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Republic of the Philippines

Jose Rizal University


80 Shaw Boulevard, Mandaluyong, 1552 Metro Manila

MANAGEMENT RESEARCH

Presented to the Faculty of the


College of Business Administration and Accountancy
In Partial Fulfillment of the
Requirements for the Degree of
Bachelor of Science in Business Administration
Major in Management

Submitted By:

Go, Christian
Mique, Janne Alexis M.
Ramos, Queences Myreen S.
Sontillanosa, Jodelle Grace D.S
Teodoro, Gellie Ann M.
Valdez Remalyn Q.
401M

Submitted to:
DR. MILLER MERCADO
Professor
CHAPTER I

INTRODUCTION

Background of the Study

This chapter includes company profile, history, owner’s profile, organizational structure and the products

and services offered. This paper aims to study and know the background about a aviation company that declined,

seek for the reason why that happened and finally give the recommendations for it to grow again. Air travelers

know the frustration of waiting endlessly for their plane to arrive or depart. Delayed flights are

inevitable instance that maybe caused by a couple of factors i.e., technical problems, bad weather

and air traffic. Although passengers anticipate delays, no one counts on such eventuality to

happen to him. Cebu Pacific Air is currently the country’s leading domestic carrier, serving the

most domestic destinations with the largest number flights and routes, and equipped with the

youngest fleet. Cebu Air, Inc., operating as Cebu Pacific Air, is based on the grounds of Ninoy

Aquino International Airport (Manila Terminal 3), Pasay City, Metro Manila, the Philippines. It offers

scheduled flights to both domestic and international destinations. Its main base is Ninoy Aquino

Airport, Manila, with other hubs at Mactan-Cebu International Airport, Francisco Bangoy International

Airport and Diosdado Macapagal International Airport. The airline is a subsidiary of Holdings,

controlled by the Gokongwei family -one of the richest Filipino-Chinese families based in the

Philippines. Cebu Pacific is currently headed by Lance Gokongwei, presumptive heir of John

Gokongwei, the chairman emeritus of JGSummit.


Company Profile

Mission Statement
Main Mission: Cebu Pacific brings people together through an affordable, reliable mode of travel
a fun-filled experience that’s delivered with a true heart and soul for service. Cebu Pacific provides an opportunity
for everyone to travel anywhere and everywhere they wanted with a fun-filled experience that is conveyed with
passion for excellent service

Vision Statement
We enhance the quality of life of the communities we serve and are an active partner in the nation’s progress.
Cebu Pacific is internationally renowned as the most successful low-cost carrier in the Asia-Pacific region. We
take pride in being the best domestic airline and the Filipino
travellers’ first choice.
We are reputed for our unparalleled genuine, warm and caringservice. We are recognized for our innovation and
commitment to excellence, and we are the industry and academe benchmark for success. We are an employer of
choice, providing many opportunities for professional and personal growth in learning, egalitarian and non-
bureaucratic workplace. Our people are goal-oriented team players, empowered and disciplined, with a big sense
of integrity, enthusiastically spreading the culture of fun throughout the world. Our equipment, facilities and
systems enable us to ensure consistent highly efficient levels of operation. We have a deep sense of family
extending beyond the airline, encompassing the communities we serve and the family we love.

Strategic Objectives
Becoming Global
-What we offer will appeal to customers across the globe. Wherever we operate,
individuals and business travellers alike will want to fly with us whenever they can.
Premium Service
-We will make sure all our customers enjoy a unique premium service whenever and
wherever they come into contact with us. Our customers will recognize that the service
we offer is worth paying that little bit more for.
Preferred Airline
-Remain the top choice for international flights for premium customers as well as cargo,
economy and shorter flight.
Meet Customers' Needs
-Explore the latest options and products to enhance customer loyalty

Company History
Cebu Pacific Air is an airline company located at Ninoy Aquino International Airport
locally based here in Philippines. It offers booked flights to both domestic and international
destinations. The airline is a subsidiary of JG Summit Holdings and its current Chief Executive
Officer is Lance Gokongwei. Cebu Pacific was established on August 26, 1988 then later on
started its operations on March 8, 1996 with a promise to give "low fare, great value" to
everyone who wanted to fly. The airline was established on August 26, 1988, and started
operations on March 8, 1996. Republic Act No. 7151, which grants franchise to Cebu Air, Inc.,
was approved on August 30, 1991. Cebu Air, Inc. was subsequently acquired by JG Summit
Holdings. Domestic services commenced following market deregulation by the Philippine
government. It temporarily ceased operations in February 1998 after being grounded by the
government due to an accident, but resumed services later the next month following re-
certification of its aircraft. It initially started with 24 domestic flights daily among Metro Manila,
Metro Cebu and Metro Davao. By the end of 2001, its operations had grown to about 80 daily
flights to 18 domestic destinations. After offering low fares to domestic destinations, CEB
launched its international operations on November 2001 and now flies to Bangkok, Busan,
Guangzhou, Ho Chi Minh, Hong Kong, Jakarta, Kota Kinabalu, Kuala Lumpur, Macau, Osaka,
Seoul,Shanghai, Singapore and Taipei. In short, destinations, where one can go shopping and
sightseeing! To get every Juan to more places every day, CEB operates a fleet of 33 Airbus
(10A319 and 23 A320) and 8 ATR 72-500 aircraft; the youngest fleet in the Philippines. With the
completion of the re-fleeting program, our capacity has doubled.CEB offers the lowest year-
round Late Fares for its destinations. CEB remains to be the pioneer in creative pricing strategies
as it manages to offer the lowest fare in every route it operates. Cebu Pacific is not just the leader
in low fares but also in innovation and creativity! CEB is the first local airline to introduce e-
ticketing, prepaid excess baggage and seat selection in the Philippines. Guests have also learned
to anticipate a uniquely upbeat flying experience with CEB, as this is the only domestic carrier
that offers fun in the skies with its games on board popularly known as Fun Flights, together with
its entertaining in-flight magazine Smile.CEB also partnered with various destination hotels, car
rental service, travel insurance and entertainment ticketing service, to provide its guests a more
convenient travel experience. On time performance, schedule reliability and a smooth,
comfortable flight are just some of the things that the air-travelling public has come to expect
from Cebu Pacific. In the 2000s, Cebu Pacific was granted rights to operate international flights
to the region, including Malaysia, Indonesia, Singapore, Thailand, South Korea, Hong Kong, and
Guam. International flights were launched on November 22, 2001, with twice-daily service to
Hong Kong. On March 1, 2002, it commenced thrice-weekly flights to Seoul. Other regional
flights were introduced and suspended later; however, including flights to Singapore (from
November 6, 2002, to January 2003) and from Manila via Subic to Seoul (from December 2002)
due in part to the effects of the SARS epidemic. The airline resumed its Manila-to-Singapore
flights on August 31, 2006 and launched its direct flight from Cebu to Singapore on October 23,
2006, the first low-cost airline to serve the Cebu-Singapore-Cebu sector, and in direct
competition with Singapore Airlines' subsidiary Silk Air, CEB is now the only Philippine
carrier serving the Cebu-Singapore-Cebu route after PAL terminated its direct service. The
airline operates direct flights from Cebu to Hong Kong which commenced October 2,2006,
which also made CEB the only Philippine carrier to serve a Cebu-Hong Kong-Cebu route after
PAL terminated its direct service and is now code-sharing with Cathay Pacific for this route. In
May 2005, Cebu Pacific received two Airbus A320aircraft on lease from CIT Leasing and
operated its first service with the new aircraft on June 3, 2005, from Manila to Davao City. In
December 2006, after a month or two of operating the new direct flights, Cebu Pacific
announced that it would increase flight frequency for its Cebu-Hong Kong-Cebu from four
to five times weekly and Cebu-Singapore-Cebu flights from four to six weekly effective January
25, 2007. As of January 2008, it operates regional flights to Busan, Hong Kong, Singapore,
Seoul-Incheon, Taipei and Bangkok beginning April 6, 2008 from its Cebu hub; and Bangkok,
Guangzhou, Hong Kong, Jakarta, Kuala Lumpur, Macau, Singapore, Taipei, Seoul-Incheon,
Shanghai and Xiamen from Manila. Cebu Pacific's plans to begin international flights from Clark
were initially unsuccessful when its request was denied. The nations involved came to an
agreement that Cebu Pacific would be only allowed to operate charter flights from Clark to
the respective countries' airport(s). Only Singapore initially agreed to allow Cebu Pacific to fly
scheduled flights from Clark to Singapore. Currently Cebu Pacific only operates a route from
Clark to Cebu, but has since announced that it will be commencing international flights from
Clark to Hong Kong, Macau and Singapore from November 2008 as well as domestic flights
from Clark to Cebu. In June 2007, Cebu Pacific announced an order of up to14 brand-new ATR-
72-500 aircraft, with six firm orders and eight options. It plans to initially offer flights to
Boracay, using Boracay's Godofredo P. Ramos Airport. On November 12, 2007, Cebu Pacific
announced Davao's Francisco Bangoy International Airport as its fourth hub. Cebu Pacific
announced that it would initially fly internationally from Davao to Singapore, Hong Kong and
fly one domestic flight to Iloilo. Both direct services from Davao to Singapore and Iloilo
commenced on May 8, 2008, while the service to Hong Kong commenced on May 9, 2008.In
late 2007, Cebu Pacific mentioned that it is aiming to cross the Pacific and launch non-stop
flights to the United States West Coast, Houston, Texas and Chicago, Illinois by mid-2009. On
December 18, 2007, Cebu Pacific announced that it would exercise options on its recent ATR-72-
500 turboprop order (initially six firms) to increase its firm order to 10. On February 19, 2008,
Cebu Pacific Air received its first brand-new ATR 72-500 from Toulouse, France and expected to
take delivery of another five ATRs from March to December 2008.The initial two ATRs fly on
routes such as Cebu to Bacolod. Cebu Pacific took delivery of its 16th brand-new, 179-seater
Airbus A320 aircraft, from Toulouse, France, on March 20, 2008. The new aircraft supports CEB
are expanding international and domestic operations which include flights to 12, soon to be 15,
international destinations. On May 28, 2008, Cebu Pacific was named as the world's number one
airline in terms of growth. The airline was also ranked fifth in Asia for Budget Airline passengers
transported and23rd in the world. The airline carried a total of almost 5.5 million passengers in
2007, up 57.4 per cent from 2006. On July 22, 2008, Cebu Pacific was the first airline to use the
new Terminal 3 of the Ninoy Aquino International Airport with its flight to Caticlan being the
first to depart at 0515 local time. On August 1, 2008, it moved its international operations to the
terminal; thus, becoming the first airline to have regular international commercial flights from
the new terminal. In August 2009, Cebu Pacific became the first airline in the Philippines to use
social lmedia. On January 6, 2011, Cebu Pacific flew its 50 millionth passenger from Manila to
Beijing. The airline targets to reach the 100 million passengers mark in 2015. A website
dedicated to connection thru social media of various airlines around the world, awarded Cebu
Pacific Air as the 'most sociable airline of the world' for being voted no. 1 in 2011, besting other
established airlines such as KLM, Air Asia, Singapore Airlines including other domestic airlines.
Cebu Pacific will commence international long-haul flights to Middle-East, U.S.A., Australia and
some parts of Europe on third quarter of 2013 using Airbus A330-300. In October 2010, EU
aviation authorities visited the Philippines to conduct safety assessments, observing positive
reforms in the safety standards being taken by the Civil Aviation Authority of the Philippines.
The EU is subsequently considering lifting their ban, but has made recommendations to facilitate
greater collaboration between the CAAP and Philippine government in order to make further
progress. Cebu Pacific Airlines is a low-cost airline based in Pasay City, Manila, Philippines. It is
one of the Philippines’ national flag carriers, and currently the country’s leading domestic airline.
Cebu Pacific is the leading domestic carrier in the Philippines and operates the most domestic
destinations, flights and routes and has the youngest fleet. It operates scheduled domestic and
international services. Its main base is Ninoy Aquino International Airport, Manila, with a hub at
Mactan-Cebu International Airport, Francisco Bangoy International Airport and Diosdado
Macapagal International Airport. It offers scheduled flights to both domestic and international
destinations. Cebu Pacific Air is currently the country’s leading domestic carrier, serving the
most domestic destinations with the largest number flights and routes, andequipped with the
youngest fleet. Its main base is Ninoy Aquino InternationalAirport, Manila, with other hubs at
Mactan-Cebu International Airport,FranciscoBangoy International Airport and Diosdado
Macapagal International Airport.

