In 1988, the Gokongwei’s founded Cebu Pacific (CEB), touting it as low-cost carrier to allow more people to avail of airline services. After obtaining a legislative franchise via Republic Act 7151 in August 1991, Cebu Pacific started operating in March 1996.

And there were those who said the Gokongwei’s were out of their mind or crazy, as Philippine Air Lines (PAL) was the dominant force in the country’s aviation industry and looked almost unstoppable. It turns out the Gokongweis made one of the best business moves in Philippine corporate history, and is literally leaving PAL in the dust.

This, as CEB is making the largest aircraft order in Philippine aviation history, or for 152 aircraft from Airbus worth a whopping P1.4 trillion ($24 billion). The purchase agreement is expected to be completed in the third quarter this year.

“The order is designed to provide CEB with maximum flexibility to adapt fleet growth to market conditions, with the ability to switch between the A321neo and A320neo,” CEB Chief Executive Officer (CEO) Michael Szucs said in a statement.

The Gokongwei-led airline’s order is for up to 102 A321neo and 50 A320neo.

CEB has also selected Pratt & Whitney GTF engines to power their future aircraft.
“When finalized, the deal will be a significant milestone for the local airline industry and a testament to CEB’s unwavering commitment to support the Philippine growth story,” the airline said.

Szucs said the company led the domestic airline market with 54-percent market share, followed by the Philippine Airlines (29 percent) and AirAsia (17 percent). Its first quarter 2024 revenue reached P25.3 billion with total assets at about P200 billion.

CEB was awarded Best Airline at the Routes Asia 2024 Awards in February 2024 in recognition of its contributions to airport and destination marketing in the Asia Pacific region, specifically the resumption of its Clark hub operations and launching of 15 domestic and international destinations in April last year.

Currently, CEB flies to 35 domestic and 25 international destinations.

PAL sets lower capex

For its part, PAL has earmarked $450 million (PHP25.4 billion) for its capital expenditure (capex) this year, the company announced in April.

PAL Senior Vice President and Chief Financial Officer Anna Isabel Bengzon said 80 percent of the capex this year will be spent on aircraft.

“It includes the refurbishment of the A321ceos, on the aircraft maintenance and the upgrades we’re doing on the aircraft, including the purchase of the new aircraft. There are delivery payments that’s already included with it,” Bengzon said.

PAL is investing in 22 new aircraft set for delivery from 2025 to 2029, which will include nine A350-1000 for its non-stop flights to North America and other long-haul overseas destinations as well as 13 A321neo that will serve PAL’s regional routes to Asia and Australia.

PAL will also be reconfiguring 18 of its A321ceo aircraft.

In summary, CEB’s surging ahead of PAL in the Philippine airline industry is truly one for the books, serving lessons in management on how to get ahead of the industry leader and also take advantage of the times market leader encountered its own difficulties.

In the case of PAL, it went deep into debt at one point, but succeeded in making itself financially viable anew. However, CEB may have seen that as an opportunity to capture the growing market of travelers and took note that in some parts of the globe, Cebu is as well-known as Manila.(Photo from Cebu Pacific)