowing that down, and also what does that do to costs? So already you're getting some suppliers are coming in and sort of saying, well, clearly my costs are going to go up, et cetera, et cetera. But I don't think the dust has fully settled to understand the full picture of it yet. But from a Philippine point of view, from an economics, nothing yet. Clearly, if tariffs slows down the world economy, that's bad for everyone. But no, at the moment, so far so good.

Oriel Morrison:So far so good.

Mike Szucs:So far so good.

Oriel Morrison:Let's hold on to that as long as we possibly can. Um, so let's talk about the engine issues.

Mike Szucs:How long we got?

Oriel Morrison:It's obviously been an ongoing issue for some time, and you've made some comments recently I've seen in the press that indicate that you think that it will go on for longer than ex— than you had initially expected.

Mike Szucs:Yeah, so we, um, I mean, we grew this— I mean, if you asked me a year ago, we were saying we were going to grow anywhere between 20% and 25% this year. And in the first half, we grew 20% capacity, 21% Pax. And so we were a little bit behind in the first half. But in the second half in particular, we've seen the AOG count that we have due to the Pramwini NGO issues being a good bit ahead of— or a good deal worse, I should say, than we anticipated. So we're currently about 14%.

Oriel Morrison:Okay.

Mike Szucs:Pratt Whitney Aircraft AOG, and we were originally led to believe it was going to be about half that at this point in time. So that's really brought our growth down in, in, in, in the second half of this year. And as we look forward, um, again, if you'd asked me a year ago, there was lots of noises coming out of Pratt Whitney, but that by the time we got to the end of 2026 with the AOG situation, we might be down to very low single digits. Now I think it's going to now extend into all through 2027 and maybe, maybe the start of 2028. But this is my view. If you ask my CFO, he thinks it's the start of 2029. So it's— but it's— I think it's at least another year from where we thought before. So sometime '28, sometime '29, then I think it will all go. Now, the, the upside for us is substantial though, and I think When we— I mean, it's a nightmare for the business having to manage supply chain issues and in particular the engine issues, the uncertainty, the unpredictability we have in terms of capacity and making sure that we can always deliver what we've got on sale. But from a financial point of view, we are carrying the burden of all these unproductive assets sitting on our balance sheet. So it's a substantial cost. And it's not just the 14 aircraft that are sitting idle on the ground, of course, have to be paid for, et cetera. We now have a spare engine ratio on the Pratt Whitney which is close to 30%. Now this is kind of like 3 times what you'd have expected it to be on another format. Now that will wash through over time. And by the way, I think the Pratt Whitney engine will be a good one. I mean, I think it really will be a very good one. I think it's going to be an excellent outcome for the new order. The new order was placed, and by the time that starts delivering in 2020, 2029, those engines, they'll be the advantage engine, it'll be good. But the pain that we have, not just in terms of sleepless nights and, you know, delivering the operation, but also financially, is significant. And we, you know, and the fact that we're delivering healthy margins and healthy returns, carrying this like ball and chain strapped to our foot on our balance sheet being bloated because of all these idle assets, when that, when that gets released in '28 or '29, that's going to be a real kicker for us.

Oriel Morrison:Can you recoup any of those losses?

Mike Szucs:Well, we get— no, no, no is the answer. I mean, we get, we get, um, I mean, like all airlines, there's some, there's compensation that Pratt Whitney will, will provide, and there's always negotiations around that, um, but it's, it's never, it's, it's not, not enough to, to cover all of the, all of the losses that are there. And just to give you an example of One of the ones it certainly doesn't cover. So you can imagine what we've done this year in preparation for what we thought would be the fleet we'd have available to fly in the second half of this year. We have to recruit pilots.

Oriel Morrison:Mm.

Mike Szucs:And the pilot lead time is significant. It's not like, oh, I'll pick him off the street today and he'll be flying tomorrow. So it's at least maybe a 9-month lead time that's coming in. So we're now probably, you know, 80 to 100 pilots in excess of what we would like to be. So that's a cost that we have. And we're certainly not— We treasure those pilots and we want them. We'll need them from the lot for the long term, but they're certainly now surplus and we have to carry that cost until we grow into that sometime next year.

Oriel Morrison:Okay, all right, let me just check whether we are opening for questions and I'm not hogging all the time. Are we opening for questions today? Yes, yes we are. Slido's ready.

Mike Szucs:Okay, Slido is ready. Would you consider a more smaller aircraft? Look, we have— we do have a smaller aircraft than the A320. Sorry, I was reading out the question. Yeah, I like that.

Oriel Morrison:I'm going to Qatar. Please go right ahead. We have—

Mike Szucs:I mean, we have ATRs, right? But the reason we have ATRs is because— I don't know whether to talk to the audience now or talk to you. Who asked the question?