Owner
Lance Gokongwei

He is son of the Chinese-Filipino taipan John Gokongwei. He is the President and Chief
Executive officer of the budget and publicly-listed airline Cebu Pacific Air, Inc. He is also the
Chief Operating Officer of JG Summit Holdings, Inc. and Robinsons Retail Group. He is the
recipient of the 2009 Ernst and Young Entrepreneur of the Year and Ten Outstanding Young Men.

Education

Lance Gokongwei graduated with double summa cum laude honors from the University of
Pennsylvania’s School of Engineering with a Bachelor’s Degree in Economics, Applied Science;
and the Wharton School of Business in Finance in a span of only three and a half years.

Professional Career

Lance started as an executive assistant for his father at the age of 21. There, he was exposed to
the tons of memos to make, reports to analyze, meetings to sit in and cheques to sign. He
eventually learned the ropes of the company’s day-to-date operations. In 1990, he became the
Senior Vice President. By the time he was 30, he was put in charge by the elder Gokongwei to
run Cebu Pacific.

To date, Lance he had several key positions with the Gokongwei Group. He is the current
Chairman of the Board of the Robinsons Savings Bank. He served as the Vice Chairman of
the Robinsons Land Corporation from 2002 to 2006, in which he also acted as the Deputy Chief
Executive Officer and was also a member of the executive, audit, and remuneration and
compensation committee.

He is also the President and Chief Operation Officer of the Universal Robina Corporation and a
member of its audit, nomination, executive and compensation and remuneration committee; and
the President of Digital Information Technology Services, Inc. He serves as Director for
publicly-listed telecommunication company, Digital Telecommunications Philippines, Inc. (since
1993) , Oriental Petroleum and Minerals Corporation (since 1994) and United Industrial
Corporation, Limited (since 1999).
He is also a trustee, secretary and treasurer of the Gokongwei Brothers Foundation, Inc., director
of Xavier School Trust Fund and an active member of the Young President’s Organization, the
Philippines-China Business Council, and Global Traders for Tomorrow Program.

Awards

Ten Outstanding Young Men, 2000

Ernst and and Young Entrepreneur of the Year, 2005

The 1999 Class of Global Leader for Tomorrow

Organizational Structure
CHAPTER 2

INDUSTRY AND FIRMS ENVIRONMENT

Industry Analysis
This chapter includes the internal and external environment of the firm. Air travel
remains a large and growing industry. It facilitates economic growth, International investment,
world trade and tourism and therefore is one of the main proponent of globalization. Airline
companies have three main goals, providing good service to the customers, returning the
investment with an increase to their shareholders, and lastly providing sustenance to nation’s
economy. Airline Industry must not only take in priority the goal they have set up for their
company but also the dynamics that affect the improvement and success of their industry. Such
as their airport capacity, route structures, technology, cost to leave or buy the aircraft. There are
also some unpredictable dynamics that when unprepared can affect the whole industry like the
weather that is irregular especially in Philippines where there are typhoons all year round. Fuel
cost is also a main factor in the dynamics that could change the entire industry. Fuel is also the
second largest expense and a significant portion of an airline total cost. The largest
expense airlines incur is labor that the airline must pay to pilots, flight attendants, dispatchers,
bagger handlers, and others.

The Airline industry must always put in mind the key factors that affect their success. The
customer satisfaction, Competitive rates, Technology, Airworthiness, and the destination.

Truly the industry has come from a long way, from 1952 wherein the Civil Aeronautics
Act was passed by the Philippine Government up to 2010 where it was renowned that the growth
in air travel rose to 10%, it was also the time wherein their new revenue streams, and new
channel of markets. It was also the year wherein the technology has taken up into a new level
and has become a competitive advantage. By this year consumers have been opting for more
customers self-service and the IT industry have seen a major transformation.
There are also some external factors that affect the industry such as the Civil Aviation
Authority of the Philippines. It establishes the prescribe rules and regulations for the inspection
and registration of aircraft owned and operated in the Philippines and all air. Facilities.

The Airline Industry in Philippines consist of many competitors the primary and the
National flag carrier of the Philippines is the Philippine Airlines. Its major activities to provide
air transportation for passengers and cargo within and outside the Philippines. They take off to
the most popular domestic jet routes and international and regional points that visited by
Filipinos or provide a good source of visitors to the Philippines Route network covered 20 points
in the Philippines and 30 international destinations.

Societal Environment
Aircraft engines produce emissions that are similar to other emissions resulting from
fossil fuel combustion. However, aircraft emissions are unusual in that a significant proportion is
emitted at altitude. These emissions give rise to important environmental concerns regarding
their global impact and their effect on local air quality at ground level.

A comprehensive assessment concerning aviation’s contribution to global atmospheric


problems is contained in the Special Report on Aviation and the Global Atmosphere, which was
prepared at ICAO’s (International Civil Aviation Organization) request by the Intergovernmental
Panel on Climate Change (IPCC) in collaboration with the Scientific Assessment Panel to the
Montreal Protocol on Substances that Deplete the Ozone Layer and was published in 1999. This
told us inter alia:

That aircraft emit gases and particles which alter the atmospheric concentration of
greenhouse gases, trigger the formation of condensation trails and may increase cirrus
cloudiness, all of which contribute to climate change

That aircraft are estimated to contribute about 3.5 percent of the total radiative forcing (a
measure of change in climate) by all human activities and that this percentage, which excludes
the effects of possible changes in cirrus clouds, was protected to grow.
The report recognized that the effects of some types of aircraft emissions are well
understood, revealed that the effects of others are not, and identified a number of key areas of
scientific uncertainty that limit the ability to project aviation impacts on climate and ozone.

