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CEBU PACIFIC AIR

Risk Management Analysis


BalanaaDavidLadjaMendozaTabudlong February 8, 2012

Outline
Philippine Airline Industry CEB: Company Profile Major Risks Recommendation

Philippine Airline Industry


Cebu Pacific AirPhil Express Zest Air
PAL SEAir

MARKET PLAYERS The Philippines market leader Growing fast after an LCC transformation Another adopter of the LCC model Increased focus on international routes Big LCC plans following Tiger investment

Philippine Airline Industry


Philippine Airlines 36%

Zestair 9% Cebu Pacific 47%

Philippines domestic capacity (seats) share by carrier


(as of Feb 2010)

Air Phil Express 6% SilkAir 0% SEAir 2%

Philippine Airline Industry


Cebu Pacific, 13.6%

Philippine Airlines, 27.4% Cathay Pacific, 8.8% Singapore Airlines, 5.2%


Others, 40.2% Asiana Airlines, 4.8%

Philippines international capacity (seats) share by carrier


(as of Feb 2010)

Company Profile
1988
1991 1996

Incorporated in Aug. 26, 1998


Granted a 40-year legislative franchise to operate international and domestic transport Commenced commercial operations Adopted Low Cost Carrier (LCC) business model

2005

Company Profile
Route network 50 domestic and 23 international routes 1,832 scheduled weekly flights Currently operates in 4 hubs Has 31 aircrafts in operation; targets 47 fleets by 2014 Distribution channels: internet, sales offices, call centers and third party sales outlet

Financial Highlights
2009 2010 9M 2011

Total Assets Revenues Net Income

35.3B 23.3B 3.2B

49.9B 29.1B 6.9B

53.0B 24.5B 2.2B

CEB Major Risks


Risk Operational risk Description Fuel cost Reliance on third party Operational efficiency Retaining and attracting qualified personnel Non-unionized workforce Frequency High Severity Low to High

Personnel risk

Medium

Low to High

CEB Major Risks


Risk Political and legal risk Description NAIA3 legal dispute Aviation safety ranking Open skies policy Economic downturn Availability of debt financing Frequency Low Severity High

Financial risk

Low

High

CEB Major Risks


Risk (cont.) Financial risk Description Foreign exchange and interest rates fluctuation CEB under ITH Seasonality of demand LCC business model Implementation of expansion plan Frequency Low Severity High

Business risk

High

Low to High

Recommendation
Stick to pure LCC model for long-haul operation Enter to long term contracts for fuel derivatives Increase customer loyalty through improved customer relations Offer higher salaries and better benefits to retain pilots and engineers

Thank You