CEBU AIR, INC.

“CEBU PACIFIC AIR”

Company Background
Cebu Air, Inc. is known to the public as “Cebu Pacific Air” and is currently the leading low-
cost carrier in the Philippines. It established itself as the provider of “Low Fare, Great Value”
strategy in the Philippines, by offering lower-priced fares than the traditional full-service airlines
while offering the passengers fun travel experience and reliable services. August 26, 1988 when
the parent company of CEB was incorporated and it received its 40-year legislative franchise
grant to operate international and domestic air transport services. The first scheduled flight from
Manila to Cebu started in the year 1996 and it started its international flights from Manila to Hong
Kong in the year 1997. The company adopted the low-cost carrier (LCC) business model in the
year 2005, offering their customers affordable air services. The initial public offering (IPO) of the
common stock of this company was listed on October 26, 2010 at Philippine Stock Exchange
(PSE).

Cebu Pacific is a low-cost airline based in the Philippines. It offers a discount, no frills, and
budget type of airline for both domestic and international flights. It is one of the major holdings of
JG Summit Holdings under John Gokongwei. It is currently the biggest carrier in the Philippines
and is mainly based in Ninoy Aquino International

Airport. Cebu Pacific is known for their low-cost approach. It offers no-frills, discounted
and low budget fares. This also means fewer comfort. To make up for revenue lost in decreased
ticket prices, the airline charges for extras like food, priority boarding, seat allocating, and
baggage. Cebu Pacific offers 34 domestic flights and 26 international flights. They are more
known for flying around the Philippines but are currently expanding their international destinations.

Founded on 1996 as Cebu Air, Cebu Pacific offers scheduled flights to 33 domestic
destinations, and to 16 international destinations in 10 countries. It is currently the country's
leading domestic carrier, serving the most domestic destinations wit h the largest number flights
and routes, and equipped with the youngest fleet. Its main base is Ninoy Aquino International
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
JG Summit Holdings, controlled by the Gokongwei family - one of the richest Filipino-Chinese
families based in the Philippines. Cebu Pacific is currently headed by President and CEO Lance
Gokongwei, presumptive heir of John Gokongwei, the chairman emeritus of JG Summit.
 With a company slogan, “It’s time every Juan flies” Cebu Pacific entered the market with
a promise to give "low fare, great value" to every Filipino who wanted to fly. It operates a fleet of
25 Airbus (10 A319 and 15 A320) and 8 ATR 72-500 aircraft, the youngest fleet in the Philippines.
Cebu Pacific remains to be the pioneer in creative pricing strategies as it manages to offer the
lowest fare in every route it operates.

The Parent Company of CEB has twelve special purpose entities (SPE) that it controls,
namely: Cebu Aircraft Leasing Limited, IBON Leasing Limited, Boracay Leasing Limited, Surigao
Leasing Limited, Sharp Aircraft Leasing Limited, Vector Aircraft Leasing Limited, Panatag One
Aircraft Leasing Limited, Panatag Two Aircraft Leasing Limited, Panatag Three Aircraft Leasing
Limited, Summit A Aircraft Leasing Limited, Summit B Aircraft Leasing Limited and Summit C
Aircraft Leasing Limited. March 20, 2014, when Parent Company acquired 100% ownership of
Tiger Airways Philippines (TAP), which includes 40% stake in Roar Aviation II Pte. Ltd. (Roar II),
a wholly owned subsidiary of Tiger Airways Holdings Limited (TAH). CEBGO, Inc., formerly TAP,
operations were approved by Securities and Exchange Commission last April 27, 2015, The
Parent Company calls its twelve SPEs and CEBGO Inc. as “the Group” for consolidated financial
reporting purposes.

