Cebu Air Inc., operating and more commonly known as Cebu Pacific Air, is the leading low cost airline carrier in the Philippines. It pioneered the low fare, great value scheme in the local aviation industry by providing scheduled air travel services to passengers who are willing to forego extra amenities for fares that are usually cheaper than those offered by its competitors in the industry while still maintaining efficient services and providing passengers with quality travel experience. Cebu Air offers scheduled flights to both domestic and international destinations. Its main base it the Ninoy Aquino International Airport, with hubs at Mactan Cebu International Airport, Clark International Airport, Kalibo International Airport, Francisco Bangoy International Airport, and Iloilo International Airport. As of December 31, 2014, the Group operates an extensive route network serving 57 domestic routes and 37 international routes with a total of 2,652 scheduled weekly flights. It also operates a fleet of 52 aircraft which comprises of ten Airbus A319, 29 Airbus A320, eight ATR 72-500 and five Airbus A330 aircraft. Cebu Air was incorporated on August 26, 1988 and it was granted by the government a 40 year legislative franchise to operate international and domestic air transportation services in 1991. In 1997, it was given the status of being an official Philippine carrier to operate international by the Office of the President. Cebu Air is a subsidiary of JG Summit Holdings. It is currently headed by Lance Gokongwei, the chairman emeritus of JG Summit. It was first listed with the Philippine Stock Exchange (PSE) to issue common stocks on October 26, 2010, thus commencing the companys initial public offering (IPO). It also has ten special purpose entities that it controls that is related to its business operations and in 2014, it acquired 100% ownership of Tiger Airways Philippines. 1
In 2005, Cebu Air adopted the low cost carrier business model.
The main
objective of the LCC strategy is to offer affordable air services to passengers. It also offers airport to airport cargo services, ancillary services, and in flight merchandising. Profitability Cebu Air Inc. recognizes revenue from three activities namely sale of air transportation services for passengers and cargoes, and from ancillary activities which includes excess baggage fee, rebooking, refunds, cancellation fees, in flight sales, advanced seat selection fee, reservation booking fees and others. Cebu Air recorded 52,000,018,310 worth or revenue for 2014. 77.29% of the revenue came from sales of air transportation services to passengers and 6.05% from cargoes. 16.67% of the revenue came from ancillary activities. It also recorded revenue from equity in net income of joint ventures and interest income. Cebu Air is included in the five most profitable airlines in Southeast Asia during the first three quarters of 2015. This profitability is most likely due to more rational capacity and low fuel prices, accounting to the Capa Center for Aviation. According to an article in Business Inquirer, the airlines long haul units are unprofitable and the demand from the domestic flights offsets such loss and still makes profit for the company. While Cebu Pacifics long haul operation has been unprofitable in 2015, the group believes ot os tracking well and could become profitable in 2016 Capa said in the report. Major Consumer Served Cebu Airs target consumers are those leisure and business travelers who prefer less comfort and more travel. They are budget-conscious, satisfied with a low cost, safe and enjoyable airline services. Cebu Air services are usually acquired by leisure travelers who want to explore the country. To cut expenses and save money, they tend to purchase tickets at Cebu Pacific since domestic flights would only take a couple of 2
minutes or hours. Companies who send employees for business meeting tend to favor the low cost prices of Cebu Pacific to reduce their operating expenses, thus generating more profit. Travel agencies tend to partner with Cebu Pacific on its vacation packages to give the most affordable offer to consumers since with todays trend of travel; the cheapest one usually becomes the most profitable. Families travelling to provinces or having international vacations near the country also favors travelling with the airline to minimize expenses and use such savings on the vacation.
Chapter II: Vision/Mission
Vision statement: The most successful low-cost carrier in the world The vision statement of Cebu Pacific clearly answers the question What do we want to become?. In the companys vision statement, it clearly stated that its goal is to be the most successful low cost carrier in the country. This vision clearly sets the path of the company thus making it a good foundation in knowing the purpose of the company, and developing its mission statement. However, the company neglects to include its plan on its customers. The customers are the priority since they give meaning to the organization. Without considering the needs of the customers, the company fails to provide the basis of the services it offers. Cebu Pacific may be successful in becoming the the most low-cost carrier in the world but its operations will cease if it means providing a low-cost fare even if it includes sacrificing customer satisfaction. Mission statements: Cebu Pacific brings people together through safe, affordable, reliable, and funfilled air travel. We are committed to innovation and excellence in everything we do. We are an employer of choice providing opportunities for professional and personal growth. We have a deep sense of family values throughout our airline. We enhance the quality of life of the communities we serve and are an active partner in our nation's progress. We offer our shareholders a fair return on their investments. A well-written mission statement includes nine components: customers, products or services, markets, technology, concern for survival, growth, and profitability, philosophy, self-concept, concern for public image, and concern for employees.
Upon evaluation of the companys mission statements, it can be determined that
Cebu Pacific lacks three components. The company failed to include in its mission statements their customers, market, and self-concept. Cebu Pacific should have stated who their present customers are and how they plan to enhance their relationship with their customers. Writing a customer-oriented mission statement attracts customers since it will project what expectations customers could have from Cebu Pacific. As to its market, Cebu Pacific should have stated the market where it currently competes and its plan of expanding its market. This mission statement could have projected the companys interest for continuous growth. With this, the stakeholders, especially the investors, will put its trust on Cebu Pacific since having this interest shows that the company has a plan and direction in the long-run. Moreover, the company sees itself as a low-cost carrier but failed to include this in its mission statement as its distinctive competence. Including this statement will also attract its customers since most air travelers would prefer a low-cost air fare. This also establishes the companys reputation as the most known low-cost carrier in the country. Though Cebu Pacific has failed in meeting three out of nine essential components, it was successful in declaring the major service that it offers to its customers. Aside from providing a low-cost air fare, Cebu Pacific offers safe, reliable, and fun-filled air travel. As to its statement on technology, Cebu Pacific has stated its commitment on innovation which shows its interest to further enhance the services it offers. However, Cebu Pacific could have been specific on whether it has been coping with technological advancements. Moreover, Cebu Pacific is clear on what values it upholds. These values reflect what kind of service provider Cebu Pacific is. Incorporating that it upholds family values, it shows that Cebu Pacific take care of its customers like how a family would. Lastly, Cebu Pacific also successfully stated its concern for survival, growth, and profitability, for public image, and for employees. Expressing its concern for survival, growth, and profitability is important since it attracts investors. Investors have a huge contribution on the success of the operations of Cebu Pacific because without their trust, expansion will be more difficult. As to its concern for 5
its employees, it shows that the company sees its employees as valuable assets of the company. It will attract more employees to work for them. Also, with this concern, employees will be loyal to the company and thus, the employees will be motivated to provide a pleasing service to the customers. Moreover, the companys mission statement expressing its concern for public image also reflects the service it provides to its customers. Having a concern for public image means that the company will not do anything that could ruin its reputation in its industry. This means that it will provide quality service so it would maintain its image to the public. Revised Vision and Mission statement Here is a revised workable vision and mission statement proposed by the group. Vision statement: The best customer-oriented low-cost carrier. Mission statement: We are committed in providing the best customer relations imbued with Filipino courtesy and hospitality.
