Cebu Pacific Adjusts Fleet for Tigerair

Cebu Pacific is anticipating delivery of 8 new aircraft from Airbus this year as part of on-going efforts to renew its fleet with modern, fuel efficient aircraft.

cebu pacific
Copyright Photo: Angelo Agcamaran/PPSG
According to Jorenz Tanada, Vice President of Corporate Affairs, the arrival of the new aircraft is intended to augment Cebu Pacific's current fleet of forty-eight aircraft. "For 2014, we look forward to taking delivery of 8 additional Airbus aircraft including 5 Airbus A320 and 3 Airbus A330," said Tanada. "The A330's will be utilized to expand our long-haul operations. We will continue to bring the benefits of low-cost travel to even more travelers."

Cebu Pacific's fleet is currently composed of ten Airbus A319 aircraft, twenty-eight Airbus A320 aircraft, two Airbus A330 aircraft, and eight ATR 72-500 turbo-prop aircraft. Between 2014 and 2021, the budget carrier is expecting an additional fourteen A320 aircraft, thirty Airbus A321neo aircraft, and four Airbus A330 aircraft. The airline's massive refleeting program is valued at $4 billion.

With the recent decision to acquire Tigerair Philippines for $15 million, Cebu Pacific will need to make adjustments to its fleet plan in order to accommodate Tigerair, which will see the departure of its leased Airbus aircraft back to Tigerair Singapore later this year. According to Cebu Pacific, the airline expects that it will be able to transfer aircraft to Tigerair Philippines without impairing its ability to increase domestic capacity by nine percent in 2014. Cebu Pacific believes that it can increase capacity by almost twenty percent when factoring in flights operated by its new subsidiary Tigerair Philippines.

In order to accomplish its capacity goals in 2014, Cebu Pacific intends to improve aircraft utilization rates at both companies. Although Cebu Pacific will be accepting delivery of five new A320 aircraft in 2014, it will be returning four aircraft operated by Tigerair. That means that Cebu Pacific's narrow-body fleet will only grow by one aircraft in 2014.

Cebu Pacific will be replacing the aircraft departing the Tigerair fleet by transferring four of its own A320 family aircraft to its new subsidiary. By the end of the year, Cebu Pacific is expected to be operating 35 A320 aircraft compared to the 38 that it currently operates. However, the carrier believes that it will be able to keep nearly the same number of aircraft in active service as the A320 aircraft involved in the runway overrun incident in Davao last year returns to service at the end of February. That will leave the airline with three spare aircraft. But it is expected that the number of spare aircraft will be reduced as Cebu Pacific attempts to free up aircraft to transfer to Tigerair.

Cebu Pacific may also evaluate temporarily using its first new A330 aircraft of 2014 in the domestic market to offset the loss of the first aircraft to Tigerair while it finalizes a plan for its second long-haul route. Depending on when Cebu Pacific's future long-haul routes will be launched, there may also be additional opportunities to use the other two Airbus A330 aircraft that are expected to be delivered later this year. The fourth and fifth A330 aircraft to join the Cebu Pacific fleet are anticipated to arrive in the second and third quarter of this year.

Cebu Pacific also plans to improve aircraft utilisation levels at both airlines in an effort to bring Tigerair Philippines to profitability but also to maximize the use of the present fleet without sacrificing domestic capacity. When the deal to acquire Tigerair Philippines closes, the two A319 aircraft currently in the Tigerair fleet will be immediately returned. Cebu Pacific plans to only transfer one aircraft initially as it believes that it can maintain current capacity levels at Tigerair Philippines with only four aircraft instead of the five the airline currently has operating.

tigerair philippines
Copyright Photo: Angelo Agcamaran/PPSG
The aircraft in the Tigerair Philippines fleet see an average aircraft utilization rate that is less than ten hours per day. Cebu Pacific uses its A320 fleet on average about twelve hours each day. In order to satisfy capacity goals, it is likely that Cebu Pacific will attempt to boost aircraft utilization at both carriers up to more than 13 hours per day, a goal that was previously achieved in 2012.

The remaining three inherited A320 aircraft in the Tigerair fleet will be returned some time in the third quarter of 2014. Cebu Pacific will likely attempt to expedite the transition of the fleet as soon as possible for the purposes of fleet commonality. Tigerair's Airbus fleet are powered by different engines than those that power the Cebu Pacific Airbus fleet. For the initial few months of the year, Cebu Pacific intends to maintain a fleet of four aircraft at Tigerair Philippines. It remains unclear what livery these aircraft will carry. By the start of the third quarter, it is likely that Cebu Pacific will have had sufficient time to evaluate the Tigerair operation and may consider network changes. If new routes are launched, additional aircraft may be required.

Although Cebu Pacific intends to maintain Tigerair's current 12 routes while re-scheduling flights to ensure that the two carriers don't operate at the same time on overlapping routes, both carriers have revealed plans to expand to the Japanese market in 2014. By the end of March 2014, Cebu Pacific intends to be operating daily service to Tokyo Narita and four flights weekly to Nagoya. But since these flights are operated in the day time, Cebu Pacific will need to free up an additional aircraft just to operate the new routes. The airline has also been considering launching service to Fukuoka, Hiroshima, Ibaraki, Okinawa, Sapporo, and Haneda.

Meanwhile, Tigerair Philippines revealed late last year that it intended to launch its planned services to Japan by the end of the second quarter of 2014. The airline has been granted rights to fly from Manila, Clark, Kalibo and Cebu to Tokyo Narita and Osaka. According to Tigerair CEO Olive Ramos, the carrier's priority was to launch Manila-Narita followed by Clark-Narita, and then Kalibo-Narita. While the carrier's original plans to serve Japan remain up in the air, it is quite possible that Cebu Pacific may use its new subsidiary to fuel its expansion into the Japanese market as it seeks way to develop the franchise.

"Our intention is to grow Tigerair Philippines as an independent franchise," said Lance Gokongwei, President and CEO of Cebu Pacific. "We are reviewing opportunities to increase Tigerair Philippines' fleet." The latest statement by the chief executive at Cebu Pacific suggests that the airline intends to open new routes with Tigerair as the upcoming fleet of four aircraft would be unable to maintain Tigerair's current network and add new routes simultaneously. However, such a plan would be highly dependent on the group's ability to locate additional aircraft.

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