Against this background, the ICAO Assembly in 2001 urged States to promote scientific
research aimed at addressing the uncertainties identified in this report and requested the council
to continue to cooperate closely with the IPCC and other organizations involved in the definition
of aviation’s contribution to environmental problems in the atmosphere and the need to take
initiatives for a scientific understanding of the problems (Assembly Resolution A35-5 (PDF),
Appendix H). This was reiterated by the Assembly in 2007 (Assembly Resolution A36-22 (PDF),
Appendix I). ICAO has requested the IPCC to include an update of the main findings of the 1999
report in its Fourth Assessment Report published in 2007.

Technological
Technology seems to run the globe nowadays. An airline industry is really a field of
technology. An airline will be left out by another competitor if not technologically efficient.

Many technologies that an airline can use in providing services, from its booking, payment,
airplanes, and the like. Since today’s world seems to be a paperless economy, transactions tend to
be done electronically; airlines can use this technology, e-ticketing, online booking, and even
online payment using banks, ATM cards or even credit cards. With the use of internet, by making
websites, an airline could be more efficient.

Of course, safety should be also one of the priorities. Airlines should invest on such
technology that will improve the safety of their passengers. There are researchers that develop
equipment that will improve the safety when in air travel like a company called

Safe which has created an airbag to become one with the seat belt. Airbag is located at the
front seat belts and will be out in the event of shock/crash hard. The advantage of an airbag is in
this belt is every aircraft do not need to make massive modifications to implement the airbags in
their aircraft, enough to replace the old seat with this one. Barriers are a problem only in the
price of one airbag is sold at a price of $1200, compared with ordinary seat belt purchased at a
price of only $35.
The other is the Boeing Company and Chorus Motors which have demonstrated a
technology that could be lead to a more efficient way of moving airplanes when they are on the
ground at airports. Successful tests of an onboard electric motor attached to the nose wheel of
Boeing 767 have shown that it may be a viable way of airplanes to move in and around gates,
largely eliminating the use of airport tugs and jets engines now serving this purpose, as well as
reducing emissions. It provides advanced system solutions and innovative, breakthrough
technologies that reduce cycle time and cost while improving the quality and performance of
aerospace products and services.

Legal and Political,

In 1973, form the Letters of Instruction (151 and 151A) the airline industry in the
Philippines was monopolized by Philippine Airlines (PAL). The monopoly lasted for more than
twenty years until the Executive Order 219 in 1995 which liberalized the airline industry
establishing the domestic and international civil aviation liberalization policy in the country. The
E.O. 219 stipulates the removal of restrictions on routes and flight frequencies, as well as
government control on fares and charges. Following the liberalization, the industry attracted new
entrants such as Cebu Pacific, Air Philippines, Grand Air, and Mindanao Express. Unfortunately,
Grand Air and Mindanao Express were unsuccessful, and then SEAIR and Asian Spirit come to
birth.

Today, airline industry in the Philippines is under the regulations of Department of


Transportation and Communication (DOTC) under the civil aviation sector. The Civil Aviation
sector is composed of the Manila International Airport Authority (MIAA), Mactan Cebu
International Airport Authority (MCIAA), Philippine Aerospace Development Corporation
(PADC), Civil Aeronautics Board (CAB) and the Civil Aviation Authority of the Philippines
(CAAP) (formerly known as ATO). The department continuously upgrades and improves the
international and domestic airport facilities to meet international standards and to provide better
service to the commuters. On the other hand, our airline regulatory boards also recognize the
International Civil Aviation Organization (ICAO). The ICAO has several regulations that the
local boards are following.
Last March 19, 2009, the ISO 9001:2000 Certificate for NAIA Terminal 1 was awarded
by the Anglo Japanese American (AJA) Registrars, Inc. after passing the Phase 1 Audit of the
Passenger Facilitation Processes. On May 21, 2009, MIAA was given the upgraded ISO
9001:2008 Certification making the Authority and the NAIA Terminal 1 one of the very few
institutions in the country that have passed t

Today, airline industry in the Philippines is facing a big issue on international safety
standard. Early this year, the European Union banned airlines from Angola and vowed to block
carriers from Sudan and the Philippines from starting flights to the 27-country bloc. The
European Transport Commissioner Siim Kallas said that they cannot accept airlines fly into the
EU if they do not fully comply with international safety standards. The Philippine authorities and
airlines made efforts to resolve this issue but still Philippines would be banned from the EU as a
precaution.

Social Cultural

Philippines is archipelagic, separated by water with other countries and is composed of


many islands. Filipinos live in immense geographic locations. Depending on distance, options of
travel are by land, sea and air.

As the world seems to become borderless and as the concept of globalization is embraced
by everyone, airline industry seems to grow. Tourists, foreign students and businessmen
travelling around the globe seem to grow also. The most used mode of transportation for long
destinations is an airplane. People choose it over other vehicles for its speed, comfortability, and
safety that is why most business people choose to travel by air as the business world requires fast
pace.

The major passengers or air travelers are those people who love travelling, like inside or
outside of the country. Some reasons for travelling include people going home to their respective
provinces during holidays and regular seasons; some are having their vacations and some for
business purposes.
Travelers tend to choose airlines based on several factors. Price, safety, customer, service,
facilities, comfortability and of course its speed are the most wanted in an airline. Some airlines
tend to offer promos for cheaper seat price for early booking, tour packages and partners with
other establishments. Some passengers avail those promos, others do not. Mostly, air travelers
buy tickets in advance.

Today, whether upper class, middle class, or low-class people and whether domestic or
international air travel, it’s easy to travel given the fact that there are several airlines that offer
vast options to choose from.

Economics

Economic development worldwide is getting a significant boost from air transport. This wider
economic benefit is being generated by increasing connections between cities – enabling the
flow of goods, people, capital, technology and ideas – and falling air transport costs. The number
of unique city-pair connections is expected to reach more than 18,000 in 2016, double the
connectivity by air twenty years ago. The price of air transport for users continues to fall, after
adjusting for inflation. Compared to twenty years ago real transport costs have more than halved.
Lower transport costs and improving connectivity have boosted trade flows; trade itself has
resulted from globalizing supply chains and associated investment. Air transport is vital for
manufactures trade, particularly trade in components which is a major part of cross border trade
today. We forecast that the value of international trade shipped by air this year will be $5.5
trillion (down from 2014 only because of the stronger $). Tourists travelling by air in 2016 are
forecast to spend $657 billion. Another impact on the wider economy comes through the
influence increased airline activity has on jobs in the sector, in its supply chain, and the jobs
generated as spending ripples through the economy. These ‘supply chain’ jobs around the world
are estimated to have been 62.7 million in 2014 Although every effort has been made to ensure
that the data and analysis quoted and used for the research behind any IATA Economics Report
is reliable and accurate, the International Air Transport Association shall not be held responsible
for any loss or damage caused by errors, omissions, misprints or misinterpretation of the contents
hereof, and expressly disclaims any and all liability to any person or entity, in respect of anything
done or omitted, and the consequences of anything done or omitted, by any such person or entity
in reliance on the contents of any Report. The Airline Industry Economic Performance takes a
broader look at how

The industry is adding value for its consumers, the wider economy and governments, as well as
for its investors. It is released on a bi-annual basis since June 2014 and it substitutes the former
Financial Forecast publication.

Political

Governments have also gained substantially from the good performance of the airline industry.
Airlines and their customers are forecast to generate $118 billion in tax revenues this year. That’s
the equivalent of 45% of the industry’s GVA (Gross Value Added, which is the firm-level
equivalent to GDP), paid to governments in payroll, social security, corporate and product taxes
(Note that charges for services are excluded). In addition, the industry continues to create high
value added jobs.

But in many countries the value that aviation generates is not well understood. The commercial
activities of the industry remain highly constrained by bilateral and other regulations. Moreover,
regulation is far from ‘smart’, leading to unnecessarily high costs. Visa requirements discourage
inbound tourism and business travel. Encouragingly visa openness levels are improving.
Unfortunately, the number of individual ticket taxes has risen to an alarming 233, while the level
of many existing taxes continues to ratchet upwards.

Technology

Cebu Pacific has invested in airline technology company Air Black Box Asia Pacific Pte. Ltd., a
move which allows the Gokongwei led airline to enhance cooperation with other carriers in the
region.

In a statement, Cebu Pacific said it has joined Air Black Box Asia Pacific as a shareholder, along
with ANA Holdings. Air Black Box Asia Pacific is a joint venture founded by Singapore Airlines
Subsidiary Scoot Pte Ltd., along with Nok Airlines Public Co. Ltd. and Vault PAD Ventures.