Oriel Morrison:He's going to put you on that. Yeah, you're going to stop people from asking questions if you do that.

Mike Szucs:No, we have ATR 72-600s, and the reason why I have a smaller aircraft is literally because some of the airfields currently, the runway's not long enough or strong enough, and yet they're very attractive places. I mean, we recently bought— in the last year, we acquired a small airline, Air Swift, which operates exclusively to El Nido. Some of you may have gone to El Nido. El Nido is— I mean, it's paradise. And that you can only get in there on an ATR. Now, over time, that will change because the runways will get lengthened, the runways will get strengthened. And just to be clear on something, we are about the most complicated LCC from a fleet point of view anywhere in the world. And it's not because we're completely bonkers.

Oriel Morrison:Okay.

Mike Szucs:I mean, the only reason we do it is because of the infrastructure. So we have ATRs because we need to get to some really attractive places. And frankly, I would rather have all A321neos. I wouldn't even have any A320neos. I'd rather they were all A321neos, but some of the airfields aren't strong enough or long enough for an A321, so we need the A320. And the 330neo, which I absolutely adore as an aircraft, I mean, we use that primarily on short haul now. When we bought it, it wasn't really for the long haul. As I say, the long haul is, you know, for the odd route, but it really is a magnificent short haul bus, and it really is for regional travel, and we use it on domestic as well. But where it's brilliant, and one of the reasons why it's brilliant, by the way, it's got the lowest unit seat costs, the lowest carbon footprint of any any commercial jet out there, period.

Oriel Morrison:And that's really important.

Mike Szucs:No, no, it's really important. The costs and the environmental aspect, hugely important. But what it does as well is it is 2 A321s operating 1 slot in Manila, which is slot constrained, or 2 A3— it's operating 1 slot in, I don't know, Hong Kong. All of— so many of the airfields here in this part of the world are slot constrained. Manila is probably one of the greatest cases. points. But the big metropolises all have slot issues, and this is an aircraft that can give you huge uplift in capacity even though you only use one slot. An example of what we've done in Manila, if I look to 2019, right, so the advantage of upgauging 330s and 321s, for example. In 2019 versus 2019, Our Manila capacity, seat capacity, has grown by 22%. Now you'd think, hang on a sec, but Manila's slot constrained. Well, it is, but this is all about upgauging. And that's huge. That is huge in terms of the benefit that we get from that.

Oriel Morrison:Yeah.

Mike Szucs:So anyway, long answer to a question. Sorry about that. But no, we, for choice, we won't go for shorter aircraft. And again, I mean, the 321neo is a, is a I think it is the aircraft of choice for LCCs. I mean, the 737 is a good option as well, but you really would love to have just one type. And you look, O'Leary does it brilliantly with the 737. We would be all A321neos but for the infrastructure constraints.

Oriel Morrison:Okay.

Mike Szucs:But we, we, we do all right. The A330 is there for a reason, so is the ATR. Right, would Cebu consider airline alliance post-value alliance failure? Oh gosh.

Oriel Morrison:You really don't need me.

Mike Szucs:Look, I, I don't— I think partnerships is something, right? I mean, the Value Alliance was about partnerships and looking at some forms of connectivity. We're currently looking at something with DOOHOP. I know Hugh's in the audience at the moment. Hugh Aitken I know well. So we're looking at something where you can— where we can do some connectivity with, with other airlines. So, yeah, I mean, Value Alliance was a means of trying to do that a long, long time ago. Didn't work, but there's— often things don't work, but you move on. But, yeah, partnerships is something that we would look at. And look, at some point, and I don't know if it's going to happen in my time, or it's— at some point there will be consolidation in this part of the world. You've seen it in other parts of the world due to ownership issues, due to different regulatory environments. each country. It's not happening at the pace it would naturally do so. I mean, there's a lot of, there's a lot of carriers here that frankly need to be consolidated. I mean, in a normal world they would be acquired or they, you know, a lot of them would fail.

Oriel Morrison:Such as?

Mike Szucs:I'm not, you know, no, don't get me on that. But no, it's, it's ripe for some consolidation, but just the environment doesn't, doesn't lend itself well to do that at this point in time. It'll happen at some point.

Oriel Morrison:Okay, I've got another question for you on sustainability, something you and I have spoken about before. You have put a lot of pride into the work that you've done electrifying ground fleet, for example, working on SAF. What would your thoughts, your predictions even, be for producing SAF in the Philippines?