The Chief Audit Executive of the Corporate Internal Audit of CEB is Mr. Emmanuel De
Pano who is assisted by the Director for Internal Audit, Ms. Gaudilla D. De La Paz. And the
external or independent auditor of CEB is Sycip Gorres Velayo & Co. (SGV & Co.). Also,
accountability, respect, excellence, fun, integrity and teamwork are the core values that they apply
and maintain.

Fig. 1-1 Board of Directors

Figure 1-2 Management Team and Executive Officers
 CEBU PACIFIC AIR MISSION:

The Mission Statement of Cebu Pacific Air is:

"Why everyone flies."

1. Cebu Pacific brings people together through safe, affordable, reliable, and fun-filled air
travel.
2. We are committed to innovation and excellence in everything we do.
3. We are an employer of choice providing opportunities for professional and personal
growth.
4. We have a deep sense of family values throughout our airline.
5. We enhance the quality of life of the communities we serve and are an active partner in
our nation's progress.
6. We offer our shareholders a fair return on their investments.

CEBU PACIFIC AIR VISION:

It is to become the most successful low-cost carrier in the Asia-Pacific region; to be

the best domestic airline and the Filipino travelers' first choice, recognized with unparalleled
genuine, warm and caring service; to become the pioneer in innovation and commitment to
excellence.
 CEBU PACIFIC AIR PRODUCTS AND SERVICES

As of December 31, 2018, it operates 56 domestic routes and 41 international routes with
a total of 2,685 scheduled weekly flights, also as of that date, it operates a fleet of 55 aircrafts of
which comprises of 8 (eight) Airbus A319, 33 (thirty-three) Airbus A320, 8 (eight) ATR 72-500 and
6 (six) Airbus A330 aircraft. The average aircraft age of the Group’s fleet is approximately 4.80
years as of this date. It operates from seven hubs: NAIA terminal 3 and 4, Mactan-Cebu
International Airport, DMIA, Davao International Airport, Ilo-ilo International Airport, regional
center of western Visayas region and Kalibo International Airport.

The company offers not only passenger service but also airport-to-airport cargo services on its
domestic and international routes, ancillary services
such as cancellation and rebooking options, in-flight
merchandising and travel-related products and
services. It distributes these services through three
channels: the internet; direct sales through sales
offices, call centers and government or corporate
client accounts; and third-party sales outlets (travel
agencies).

Fare Bundles

This offers a simple solution for guests looking to book their travel essential in an easy way.
They have option to choose different bundles, examples are “Fly” for airfare, “Fly+Bag” for airfare
and baggage allowance, and “Fly+Bag+Meal” for airfare, baggage allowance and meal. This is
available for all flights, domestic and international.

GetGo

It allows guests to accumulate points and give rewards to their respective customers. They
may redeem free flights by the use of this program. This program is elaborated on their GetGo
website, www.GetGo.com.ph.
 Mobile App

This allows customers to book and check-in for their flights online with the use of their mobile
app. In checking in, they can use web-check in, Kiosk Check-in, and mobile check-in.

Agent express

CEB was the first in Southeast Asia who deployed roving airport agents to check-in
passengers and print boarding passes on the spot by the use of tablets and boarding pass
printers. From 4 hours up to 45mins before departure, they can give assistance to passengers to
check-in for their flights.

Prepaid Baggage

Passengers can pre-purchase baggage allowance to save on time and money at check -in.
The prepaid baggage options ranges from 15 to 40 kilograms. They can avail this until four hours
before their departure.

Seat Selector

Seats can be selected if customers book a flight online for a minimum fee. They can select seats
near the aisle and additional leg room (Preferred seats) or close to exits (Standard Plus seat
option) depending upon their preference. The other seats will be the Standard seats.

CEB Air Wi-Fi

The flights of Airbus A330 is equipped with WiFi and may be availed for as low as USD2. They
can avail it through their gadget via credit card or by availing prepaid cards onboard.