The joint venture is behind the software platform enabling airlines to connect and cooperate.
The platform has also been credited in making Value Alliance which includes Scoot, Nok Air,
NokScoot, Tigerair Singapore, Tiger air Australia, Cebu Pacific, Cebgo, Vanilla Air and Jeju Air,
Possible. Customers can book the best available fares on flights from any

of the airlines in the Value Alliance in a single transaction from each partner website through the
platform. This allows member airlines to combine inventory and at the same time, cooperate in a
broader route network, which means more destinations, more routing options, and greater
convenience for customers of each airline,” said Paterno Mantaring, vice president for corporate
affairs at Cebu Pacific. Air Black Box Asia is set to expand its footprint as Value Alliance airline
customers adopt Air Black Box technology. It likewise expects to have additional airline
customers in the Asia Pacific region. Cebu Pacific currently has flights to 36 domestic
destinations as well as to 30 international points in Asia, Australia, the Middle East, and US. Its
wholly owned subsidiary Cebgo meanwhile, has flight services to 24 Philippine destinations
from strategic hubs in Manila and Cebu.

Socio-Cultural

All organizations maintain their own specific culture, but in that respect probably none are more
complex than the one of an international airline. The word ‘international’ already suggests that
there are diverse political, ethnic and social issues that need to be taken into account when
designing any managerial policy. And then on top of that there is also the requirement to
maintain products and services of uniform quality regardless of the market setting. Knowledge of
cultural dimensions is priceless in mitigating risk, containing costs and improving corporate
effectiveness. Surprisingly, the most noteworthy aspects of organizational behavior are often
overlooked or their effect is largely underestimated.

Task environment
Shows the respondents’ level of satisfaction on the airline’s quality of aircraft
environment. The respondents were “Fully Satisfied” with 4 out of 7 items under quality of
aircraft environment. These were: “Space between seats” with a weighted mean of 4.83,
“Cleanliness of aircraft” with weighted mean of 4.75, “Lavatories/Toilets” with a weighted mean
of 4.65, and “Lighting system” with a weighted mean of 4.63. The results indicate the passenger
respondents put premium on the distance between rows of seats in choosing airlines. According
to Christensen (2015), perhaps more crucial difference in airplane seats comes from the
measurement between seats aligned vertically, called the pitch. While people are a bit wider, they
are also considerably taller than they once were, on average. Much discomfort in long flights
comes from the inability to move one’s legs properly due to small pitches. The following
obtained the lowest weighted means: “Air-conditioning” with a weighted mean of 4.45,
“Baggage.

A typical day at work we always monitor the daily flights, answer emails from outstation
and answer some of the check in agent’s queries. Report to the Duty Manager about the daily
reports. The hardest part of the job is when there is a delayed and cancelled flight because other
passengers have connecting flights to other places in domestic routes and some have a
connecting flight in international routes. Since Cebu Pacific Air is a low-cost carrier we cannot
offer them to be transferred to other airlines (but it depends on the reason of delays). Well, the
most enjoyable part of the job is when we got a chance to meet different kinds personality in the
industry.

Consumers

Most of the travelers now preferred air travel than land or sea travel. Air travel is much
faster that land or sea travel, because of some matters like business matters, some of the
executives need to travel for some important manners. The biggest consumer in this industry is
the local and foreign tourist. We all know that Filipinos loves to travel and almost half of it prefer
to travel by air. And Philippines are known for being the recreation place in the world, so the
foreign tourist is starting
to grow. It’s a big advantage to the industry.
Substitute Services
There’re other kinds of transportation and become substitute to air transportation such as
buses, ships, etc. but it cannot be totally replaced by any of it, first its time convenience, second
the range of destination, third comfort ability. And
that’s what consumers want.

Cebu Pacific Air is currently the country’s leading domestic carrier, serving the most
domestic destinations with the largest number flights and routes, and equipped with the youngest
fleet.

Marketing Concept
Air travel remains a large and growing industry. It facilitates economic growth,
International investment, world trade and tourism and therefore is one of the main proponent
of globalization. Airline companies have three main goals, providing good service to the
customers, returning the investment with an increase to their shareholders, and lastly providing
sustenance to nation’s economy.

Cebu Pacific Air target markets are the business and leisure travelers, who want to be
fulfilled by a low cost, no frills, and fun airline service. Cebu Pacific Air is a low-cost carrier
who can offer many routes, has the youngest fleet, and can give a ―Fun Flight experience.
Airline Industry must not only take in priority the goal they have set up for their company but
also the dynamics that affect the improvement and success of their industry. Such as their airport
capacity, route structures, technology, cost to leave or buy the aircraft.

There are also some unpredictable dynamics that when unprepared can affect the whole
industry like the weather that is irregular especially in Philippines where there are typhoons all
year round. Fuel cost is also a main factor in the dynamics that could change the entire industry.
Fuel is also the second largest expense and a significant portion of an airline total cost.

The largest expense an airline incur is labor that the airline must pay to pilots, flight
attendants, dispatchers, bagger handlers, and others. The Airline industry must always put in
mind the key factors that affect their success. The customer satisfaction, Competitive rates,
Technology, Airworthiness and the destination.

The Airline Industry in Philippines consist of many competitors the primary and the
National flag carrier of the Philippines is the Philippine Airlines. Its major activity is to provide
air transportation for passengers and cargo within and outside the Philippines. They take off to
the most popular domestic jet routes and international and regional points that visited by
Filipinos or provide a good source of visitors to the Philippines Route network covered 20 points
in the Philippines and 30 international destinations.

There’re other kinds of transportation and become substitute to air transportation such as
buses, ships, etc. but it cannot be totally replaced by any of it, first its time convenience, second
the range of destination, third comfort ability. And that’s what consumers want. They are
currently the country’s leading domestic carrier, serving the most domestic destinations with the
largest number flights and routes, and equipped with the youngest fleet.

Cebu pacific makes sure that their target market needs, wants & demands
were provided. Professionals and tourists need to experience luxury, to achieve status and
recognition, gain self-esteem, and to be fulfilled to attain self-actualization Professionals and
tourists choose Cebu Pacific over other airlines because of price, service, safety, extensive
distribution coverage, on-time flights, and brand promise of a “Fun Flight” experience. They
make sure it dominates the domestic market and is priced lower than Philippine Airlines which is
its main competitor. It’s main positioning creating its brand identity is “It’s time everyone flies”
or occasionally modified with humorous intent as “It’s time every Juan flies”.

It signifies the capability of the Filipino citizen to afford a good airline experience. Cebu
Pacific has the youngest fleet in the Philippines and continues to differentiate itself from
other airlines. They also offer Piso Fare Promo as there marketing concept to have more
attractions to those travelers and for those citizen that haven’t experience to travel by air.
Cebu Pacific Air remains to be the pioneer in creative pricing strategies as it manages to
offer the lowest fare in every route it operates. Their innovation is key to its domestic market
dominance. They have initialized the first local airline to introduce e-ticketing, prepaid excess
baggage and seat selection in the Philippines. The only domestic carrier that offers fun in the
skies with its games on board popularly known as Fun Flights, together with its entertaining
inflight magazine – Smile. They also made it so that All Fares are now―Lite Fares ―Customers
don’t have to pay for: Newspapers, lounges, free meals Paper tickets, frequent flyer programs.
Cebu Pacific leverages on their strong internet presence to advertise sales promotions. They
also use social network sites to promote sales.

The use of social networking sites is also a form of Word of Mouth Marketing. Cebu
Pacific’s safety demo dance even went viral. Cebu Pacific also uses print and TV advertising,
supported by radio and outdoor advertising. The company uses various PR campaigns such as
press releases, annual reports, and their company magazine.

Cebu Pacific’s main distribution channel is the internet. Their Three principal distribution
channels: Internet Booking sales office, call centers, client accounts Third-party sales Outlet
Distributors General Sales Agents Wholesalers and Preferred sales agents. Cebu Pacific is
internationally renowned as the most successful low-cost carrier in the Asia-Pacific region. They
provide an opportunity for everyone to travel anywhere and everywhere they wanted with a fun-
filled experience that is conveyed with passion for excellent service.

Advertising
Cebu pacific will also use under market penetration such as effective advertisements
will be made for the Cebu pacific in the TV and radio ads, print newspapers and magazines.
There will also have an establishment of Research and Development (R&D) Unit which has a
special economic significance apart from its conventional association with scientific and
technological development. R&D investment generally reflects a government’s or organization’s
willingness to forgo current operations or profit to improve future performance or returns, and its
abilities to conduct research and development. Some Secondary Strategies Cebu Pacific could
use is Under Horizontal Integration which will have to do with Merging with other Airlines.
It is concerned with developing and nurturing a distinctive competence to provide a company or
business unit with a competitive advantage. So, it is very much important in any kind of industry.
Cebu Pacific Airline will be focusing on Marketing Strategy, Research & Development Strategy,
Human Resource and Management Strategy, Financial Strategy, Information Management
Strategy and Manufacturing Strategy. These functions are an important aspect in developing a
strategic business plan because the success of the company will depend in the planning for
different department for specific functions

PROMOTIONAL

It signifies the capability of the Filipino citizen to afford a good airline experience. Cebu
Pacific has the youngest fleet in the Philippines and continues to differentiate itself from
other airlines. They also offer Piso Fare Promo as there marketing concept to have more
attractions to those travelers and for those citizen that haven’t experience to travel by air.

