Cebu Pacific, Chief Executive Officer, Michael Szucs at the CAPA Airline Leader Summit Asia 2024

Transcript

Michael Szucs:So if we're looking at the order that we've just announced, which is for narrowbodies, I think one of the things that we wanted to make sure of was that we got maximum flexibility in the order. And the fundamental underlying factor for that is infrastructure. The Philippines has got wonderful opportunities, but we need to see the infrastructure coming in as well to be able to support any aircraft growth going into that. So we've got a firm order of 70 and the first firm guaranteed comes in 2029, which is pretty much in line with when we think Bulacan will come online as well. Bulacan is the new airport in Manila, which is going to come in as an additional airport in Manila. It's not a replacement to the existing one. It's additional. And that's one of the underlying reasons behind this new order. But of course, there's the need for replacement and there's growth in other parts of the Philippines, but some of it is Bulacan. Now, if Bulacan does, it could potentially come in in 2028. And we also could see a bit more growth in the infrastructure developments in the Philippines overall in some of the other areas. So we might want a bit more growth a little bit sooner. So we've got an opportunity to access some additional aircraft ahead of 2029. And then finally, we've got options, 50 options on top or purchase rights on top. So we've got 102 then plus 50 purchase rights. Again, depending on what is the overall infrastructure developments in the next sort of 7 or 8 years. So we really wanted an order that gave us flexibility and that's what we've got. It's a minimum of 70 starting in 2029, but it could start sooner and it could run on later than the sort of 2033, and that could take us all the way up to 152. So it's a perfect order for what we what we need, and it gives us the flexibility that we desire. We entered into the A330ceo many, many years ago. Probably, I think the decision was probably around 2013, 2014, I think was the A330ceo, and it was to enter into the long-haul markets, principally to address the overseas Filipino workers, primarily in the Middle East, and that's a good market to go and try and address. There's certainly lots of Filipinos working in places like Dubai, Doha, etc., and Saudi Arabia. What we discovered was those are very sort of competed markets, and also long-haul low-cost is a great solution, but it's not a definite slam-dunk winner. What we discovered that it works on some routes and perhaps not so much on others. So we now serve as long-haul, we serve Dubai, we serve Sydney, and we serve Melbourne, and we probably will do in the next 4 or 5 years we may open one or two more long-haul routes. But which goes to show the A330s that we have, and when we ordered the neo, it's not actually for long-haul. It will do long-haul very well, but it's actually to serve what we consider probably more short-haul international. So it's the Japans, it's the Singapores, it's the Hong Kongs, it's the Bangkoks. It's really anything within a 4-hour radius. And when we specified that aircraft, we wanted to to make sure we had the economics to do short sectors. And that means we want our high seat count, but also we want very efficient maintenance costs on things like the engines. And frankly, what we've got is that aircraft will offer the lowest unit seat costs of any commercial jet in the world, period. Now, the challenge is you've got to operate it on thick routes because you might have low seat costs, but if you don't fill the aircraft, that's purely an academic exercise. But of course, we've got plenty of thin routes, and particularly now when Manila Airport is still slot constrained, which it will be until Bulacan comes online. So plenty of opportunities for us to deploy those A330neos, not just in short-haul international, but also in some thick domestic routes like Cebu, Davao, and other domestic routes that we're pursuing as well. So it's a fabulous big bus primarily used in short-haul markets and occasionally used in long-haul markets. It works very well, extremely versatile. And yes, we love it. We have 10 at the end of this year and it'll be growing to 16. Probably that's as far as we go because further down the line, as we talked about, Bulacan will come online and slot constraints will be, you know, less of an issue. Bear in mind just the simple sums here. One A330neo has the same capacity as 2 A321neos. In terms of seats, but it still takes up one slot. So that's why it's so important in a Manila-constrained environment. I think the Philippines is an exciting place to be at the moment. I mean, I think it's got great opportunity. If you look at the fundamentals in terms of the population, it's about 115 million. Population is growing. It's very young, right? If you look at the population demographic, it's almost like the perfect pyramid, you know, in terms of very, very young, increasingly educated, and getting increasingly wealthy, coming off a low GDP per capita, but it's growing fast. GDP is back on that treadmill that it was for the previous 10 years pre-pandemic of, you know, 6%, 6.5% GDP growth per annum. It's back on there and it's forecast to be in there. Inflation's under control. The government's doing a very impressive job. So the economy's looking good. The population's there. And the final bit that was often missing was the infrastructure was missing. Now, we only made the order that we made, admittedly with the flexibility that we need because we don't know when the infrastructure will exactly come online, but it is coming. And because that infrastructure is coming, we can put the aircraft in to grow into the opportunity that the economy and the population are looking for.

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