CEB Payment

Cebu Pacific is the first airline in the Philippines that offered global payment platform as a
payment option by the use of PayPal. It also facilitates online booking and payment in Chine
through Alipay. Payment of Cebu Pacific passengers who does not have credit card may pay
through this payment centers:

Over-the-counter at Robinsons Bank, Bank of the Philippine Islands, Metrobank, Banco de

Oro, and Banco de Oro, Remittance Centers in Hong Kong and Macau, Bancnet Online, ATM
transactions using Bancnet and Megalink member banks, Robinsons Department Store, SM
Business Services Center, LBC branches, Bayad Center, Cebuana Lhuillier, ECPay, and 7-
Eleven.
 CEB Fun Café and Fun Shop Inflight Duty Free

Cebu Pacific presents variety of food that fits everybody’s tastes. They offer buy-on-board
menus, they also offer branded souvenirs and accessories. They also have inflight Duty Free
where passengers can avail different world-class Duty-Free products.

CEB Travel-Sure

They offer Travel-Sure travel insurance for passengers, from one to 65 years old, underwritten
by Malayan Insurance Co., Inc. It covers emergency medical treatment, unexpected travel
circumstances due to weather, loss of travel documents or luggage or any fortuitous events,
personal accidents, recovery of travel and accommodation expenses if it is unused, and baggage
protect in case of physical loss or damage to checked baggage.

CEB Sports Equipment

The customers can avail of sports equipment handling service for a minimum fee upon
booking. The passengers can bring their own sports equipment to avoid spending for rental fees
on their destination, this covers these equipment bicycles, fishing equipment, golf clubs,
scuba/diving equipment, surfboards/wakeboards, and bowling balls.

CEB Flexi

. CEB Flexi is a new product that allows guest to rebook their flights up to 2 times for FREE.
The CEB Flexi rebooking is 60% lower than regular rebooking fees. This fee may be applied to
both regular and promotional fare types entities guest flight up to two types paying only the
difference. CEB Flexi is already available for selling effective October 22, 2019.

Other services of CEB are, CEB Connect, CEB Hotels, CEB Car Rentals, CEB Cruises,
CEB Biz, and CEB Cargo Services. (Cebu Pacific Air: Annual Report, 2015)
 STRATEGIC MANAGEMENT SYSTEM OF CEBU PACIFIC AIR

Cebu Pacific works under a budget airline business model. This strategy offers
unbundled fares, meaning the fares that they offer come with no frills and are easy on the budget.
For example, they cut down in-flight food service. This low-cost carrier strategy appeals to a lot
of Filipino consumers because it is a price sensitive market. This low -cost carrier strategy enables
them to have regular customers who want to travel but also keep in mind their budget. For the
incoming years, Cebu Pacific aims to offer more international flight locations for the airline. As of
now, they currently have 26 international destinations. Financially, it aims to increase their market
share by 3.5% the incoming year. At the same time, they want to increase their net operating
income by 18%.

Cebu Pacific also practices Cost Leadership Strategy. This is when profits are increased
due to the decrease of cost, lowering of prices but still having reasonable profit because of
reduced costs. In Cebu Pacific's case, they try to cut costs by increasing seats in all the planes.
If an airbus originally has a certain number of seats, Cebu Pacific tries to add more so they can
take in more passengers. Also, they try to increase their profits through their add -ons such as
meals and baggage
 SWOT MATRIX OF CEBU PACIFIC AIR

STRENGTHS (S) WEAKNESSES (W)

S1. Cebu Pacific holds W1. Working capital is valued

59.5% market share at -27.62

S2. Passenger volume up by W2. Cebu Pacific still do not

9% during 2017 and 13% offer Europe as their
during Quarter 1 of 2018 destination

S3. Travel Sure Travel W3. Cebu Pacific’s flight

Insurance delays and cancellation

S4. PayPal (Mode of W4. Cebu Pacific’s delayed

SWOT ANALYSIS Payment) refunding

S5. Piso Fare promo that W5. Poor in-flight staffing

Cebu Pacific offers
W6. Limited Destinations
S6. The only carrier that
offers fun games on board