ADVERTISING
CEB Advertising Media

Cebu Pacific gives you a unique and effective new media platform that offers direct consumer
response. Maximize your advertising budget and reach your customers through out-of-the-box
media channels! Build brand awareness, increase product utilization, and improve reach and
interaction with a captive audience through the Philippines’ largest national flag carrier.

We give you access to our growing number of guests making sure that your campaigns are
carried out to meet your specific advertising needs.

Our ambient media channels provide you the most elegant way of reaching the consumer with
campaigns that create attention and news pieces for so much less!

We’d love to hear more about your out-of-the-box ideas that are not listed here! To advertise,
drop us an email at cebadmedia@cebupacificair.com

Discounts
Cebu Pacific Air is a Philippine budget airline offering low cost airfare domestically
across the country and international flights around Asia to top tourist destinations like Hong
Kong, Singapore, Bangkok and many more. It’s currently one of the most popular airlines in the
country with great prices, customer support and new planes. The airline is based on the grounds
of Ninoy Aquino International Airport, Pasay City, Metro Manila and has ticket offices around
Metro Manila and the provinces or you can book a Cebu Pacific cheap flight easily on their
website, just enter your to and from locations, the dates and how many people are travelling and
you can choose from hundreds of discounted airfares. Check our Cebu Pacific promos below and
book a flight today on the countries favorite airline.
Competitors

The Airline Industry in Philippines consist of many competitors the primary and the
National flag carrier of the Philippines is the Philippine Airlines. Its major activity is to provide
air transportation for passengers and cargo within and outside the Philippines. They take off to
the most popular domestic jet routes and international and regional points that visited by
Filipinos or provide a good source of visitors to the Philippines Route network covered 20 points
in the Philippines and 30 international destinations.

Market Competitors (Major)

Zest Airways
Zest Airways Inc. (formerly Asian Spirit) is an airline based in Pasay City, Manila inthe
Philippines. It operates scheduled domestic and international tourist services,mainly feeder
services linking Manila and Cebu with 24 domestic destinations insupport of the trunk route
operations of other airlines. Its main base is Ninoy AquinoInternational Airport, Manila, and with
a hub at Mactan-Cebu International AirportAlso these hubs outside Manila still have to be made
operative as of July 2009.
The airline was originally founded as Asian Spirit, the first airline in the Philippines to
berun as a cooperative.The airline wants to fly to three international points to Sandakan (already
stopped),Malaysia from Zamboanga, to Seoul from Kalibo, Laoag, and Davao, and Macaufrom
Angeles City. However, these international routings never took off. It intends tocommence
international expansion to Bangkok and Singapore from Manila sometime in 2009.

On March 26, 2008, AMY Holdings Corp. established ZEST AIRWAYS, INC. as itsees
the opportunity for growth in the airline and aviation industry.

The thrust of the management is focused on:


Accelerating profitability by introducing BRAND NEW aircraft Innovating marketing strategies.

On September 25, 2008, the Securities and Exchange Commission formally approvedthe
corporate name of Zest Air and the juridical personality of Zest Airways, Inc. was formally
established. ZEST AIR will initially operate to 20 local destinations and will launch its regional
and Southeast Asian operations beginning June 2009

Philippine Airlines

Philippine Airlines, Inc. (abbreviated as PAL), also known historically as PhilippineAir


Lines, is the flag carrier and national airline of the Philippines. Headquartered inthe Philippine
National Bank Financial Center in Pasay City, the airline was foundedin 1941 and is the oldest
commercial airline in Asia operating under its original name.Out of its hubs at Ninoy Aquino
International Airport of Manila and Mactan-CebuInternational Airport of Cebu City, Philippine
Airlines serves nineteen destinations inthe Philippines and 24 destinations in Southeast Asia,
Middle East, East Asia,Oceania and North America

Philippine Airlines Inc. owns and operates national and international flights. The
company’s fleet includes Boeing 747
-400, Airbus A340-300, Airbus A320-200, and Boeing 737-400. Its international destinations
include Jakarta; Vancouver; LosAngeles; Honolulu; and Shanghai and national destinations
include Along, Nag,Leaps, Butane, and Dalai. Philippine Airlines was founded in 1941 and is
headquartered in Makati, Philippines. Philippine Airlines Inc. operates as a subsidiary of PAL
Holdings, Inc.

Formerly one of the largest Asian airlines, PAL was severely affected by the 1997Asian
Financial Crisis. In what was believed to be one of the Philippines’ biggest
corporate failures, PAL was forced to downsize its international operations by completely cutting
operations to Europe and eventually Southwest Asia, cutting virtually all domestic services
excluding routes operated from Manila, reducing the size of its fleet and terminating the jobs of
thousands of employees. The airline was placed under receivership in 1998, gradually
restoring operations to many of the destinations it formerly serviced. PAL exited receivership in
2007 with ambitious plans to further its previously-serviced destinations, as well as diversify its
fleet.
Philippine Airlines is the only airline in the Philippines to be accredited with the IATA
Operational Safety Audit (IOSA) by the International Air Transport Association (IATA) and has
been awarded a 3-star rating by the independent research consultancy firm Skytra

Market Competitors (Minor)

Land Transportation

Bus Lines
Victory Liners
This bus company played a major role in transport industry since it became the product of Japanese
occupation in the country after World War II, with used Chevy trucks from the United States Army as their
primary transportation fleet. Victory Liner has grown as one of the largest bus transportation business groups in the
Philippines, servicing all key destinations in Northern and Central Luzon.

PhilTranCo
Philippine transport company in the Philippines with a reach from Luzon to Mindanao. Philtranco is also
one of the largest bus company in the Philippines and the oldest bus company to exist (1914), followed by
BLTBCo. (now DLTBCo), Maria De Leon Transit (1938), Farinas (1938), Victory Liner, (1945) and Philippine
Rabbit (1946).

Ferries
SuperFerry
Founded as Aboitiz Shipping Company, later Aboitiz Super Ferry was one of the largest ferry companies in
the Philippines before it was purchased by Negros Navigation, which simultaneously was purchased by the
Chinese government through its private equity fund the China-Asean Investment Cooperation Fund, and became
2GO Travel, part of the 2GO Group.
CHAPTER 3

SITUATIONAL ANALYSIS

In this chapter will be able to determine and discuss the situational analysis of the
company wherein the strength, weakness, opportunities and threats are being discussed.
Situational analysis goal is to build on strengths as much as possible while reducing weaknesses.
A future threat can be a potential weakness while a future opportunity can be a potential strength.
This analysis helps a company come up with a plan that keeps it prepared for many potential
scenarios called tows metrics.

STRENGTHS

S1 Leading low-cost carrier with highest market share at 57.0% in 2015 and 56.0% in
2017

CEB carried over 150,000 passengers between Manila and Sydney for full-year 2015.
Based on the latest report from Australia’s Bureau of Infrastructure, Transport and Regional
Economics (BITRE), the airline remains the largest carrier on the Manila – Sydney route, with
40% market share from November 2014 to October 2015. During this period, overall traffic
between Manila and Sydney also grew by 69%. Meanwhile, passenger growth on flights to and
from the Middle East remained robust, driven by sustained capacity between Manila and Riyadh,
Kuwait, and Dubai, and the launch of Manila – Doha in June 2015. Among the Middle East
routes, flights between Manila and Dubai posted the highest number of passengers, with over
230,000 guests flown in 2015.Passengers flown to short haul international destinations such as
Hong Kong, Japan and China also increased.
Passenger volume to and from Japan grew by 39% to over 280,000 in 2015 as CEB
successfully stimulated traffic with the launch of its operations from Manila and Cebu to Tokyo
(Narita), and Manila to Nagoya. The airline also mounted flights between Manila and Fukuoka,
its fourth destination in Japan, in December 2015.
In the Philippines, domestic passengers increased by 7.41% in 2015, following added
frequencies between Manila and Tagbilaran (Bohol), and Cebu and Tandag (Surigao del Sur).
Both routes posted over 100% in passenger growth year-on-year.
S2 Pioneer in creative pricing strategies as it manages to offer the lowest fare

Cebu Pacific (CEB), the Philippines’ largest domestic low-cost carrier and the
Philippines’ leading carrier to the ASEAN region, today announced a landmark partnership with
Amadeus, a leading global technology and distribution partner to the travel industry. Cebu
Pacific has selected Amadeus as its only distribution partner in the Philippines, giving travel
agents full access to their domestic and international content.

Cebu Pacific makes around 1.5 million bookings a year through travel agencies. Through
this new partnership, all travel agents using the Amadeus distribution system will now be able to
access Cebu Pacific’s full content, offering the most competitive prices and value-added services
to their customers.

Cebu Pacific President and CEO Lance Y. Gokongwei said: “Cebu Pacific’s partnership
with Amadeus will benefit the public through its increased capability to book low fares through
the Philippines’ travel agency network. We are therefore pleased to announce that through this
groundbreaking partnership, all Amadeus-connected travel agents will have full access to our
international and domestic fares, including added benefits such as our trademark seat sales. This
will further enhance our travel agent network.”

