Cebu Air, Inc.

“2019 was a remarkable year for CEB as we improved our operating profit margin to 15%, and more than doubled our net income from 2018 to Php9.1 billion. 2019 also marked the arrival of our next-generation, new engine option (NEO) jets, which we consider the foundation of our re-fleeting plan and the heart of our sustainability program. Macroeconomic factors were also favorable, with fuel prices down and peso appreciating, ending our 2019 with a strong balance sheet. 2020 looks to be a different story due to the COVID-19 pandemic effectively removing almost a quarter of our operations already. With our various ongoing management initiatives to ensure passenger and employee safety, operational and financial stability, we hope to end this year still as one of the most resilient airlines in the industry.”

- Andrew L. Huang, Chief Finance Officer

Cebu Air, Inc. (CEB), the air transportation arm of JG Summit, is the Philippines’ leading airline company and remains a pioneer in creative pricing strategies. Since its incorporation in 1996, CEB has created an extensive network with year-round affordable flights to 37 domestic and 27 international destinations; and has become one of the fastest-growing low-cost carriers in the world. The company also offers air cargo transportation which allows for seamless movement of goods from key domestic hubs to CEB international stations and major consolidator ports in the region.

37

domestic

27

international

2019 Financial Performance and Key Developments

In 2019, CEB entered a recovery phase and exhibited resiliency from the Philippine aviation storm of 2018. Passengers flown increased 11% to 22.5 million versus last year as backed by stronger underlying demand and solid execution of revenue initiatives. This drove total revenue to grow 14% year-on-year (YoY) to Php84.8 billion. Moreover, passenger growth remained ahead of seat growth of 9%, resulting in a healthy seat load factor of 86.4%. Similarly, Revenue Passenger Kilometer (RPK) increased 15% to 25 billion, ahead of Available Seat Kilometer (ASK) growth of 13% to 29 billion, as we expanded internationally. Macroeconomic drivers were likewise in our favor, as average Jet fuel price declined 8.9% to $77.24/ bbl, and Philippine Peso strengthened, averaging Php51.79/US$ vs Php52.67/US$ in 2018.

These have all contributed to significant growth in operating profits. 2019 EBITDAR grew 36% to Php30.3 billion, while EBIT posted Php12.6 billion, a 79% increase from last year, for an EBIT margin of 15%. Overall, we are pleased to report that our net income more than doubled-from Php3.9 billion in 2018 to Php9.1 billion in 2019. With these, CEB remains one of the most profitable airlines in the country, and globally.

“We are pleased to report that our net income more than doubled-from Php3.9 billion in 2018 to Php9.1 billion in 2019.”

2019 also marked the arrival of next-generation jets, capacity leadership in key hubs, and global industry membership.

New Engine Option (NEO) jets lay the foundation of the next stage of re-fleeting for CEB. We welcomed a total of 12 new aircraft—six (6) Airbus 321NEO, five (5) Airbus A320NEO, and an ATR 72-600. Each new NEO aircraft has an Ecoplane seal to identify that it is more fuel- efficient.

In terms of network growth, new destinations and new routes were opened in 2019. CEB ended as the capacity leader in Clark and Palawan, enabling a lot more Juans to fly conveniently and affordably. The network was ramped up by 10 new connections across hubs, the first one being the Manila to Marinduque route in April. This move allows for faster access to the island, compared to the eight-hour journey by land and ferry.

International growth took place as Cebu- Shanghai flights started operations. CEB also began flying between Manila and Shenzhen, as well as between Clark and Guangzhou. These three routes signify a demand for access to and from more Chinese destinations.

To close off the year, two additional routes from Puerto Princesa were launched – one to and from Clark and the other is to and from Hong Kong. These new routes make us the largest carrier, capacity-wise at Clark International Airport with a 28% share, and Palawan, counting both Coron (Busuanga) and Puerto Princesa, at 46% share.

“CEB being inducted into the International Air Transport Association (IATA), the trade association of the global airline industry was another milestone for the year to be celebrated.”

CEB further pushed growth in Northern and Central Luzon with the beginning of operations to three new routes from the Clark hub namely Bacolod, Iloilo, and Narita, Japan. The Clark- Narita route is the first from Clark that flies directly to Tokyo.

CEB being inducted into the International Air Transport Association (IATA), the trade association of the global airline industry was another milestone for the year to be celebrated. With this, CEB became one of the more than 290 member-airlines from 117 countries all over the world. CEB is IATA’s largest member among Philippine carriers. Our formal membership is preceded by the airline’s compliance with the IATA Operational Safety Audit, a globally recognized evaluation system.

5-Year OGSM

CEB conducted its monthly strategic planning including participation in a series of workshops to establish its own 5-year strategic plan. 2019 was then concluded with the company’s creation of its goals and objectives geared toward strong leadership with sustainable profitability.

CEB aims to maintain its strong market leadership status by providing air transport solutions in key regions throughout the Philippines and in select cities in Asia and beyond. This will be achieved through cost-effective, efficient processes and high caliber service attuned to the needs of our customers.

Our commercial strategies include:

diversifying our existing revenue base

by opening new hubs, expanding international footprint, and accelerating growth on ancillary and cargo businesses;

defending our domestic market leadership

by maximizing capacity in Manila and driving seats through increased frequency of flights in existing stations.

Future Business Outlook

CEB is targeting to grow its 2020 revenues by 10%. This will be mainly driven by solid passenger sales performance and accelerated ancillary and cargo businesses. Initiatives to ensure operational efficiency and sustainability are also in place – continuous re-fleeting program to maintain young and fuel- efficient aircraft and digital transformation. These will help maintain a healthy EBIT margin of 13.5%. However, given the major disruption in the operations from travel restrictions and quarantines brought by 2019 Novel Coronavirus, 2020 outlook will be re-assessed to consider the effect of this pandemic.

Visit CEB’s 2019 digital annual report for more information.

https://cebupacificaircorporate.com/2019CEBAR/

Annual Report 2019

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