Mike Szucs:Well, no, I mean, really good. And what I like about the sustainability agenda now, it's got a sense of realism to I think over the last couple of years there were lots of people coming out, we're going to be net zero here, there, or everywhere, and I think the important thing is to do what you can do today. Actually, the single biggest thing, and you didn't mention, is that anyone can do is invest in efficient aircraft, right? So we've got 72% of our jets are now NEOs, right, which is the single biggest thing we can do. You know, when a 321neo, the fuel burn per passenger is somewhere between, you know, 17%, 18% less than it would be on the equivalent equivalent CEO. So that's the single biggest thing that any airline can do at this point in time. All right? And then, yeah, take the low-hanging fruit, invest in the ground equipment and everything else, which is all that stuff. Now I think the next thing is SAF, right? I don't think there is a— I don't think with the fleets that are out there, and by the way, people are ordering aircraft now with Airbus and Boeing that are going to arrive in the early 2030s, and they'll still be ordering them well into the mid-2030s on the existing platforms, and these aircraft will run around for the next 20 years beyond that. So hydrocarbon fuel is clearly going to be a critical part of aviation, whether— I mean, I'm not a believer in the hydrogen story, so we need a hydrocarbon fuel, and there's nothing out there other than some sort of SAF. But the problem is there's not enough of it and it's too damned expensive. And so What we've got to do as an industry, and I think it's rather than sort of making big statements about, you know, when we're going to be net zero, is making sure that we're doing what we can to encourage and get involved with pockets of SAF production. And I think we've— I mean, as I say, we've done all the stuff that we've done this far, which has been great. Now we need to look at how can we help if we can get some SAF production locally in the Philippines. Now, I don't know whether it's going to produce 1 liter or a trillion gallons. I've got no idea, but we've got to put our foot down and say, right, okay, we're going to be interested in this because it inevitably is going to be part of the future. By the way, SAF is not going to fill all of the aircraft fuel tanks in the next, you know, in 15 years. There simply won't be enough of it. But But we need it to be a substantial part. And I think our point now is that we've done everything we can. We've done the big things that we can do today. The next one for us is to— can we work with somebody to see if we can get some SAF production? And great if it's in the Philippines. I mean, look, locally, because we don't want to transport fuel around. I mean, there's a carbon footprint in that. So if you can produce it locally in the Philippines, there's lots of, you know, corn husks that apparently will be the right foodstuff to help make the SAF.

Oriel Morrison:Okay.

Mike Szucs:So why wouldn't we?

Oriel Morrison:Do you think that's a reality?

Mike Szucs:Yeah, I think it is. I mean, we've got the fundamentals are there. I'm not the scientist who's going to be able to sort of say that, but we've— I mean, we're an airline that has got the ability to drive and help some investment to go there. And it would be great. It would be a great story for the Philippines.

Oriel Morrison:The middle one, please.

Mike Szucs:Is Cebu Pacific already using SAF? We've done— we're the only actual carrier in the Philippines that's done SAF. We've done SAF flights. Yeah, I mean, we're not doing it now, but we, we've done a whole load of delivery flights. In fact, I think in 2024 all of our delivery flights had an element of SAF. We've done one flight as well, commercial flight, that had some SAF fuel in it. I think that was either from Japan or Singapore. We're not doing it now. The reason I think we moved on, I mean, that was all about saying, yeah, we can do SAF, we've done our bit, but there's no point now. The next point is to say, are you doing the low-hanging fruit? Are you investing in new fleet? Oh, and by the way, are you now engaging with people to try to get SAF production? I don't need to do the, hey, look, I've got a bit of SAF in my flight. I mean, I don't, I don't need that anymore. What I've got to do is to see if we can get some SAF produced.

Oriel Morrison:So we have one final question I think that we've got time for there. How do you manage external stakeholders like government and private airport operators?

Mike Szucs:How do we manage? Well, um, well, we've got a great team, right? Um, and actually, um, we spread ourselves around. I mean, we— I mean, there's a lot of— let's say there's an awful lot of engagement working with the government. I think the government, I mean, is doing generally a good job. The economy's on track, and as I say, the investment is— or the, you know, the willingness to invest is there. What we've got to do is work with them to get the coordination, but we do spend an awful lot of time, but they're healthy interactions. I mean, we— And I think there is an understanding now within government in the Philippines. I'm not saying it wasn't there before. And I think we've, in many ways, we've partly earned the right to have a voice because, you know, we've grown and I think we've demonstrated that we're an important part of the story in the Philippines, as is Philippine Airlines, by the way. I think the two of us collectively have a voice with government to say, look, we think you should do this, we think you should do that.

Oriel Morrison:Yeah.

Mike Szucs:And I think the government is listening. So we have to present ourselves well, but we do have— we have something to say.

Oriel Morrison:Amazing. Mike, thank you so much for your time. Ladies and gentlemen, please help me give Mike a big round of applause.

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