“Cebu Pacific has been a leading innovator in the Philippines aviation sector since its
inception in 1996. We are therefore delighted to see that as a fast-growing low-cost carrier, Cebu
Pacific has once again taken the lead and has realised the full potential of making its inventory
available to the Amadeus distribution network,” said David Brett, President, Amadeus Asia
Pacific.

“Cebu Pacific plays a pivotal role in the growth of tourism in the Philippines market. This
technology partnership will support the airline’s growth strategy, as well as the growth of the
Philippines travel industry. The Philippines Department of Tourism have set their goal to attract
five million tourists a year to the country by 2010,” he added.

Currently, 56 low-cost carriers are distributed through Amadeus representing 48% of the
world’s low-cost carriers.
Cebu Pacific operates a fleet of 20 aircraft with 18 A320/A319 and 2 ATR 72-500. Cebu
Pacific expects to have a fleet of 25 aircraft by the end of 2008 with 19 A320/A319 and 6 ATR
72 and will continue to have the youngest fleet in the Philippines. Cebu Pacific continues to offer
‘Go’ fares – providing the lowest year-round fares in all its domestic and international
destinations. Cebu Pacific remains the pioneer in creative pricing strategies as it manages to offer
the lowest fare in every route it operates.

S3 Partnered with WWF-Philippines for a climate adaptation program

Cebu Pacific (CEB), one of Asia’s most innovative airlines, renews its partnership with
the World-Wide Fund for Nature (WWF-Philippines) for CEB’s Bright Skies for Every Juan, a
climate adaptation program to fight global warming. Now a three-year commitment to the
environment, CEB’s Bright Skies program gives passengers an opportunity to help protect not
only Apo Reef but also the Tubbataha Reefs.

Passengers get the chance to help coastal communities residing close to Apo and the
Tubbataha Reefs adapt to climate change by making donations as they book their CEB flights via
www.cebupacificair.com. CEB’s website estimates carbon emissions based on the distance of
their flight, and guests can opt to donate an amount based on that estimate, to effectively offset
his or her carbon emissions.

“Ever since the program was implemented in 2008, we have seen substantial results from
our government partners and WWF-Philippines. We decided to continue our ‘Bright Skies for
Every Juan’ program until 2014 because we are committed to help coastal communities adapt to
climate change, and encourage our guests to be responsible travellers," said Lance Gokongwei,
Cebu Pacific President and CEO.

Since the program started in 2008, donations to the Bright Skies program have amounted
to over PHP17M. Proceeds have previously supported only the community-based climate
adaptation project in Sablayan, Mindoro, the nearest coastal community to Apo Reef. From
January 2010 to May 2011, donations to the Bright Skies program helped conduct more than 300
patrol days; apprehend 15 violators; involve and engage 85 crew on motorized fishing boats; file
four criminal cases; and maintain the Apo Reef Natural Park.
Now, passengers’ donations to Bright Skies will support the Apo Reef and the Sablayan
community, as well as the Tubbataha Reefs in Palawan and the Cagayancillo community. The
biggest coral reefs in the country will ultimately benefit from stronger conservation and
rehabilitation efforts funded by CEB passenger donations.

“In the next three years, we are hoping to further expand our climate adaptation programs
to more of the Philippines’ most productive coral reefs. We invite our passengers to take part in
making a difference for the environment with Bright Skies for Every Juan," said Gokongwei.

S4 Operates one of the youngest fleets in the world

Cebu Pacific Air is currently the country’s leading domestic carrier, serving the most
domestic destinations with the largest number flights and routes, and equipped with the youngest
fleet. CEB operates one of the world’s youngest fleet of ATR 72-600 aircraft, which is probably
the most technologically advanced turbo-prop currently in commercial service. To complement
the ATR, our investment in the iPad EFB aligns with our goal of operational excellence through
the introduction of systems that enhance safety and efficiency in flight operations. With the EFB
iPad, aircraft performance software and aeronautical charts are readily available, flight plans are
constantly updated, and aircraft documentation and procedures are easily accessed; this is
important when time critical decisions need to be made and executed in the flight deck,” said
Captain Sam Avila, Cebu Pacific Vice President for Flight Operations.

S5 They bolstered their domestic network by launching direct flights on those


underserved inter-island routes

Cebu Pacific has added five new routes to its inter-regional network, connecting more
islands from Mindanao and Visayas to the rest of the archipelago. The addition of new routes
came after stakeholders, particularly in Mindanao, asked the airline company to improve
connectivity of key cities. Starting July 26, Cebu Pacific's wholly-owned subsidiary Cebgo will
fly three times weekly (Monday, Wednesday, and Friday) between Cebu and Masbate, Davao and
Dumaguete, and Zamboanga and Cotabato. Cebgo will also begin flying four times a week
(Tuesday, Thursday, Saturday, and Saturday) between Cagayan de Oro and Zamboanga, and
Davao and Tacloban on July 27, 2017. The new routes will be serviced by the Cebgo fleet of
ATR aircraft. “Cebu Pacific is very pleased to continue to help promote domestic and
international tourism and a logistics enabler to move goods across the country. As we expand
into new routes and destinations across the Philippine archipelago, we are committed to being a
partner in spurring trade and tourism; helping pump-prime the local economy and providing
everyJuan with more travel options with year-round affordable fares,” said Alexander Lao,
President and CEO of Cebgo. CEB offers its lowest all-in one-way year-round fare from Cebu to
Masbate at P1,758; from Cagayan de Oro to Zamboanga at P1,906; from Davao to Dumaguete at
P2,590 and Davao to Tacloban at P2,142; and Zamboanga to Cotabato at P1,806. “Travelling
across the Philippines is easier and more convenient for everyJuan. To get from the Visayas to
Mindanao and back, travellers now have more choices and need not pass through larger airports
in Metro Manila or even Cebu.” Cebu Pacific has launched commercial operations of eight (8)
new routes: Manila-Masbate, Manila and Tablas, Romblon, between Cagayan de Oro and
Tagbilaran, to and from Cagayan de Oro and Bacolod, Cebu-Cotabato, Cebu-Busuanga (Coron),
Clark-Busuanga (Coron), and Clark-Caticlan (Boracay). Aside from its Cebu and Davao hubs,
CEB also operates flights out of four other strategically placed hubs in Manila, Clark, Kalibo,
and Iloilo. CEB enhances inter-island connectivity within the country and across the globe with
its 66 destinations with over 100 routes, spanning Asia, Australia, the Middle East, and USA.

S6 Record-breaking consolidated net income of P9.75 billion for 2016, more than double
previous year’s net income of P4.39 billion, for a net margin of 15.8%

Cebu Pacific, the country’s largest airline, said Friday its net income doubled to P9.75 billion in
2016, from P4.38 in the previous year.
Gross revenues last year grew to P63.8 billion from P56.6 billion in the previous year, the airline
said in a stock exchange filing.
Gross expenses rose to P54.1 billion from P53.1 billion during the same period.
Shares of Cebu Pacific were up 1.21 percent to P92.1 in early trading on Friday.

WEAKNESSES
W1 Delayed flights

Philippines - Budget carrier Cebu Pacific reiterated that it provides compensation to


passengers with flight delays of three hours or more, as well as flight cancellations due to causes
within the airline's control and force majeure.

The airline came under fire during the Christmas holidays for numerous flight delays and
cancellations. This promoted the Civil Aeronautics Board to impose a P52-million fine on Cebu
Pacific.

Cebu Pacific chief executive and president Lance Gokongwei on Wednesday apologized
to passengers who were affected by delays and cancellation of flights during the holiday peak
season

W2 Limited International Destination (only in ASIA)


Cebu Pacific is still in need of additional aircraft that will have the range and capability of
serving long-haul destinations in Europe and the United States as its existing A330-300
fleet has limited range. However, that does not prevent the carrier from flying to
destinations such as Italy via intermediate points such as Dubai or Tel Aviv

W3 Poor customer service

Consumer Complaints
I have booked all my domestic flights around Visayan regions on their website. Be
aware of the manage - purchase add-on. If making a booking, make sure that your flight
will allow to purchase add-ons on check in baggage. I just realized that my flight cannot
purchase add-ons online. I rang them up and inquire on how to purchase add-ons for my
flights. They said that it's not allowed but if you check in at the airport and YOU HAVE
EXCESS BAGGAGE, THE AIRCRAFT WILL ALLOW BUT FOR AN EXPENSIVE
COST. So Kapamilya, other airlines may be a bit more expensive but they are more
flexible on allowances for a cost. NOT WITH CEBU PACIFIC. They also change one of
my flight and they want me to just accept it. I asked if they can at least give me
something for the inconvenience they've caused me but they said there is nothing they
can do except for an additional cost.
I booked a flight on their website for Jan 23! next year. I get an email that it's for June 23 next
week! I call them up figuring I would have to pay a changeover fee or maybe get lucky and have
some decency since it's been less than 48 hours. (Didn't get confirmation email until this morning
and was at work all day.) Nope they want to charge me 11000PHP to change my flight with fees.
My original flight was only 8600! I can rebook the flight online for 8600 as a new flight! So, I go
screw it. I will cancel my original and get a credit.

