Cebu Pacific Air has been releasing press notices for the last year about its initial public offering (IPO) of its stock on the open market. They are looking to raise 730 million dollars. The date for Cebu Pacific Air’s IPO is now set for October 25, 2010.
I’m interested in watching this as a learning experience. In the USA, it is very hard to be part of an IPO as the demand often is much higher than the supply. This is especially true of such a well known corporation. It will be interesting to see how the stock performs during the IPO and afterwards. The way Cebu Pacific Air has been growing, I would think this stock will do extremely well in the short term. I’m not an expert at all, especially in Philippine financial matters. It has been my casual observation for USA corporations that the stock price usually falls a bit after an IPO. It then usually rebounds.
Cebu Pacific Air has been putting pressure on Philippine Airlines for the last few years. I know when I look to fly, I turn to Cebu Pacific Air first when I’m looking at prices. They often have very low fares. A friend of mine just purchased a ticket from Tacloban to Cebu City for 99 peso! Usually, to get these great deals one must book their flight online then go to an office to complete the purchase. Be leery of the prices you see, in the past, Cebu Pacific has not posted the full cost of the ticket. They have left out taxes in their posted fares which you don’t see until you book your trip. Philippine Airlines post the full price in their initial advertisement. Based on my last fare research though, Cebu Pacific may have stopped doing that. I know it left me with a bad impression. When my wallet is in question though, low prices will usually win me over, despite prior bad experiences. Not always, if quality is an issue, it wont. Even now though, I have a great deal of respect for PAL, something that can also be valuable to a corporation.
When I’ve flown Philippines Airlines (PAL), I have been impressed with the service they gave me. Filipino treat people with respect and PAL really seems to understand how to treat their customers very well. At least before they squash us into those tiny seats. Even that though, when I flew to the Philippines via PAL, my seating was better than I was use too with American Airlines. I attributed that to the type of plane. Instead of a Boeing of one type or another, it was an Airbus. Boeing is dear to the American people and their planes have a good safety record, I find their jets horrible to travel in for us back in the cheap seats. Even the McDonald Douglas plane was more comfortable. So it might not be PAL that made me more comfortable during the flight but the type of air plane itself.
Cebu Pacific plans to use these additional funds to further expand its operations which will put even more pressure on Philippine Airlines.
Philippine Airlines is strapped with routes that are less profitable as they are to destinations that are less popular with Filipino. These routes were made at the urging of the Philippine government so that air travel would be possible at all to those cities. This is putting a burden on PAL’s pricing and profits.
I look for PAL to lobby the government insisting that Cebu Air take some of these troubled routes from them. I also look for Cebu Pacific to turn it around and find a way to make their position even stronger. PAL might see that coming too and is the reason they have not already done so!
Starting 2015, the number of destinations will increase dramatically thanks to an open skies deal between the ten members of the Association of South East Asian Nations (Asean). Cebu Pacific plans to use the funds from the IPO to buy more plans. PAL still has more routes than Cebu Pacific but in recent months has leaped ahead of PAL in the number of domestic passengers.
In the wake of the Manila hostage tragedy, I’m surprised Cebu Pacific Air did not delay this IPO again. There has been a decrease in flights to the Philippines since that incident. The hostage crisis might have had less of an effect on Cebu Pacific since there main focus is on domestic travel.
If you’re a Philippine investor, now is the chance to be a part of an aggressive Philippine company out to shake up the flight industry in the Philippines. More competition, usually is also a benefit for those looking for flights in the Philippines.
Filed under: Philippine Airlines
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