They charge me 8000PHP to cancel the flight and here is the kicker. My new shiny 600
credit can only be used over the phone not online booking! So, I have the girl book me
the same flight and seats I picked online and her price is 9200! Because over the phone is
more expensive. These people don't care about anyone and just want to give you the
shaft. Stay as far away from them as possible. I hate that I have to fly with them to go to
Bangkok for my flight home. Has me worried!

W4 There is no airbus of Cebu Pacific that has reached Europe


The value of Philippine Peso diminishes against US Dollar is a factor on fuel expenses.
Work schedule might be an issue when Cebu Pacific Air starts its operations in Europe and
America.
W5 Air travel cost is increasing compared to its competitors
Cebu Pacific is primarily focused on defending its fortress position domestically, aiming to
exploit its first mover advantage in the local Philippine LCC market and grow at least as fast as
its competitors. Unlike pan-Asian LCC groups such as AirAsia and JetStar, Cebu Pacific does not
have an ambition to become a major international player. The carrier plans to continue growing
its international network, as it helps diversify its revenue stream and keep its A320 utilization
levels at about 14 hours per day, but the main priority is to defend its market leading position
domestically.

OPPORTUNITIES

O1 ASEAN integration of the Philippines

Cebu Pacific Air, the country's largest budget carrier, plans to expand its operations in
Association of Southeast Asian Nations (ASEAN) countries. This comes after the Philippine
government signed the 5th and 6th "freedoms of the air" of the ASEAN Multilateral Agreement
on Air Services (MAAS)."With Open Skies, Cebu Pacific can add more flights to and from key
destinations in ASEAN, to meet the growing travel demand within the region," the Gokongwei-
led carrier said in a statement on Wednesday, February 10.

The ASEAN Open Skies agreement allows airlines to operate unlimited flights between capitals,
leading to better connectivity and more competitive fares and services. Cebu Pacific currently
offers the most number of flights and destinations to ASEAN countries from the Philippines.
The airline flies to 11 destinations in 7 ASEAN countries, including Brunei Darussalam,
Cambodia (Siem Reap), Indonesia (Bali and Jakarta), Malaysia (Kuala Lumpur and Kota
Kinabalu), Singapore, Thailand (Bangkok and Phuket), and Vietnam (Hanoi and Saigon).
Through Cebu Pacific's interline agreement with Tigerair Singapore, it also offers flights to
Myanmar (Yangon), via Singapore. "The Philippine aviation industry has reached a milestone
that will ultimately benefit the travelling public, as we open our airspace to vast travel
opportunities and operational efficiencies between and among ASEAN carriers," Cebu Pacific
vice president for corporate affairs JR Mantaring said. Subject to regulatory approvals, the
agreement further allows carriers to upgrade their ASEAN flights to wide-bodied aircraft and
increase capacity without the need for air talks. This streamlined process will enable Cebu
Pacific to focus on expanding its operations, stimulating passenger traffic, and improving
customer experience instead of negotiating for additional air rights. "Given our government's
support of this liberalized and equitable air services agreement, the Philippines solidifies its
position as a prime and competitive global hub for air travel," Manta ring said. Cebu Pacific
offers flights to a network of over 90 routes on 64 destinations, spanning Asia, Australia, and the
Middle East. It is slated to launch direct flights between Manila and Guam, its first US
destination, on March 15, 2016.

O2 Improvement of Tourist destination


“Cebu Pacific is very pleased to continue to help promote domestic and international
tourism and a logistics enabler to move goods across the country. As we expand into new
routes and destinations across the Philippine archipelago, we are committed to being a
partner in spurring trade and tourism; helping pump-prime the local economy and providing
everyJuan with more travel options with year-round affordable fares,”

O3 European Commission lifts ban on Cebu Pacific.


Just hours after the Philippines regained Category 1 status from the United States Federal
Aviation Administration (FAA), the aviation industry garnered another milestone—this
time from the European Union, which lifted the ban on Cebu Air Inc., operator of Cebu
Pacific, allowing the budget carrier to fly in European airspace, officials from the EU and
Manila revealed Thursday.
"The decision of the European Commission to lift the ban on Cebu Pacific shows the
ability of Philippine authorities and business to work with the EU to raise standards and
create economic opportunity," EU Charge d'Affaires at the Delegation to the Philippines
Julian Vassallo said in a statement.
"Having demonstrated their commitment and capacity to adhere to international standards,
we heartily welcome Cebu Pacific to European skies," he said.
During the briefing, Vassallo said CAAP and Cebu Pacific representatives on January 28
were first invited to a technical meeting in Brussels to discuss safety actions in greater
detail.
Both were again invited on March 26 to present evidence on the oversight exercised by
CAAP and the ability of Cebu Pacific to comply with relevant aviation safety regulations,
he added.
"The Air Safety Committee made a unanimous recommendation on the basis of the
evidence it heard...[which] was endorsed by the full College of European Commissioners,"
Vassallo said.
"That leaves me with great pleasure of announcing to you all that Cebu Pacific Air has been
taken off the EU list of banned airlines," he added.
This milestone is in recognition of the sustained efforts of the Philippines to raise its
standards in air safety across the board, according to the EU official. "For this reason I
would like to inform you that the European Commission is likely to mount another EU
assessment mission to the Philippines later in the year...with prospect to lift the ban on the
Philippine aviation as a whole," Vassallo said.
In response, CAAP director general William Hotchkiss III said: "We are looking forward to
the day EU will come over and assess us one more time to possibly lift ban on all
Philippine carrier."
Meanwhile, the lifting of the ban of Cebu Pacific is another stride in Philippine aviation,
Hotchkiss said.
"We share in Cebu Pacific's enthusiasm to be a bridge of heritage and culture, as well as
trade and commerce, that link the two most prolific regions in the world, Europe and Asia,"
he said.
"We join their elation of being the other Philippine air carrier proudly flying our national
flag and making a solid commercial presence in the European continent," he added.

O4 Strategic alliance with Tiger Air Group, Singapore’s largest low-cost carrier

Subject to approval by the Competition Commission of Singapore (“the Commission”), the


interline partners will also be able to jointly operate common routes between Singapore and
the Philippines, thus providing even more travel options for customers. Both parties are
currently co-operating on the application to the Commission to further strengthen the
partnership.
O5 Business Globalization

The opportunities and threats basically imply the various opportunities that the airline
industry is facing and going through whereas, the threats imply the rivalry, the new entrance and
substitutes which in turn illustrates the way the progress of the industry or the business is going.

Airlines and the allocation and maintenance cost.

The airlines are one big industry with huge cost and investment where the allocation cost and the
maintenance cost servers as the major factors for the industry. The cost as per as the price is
concerned fluctuating market prices are a big threat to the airline industry as ression hits this area
and the economy downfall would cut down on the financial part of the airlines to fit the things as
per their budget. Like most other industries at this stage, airlines have not been immune to the
global economic downfall. At the end of 2008 cargo traffic bottomed out, posting a dismal 25%
may decline. Many airlines, particularly in the U.S., responded with aggressive capacity
adjustments and a four-quarter loss was served.
The number of aircraft taken out of service exceeded the number of new aircraft delivered in the
end of the year 2008. The expansion of fleets, which forced the airlines to drastically reduce
capacity by cutting both flight frequencies and uneconomic routes. Adding to the weak aircraft
utilization, defined as the percentage of revenue ton-miles divided into available ton-miles,
resulting in disastrous fall in yield by 20%. Though 2009 contained high economies for the
airline industry. International cargo traffic improved by 12% over from 2009 till present.

THREATS

T1 Typhoons in the Philippines


Hurricane and typhoon activity occurs in many areas of the world during different seasons.
It’s important to understand risks and operating limitations associated with these weather events.
Keep in mind that even after a hurricane or typhoon has passed through an area, there may be
airport closures, fuel shortages, and limitations of services to be mindful of.

T2 Competitors are already known and established in the market.

Assess what competitors offer

Researching your competitors is easier than it may seem - for example, you can simply collect
any flyers and price lists they produce for customers, read their online material, or even buy their
products and services to compare them with your own.

Analyze what they do better than you:

Are their prices lower?

Are their products of a higher quality?

Is their customer service highly regarded?

Is their marketing material more engaging?

T3 Competitor following their low pricing strategy


Cebu Pacific understands its costumers' needs and adds more customer value. In terms of
promotions, Cebu Pacific also has made use of the social platforms just like twitter and
YouTube that gain interest from millions of viewers in social media.
Lastly, another factor that makes Cebu Pacific Successful is the commitment from its staff.
From the CEO to the ground crew. The marketing manager of Cebu Pacific, notice that
their direct competitors are following their low price strategy.

T4 Economic instability
Refers to a community or nation experiencing financial struggles due to inflation,
consumer confidence issues, unemployment rates, and rising prices. Economic instability
affects businesses' ability to thrive, the cost of living, and the physical, emotional and
financial well-being of consumers and families.

T5 Terrorism
It seems clear now that if governments and businesses are to win the battle against
terrorism, they must take a completely proactive stance—anticipating likely targets,
substantially beefing up security, and establishing countermeasures to prevent future attacks
from occurring. It is crucial for governments and businesses to coordinate a definitive
approach to creating a more secure environment.

T6 Gas and oil price fluctuation


Following the oil price fluctuations, Asia Pacific is taking a lead, with the Civil Aviation
Department (CAD) in Hong Kong announcing that, as of 1 February 2016, the fuel levy for
outbound travel will be abolished. This is expected to drive more demand for travel,
reinforce price wars and boost competitive environment in the market, potentially
benefitting the passenger. Dominant airlines in the region, such as AirAsia, Virgin
Australia, Cebu Pacific, Cathay Pacific, Malaysia Airlines and Thai Airways, are among the
players that have already removed the fuel duty. Plans are in place for Japan Airlines and
ANA to follow suit. Other operators, such as Qantas, Air India and Air France-KLM, have
opted to either add this levy to the total ticket price or reduce this tax
CHAPTER IV

ALTERNATIVE COURSES OF ACTION

In this chapter, the research chooses the three best alternative strategies coming from the
TOWS metrics table that might be used by the firm in order to solve its problems and meet
the challenges it faces that could also lead them to success. Two advantages and
disadvantages by each strategy.

Alternative Courses of Action#1

(W4, O3) - Penetrating the Europe continent would expand the company’s horizon as to
means of more destinations, more routing options and greater convenience for the customers
who dreamed of going to European countries.

Advantages:
Will surely result to an increased in the number of customers and increase in flights as
the customers will have a wide variety of destinations to choose from.
To be able to keep pace with the company’s competitors who already offer such flights.

Disadvantages:

There will be a need for more employees.

There will be an added cost to the company as seminars and trainings would be
necessary since this would be a new set of foreign markets to deal with.

Alternative Courses of Action #2

(W3, O4) - The alliance allows both airlines to leverage on each other’s extensive route
networks, flight frequencies and customer service, providing customers an even wider range
of travel options at the lowest fares possible. Interline arrangements will enable direct and
one-stop access to the combined networks, at low fares.

Advantages:
Members of an alliance can benefit from sharing knowledge and best practice with other
members, primarily related to operational efficiencies, safety and customer service.
Benefiting from the size by achieving better prices and dealings, network size as to joint
advertising campaigns and extensive marketing promotions, network configuration as
they can increase their network offerings and market position because of new destinations
served and new routes offered.

Disadvantages:

Spend a considerable amount of money to implement the required standards of the


alliance, such as customer service standards, safety levels and technology
adaptability.

They tend to lose their independence, because they have to compromise, harmonize
their procedures, and conform to changes within the alliance.

Alternative Courses of Action #3

(S2, T3) - Empowering the R&D would result to better pricing strategies and discount
offering and eventually win against their competitors who replicate their low pricing plan.

Advantages:
Price-conscious travelers choose Cebu Pacific over any other airline because of its
promotional seat sale for most of its international and domestic routes.
Customers demand value for their money, yet choose thrift over luxury as travelling has
become a status symbol, satisfying the esteem needs of an individual.

Disadvantages:

The low prices mean you will lose some of the service like the catering, newspapers
and a maximum decrease of the aircraft infrastructure.
Many low-cost flights will limit the customer’s options to non-peak hours or days.
Airlines usually offer cheap tickets for very early morning or midnight flights.

CHAPTER V
RECOMMENDATION

After thorough evaluation by the researchers of the advantages and disadvantages of each
Alternative Courses of Action presented in the previous chapter, this chapter discusses the best
course of action for Cebu Pacific’s strategic management. The whole idea of this
recommendation is to provide a beneficial guide that will not only resolve certain issues for Cebu
pacific but result in a beneficial outcome. The recommendation provided is also supported by its
cost and benefits to encourage readers why the researchers chose the strategy.

Corporate Growth Strategy

We all know that every company’s goal is to earn profits. As for Cebu Pacific, to achieve
these target sales every year, the firm would need to sell more products and services. And one
way of doing so is expanding their customer base.

However, there is always an opportunity to grow and expand horizons for greater
corporate sustainability. That is why the researchers of this study, recommends a strategy that
focuses on expanding presence of Cebu Pacific in the Philippine and in other countries market
through networks of distribution mainly because the country has currently the fastest growing
economy in Asia which Cebu Pacific can definitely take advantage of. Since the company have
acquired Philippine Airlines recently, they are now on a good financial position to increase their
number of distribution channels in the country which will put them back in the industry leaders’
circle. Developing a new distribution strategy can ultimately be an effective way to increase
business.

This strategy is supported by our Alternative Course of Action #3: S2T3 from our TOWS
Matrix Table, which is to reintroduce and expand presence in the Philippine and in other
countries market through innovating the market development that would result to better pricing
strategies and discount offering and eventually win against their competitors who replicate their
low pricing plan. And this strategy has some of its costs and benefits for the company:

BENEFITS
Increase Profits - Companies cannot remain in business without turning a profit. Increasing the
profit can definitely attract investors to secure funding for their operations and show potential
investors their ability to generate profits in previous years and your plans to continue to earn
profits in the future. It also includes Business Expansion which allows to open other business
locations and target other markets and expand your operations into foreign territory and hire
additional employees to handle the growing responsibilities within the company.

Build Greater Awareness about Cebu Pacific - A successful combination of market and
product/service strategies can establish the company as the industry leader. It expands the
consumer exposure and makes the company’s name recognizable in the marketplace. This give
us an advantage in marketing the company and product. When consumers recognize the name as
an industry leader, it enhances the rest of your marketing efforts.

Reduce Market Risk – Risk Management is not the same as profit and losses that can be
estimated. Airlines are doing everything to reduced cost and some of the risk stem from complex
industry structure. It cannot be controlled but it could be identified and managed.

CHAPTER VI
STRATEGY IMPLEMENTATION

In this chapter the researchers will discuss the best strategy for the company and how it
should be implemented. The plan of action is in this chapter where the action, purpose,
department and time frame are given and the cost and benefit of each action are estimated and
analyzed.

Proposed Action Plan:

· Under Market Penetration strategy we propose the following strategic programs:

1. Develop new advertisements to increase customer awareness

2. Improve their marketing plans that will accommodate customer needs

3. Conduct more promotions nationwide

· Under Market Development strategy, we propose the following strategic programs:

1. Put additional international destinations.

2. Improve their competitiveness in terms of their facilities for convenience of foreign and
domestic customers

Under Product Development strategy, we proposed the following strategic programs:

1. Develop new technology or process that will easily give back refunds

2. Reduce delay of flights by implementing an on time guarantee arrival and departure


of flights
3. Provide additional planes that offers different class layout

Financial Implications

Under market penetration, developing new advertisements, improving marketing plan,


and conducting more promotions nationwide for Cebu Pacific will have a decreasing effect on its
assets because they have to pay for advertising like TV and radio commercials. But then, it will
have a positive effect on their sales because more people will be aware of their services, and
knowing that Cebu Pacific has very cheap fares and quality service, people will tend to patronize
it.

Under market development this will have an increase on their expenses because they will
have to hire more employees particularly flight and ground attendants.

Under product development strategy, it will increase their liabilities because of acquiring
new planes.

Development strategy, it will increase their liabilities because of acquiring new planes.

ACTIVITY OBJECTIVE TIME FRAME PERSON BUDGET


INVOLVED
Developing To reduce the March 2017 Administration P 1,000,000
website error Staff
occurrences in
booking system
to be more user
friendly
Implementation To encourage March 2017 Administration P 1,000,000
of mileage customer to be Staff
system loyal to our
company
Printing of To inform March 2017 Marketing and P 500,000
pamphlets foreign students Operations
regarding Department
Philippine
Universities
Marketing To increase July- September Marketing and P 650,000
alliance with service 2017 Operations
hotels of JG development and Department
Summit sale

Controls

The following areas will be examined for the attainment of the plans and objectives:

1. Reviewing the fundamental bases of the organization’s strategy.

2. Measuring the organization’s performance.

3. Comparing expected results to actual results, investigating deviations from plans, evaluating
individual performance, and examining progress being made toward meeting stated objectives.

4. Taking corrective actions if necessary. Changes will occur in the company and it requires
taking corrective actions to suit present strategies.

The action that we will apply to increase control over other competitors is to merge with
other hotels. With financial position of Cebu Pacific, it has the capacity to merge with other
hotels and still be able to take control.

Staff Training To improve their April- May 2017 Administration P 1, 500 ,000
and development competencies in Staff
Seminar customer service
to be the
benchmark in
terms of
providing
customer service
Tightening To lessen the June 2017 Administration P 200, 000
airport Security risk of Staff
unfavorable
events
Increase Web To increase the July 2017 Marketing and P 150, 000
Advertisement brand Operating
recognition Department

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