S7. Currently the most

known low-cost carrier in the
Philippines

OPPORTUNITIES (O) (SO) STRATEGIES (WO) STRATEGIES

O1 Brazil allows fully-foreign

ownership of airlines
SO1: Open new routes to WO1: Expand the business
O2 Export opportunities rooting accommodate increase in and open new routes to
from ASEAN Economic passengers (O1, O6, S2) increase liquidity (W1, W2,
Communities O1, O2)

O3 Duterte funds infrastructure

SO2: Expand their business
projects by selling $500M new
and take advantage being WO2: Open new flights by
bonds
the market leader and open investing in new airports and
O4 NASA developed an flights to new airports (O3, increase the number of
innovation that could help cut O5, S1) airlines (W3, O3, O5, O7)
carbon emissions
SO3: Advertise new
O5 Building of new airport was destinations by
WO3: Give promos that will
proposed by the government strengthening and improving
make the airfare cheaper to
their promotion and provide
O6 Obstacle to country’s tourism earn more profit (W1, O4, O6)
an easy and entertaining
and aviation due to small number
travel (O1, O6, S4, S5, S6)
of flights

O7. Increasing number of OFW's

O8. Philippines, seen as a hub in

aerospace parts manufacturing
and allied services in Asia

THREATS (T) (ST) STRATEGIES (WT) STRATEGIES

T1 Implementation of Carbon ST1: Give additional WT1: Give more trainings and
Offsetting and Reduction Scheme insurance to passengers if seminars about customer
for International Aviation delays will happen (T1, S3) service to increase efficiency
(CORSIA) (T6, W5, W4)
ST2: Increase promotion to
T2 The website of Global Petrol attract more passengers to WT2: Adding more airplanes
Prices projected that fuel prices lessen the loss due to to prevent any delays that will
will remain at a relatively stable increase in cost (T2, S2, S5) make them more profitable
price at around 1.04 USD per liter (T4, W3, W4)
ST3: Develop system that
T3 Cyclical Nature of Airlines will prevent cyber WT3: Open new flights so that
Business already on its peak vulnerabilities that will make passengers have many
them inefficient by choices and for the company
T4 Slowing down of Global
accommodating increase in to stay being profitable (W2,
Economy
passengers (T5, S2) T3)
T5 The merging of physical and
cyber creates new vulnerabilities

T6 The advancement of
technology erodes human skills
 CEBU PACIFIC STATEGIC MANAGEMENT BASED ON SWOT
ANALYSIS

Market Penetration Strategies

SO3: Advertise new destinations by strengthening and improving their promotion and
provide an easy and entertaining travel (O1, O6, S4, S5, S6)

WO3: Give promos that will make the airfare cheaper to earn more profit (W1, O4, O6)

ST2: Increase promotion to attract more passengers to lessen the loss due to increase
in cost (T2, S2, S5)

Product Development Strategies

ST1: Give additional insurance to passengers if delays will happen (T1, S3)

ST3: Develop system that will prevent cyber vulnerabilities, which can make them
inefficient, by properly accommodating increase in passengers (T5, S2)

WT1: Give more trainings and seminars to employees about customer service to
increase efficiency in work. (T6, W5, W4)

WT2: addition of more airplanes to prevent any delays that will make them more
profitable. (T4, W3, W4)

Market Development Strategies

SO1: Open new routes to accommodate increase in passengers (O1, O6, S2)

SO2: Expand their business and take advantage being the market leader and open
flights to new airports (O3, O5, S1)

WO1: Expand the business and open new routes to increase liquidity (W1, W2, O1, O2)

WO2: Open new flights by investing in new airports and increase the number of airlines
(W3, O3, O5, O7)

WT3: Open new flights so that passengers have many choices and for the company to
stay being profitable (W2, T3)
 RELAVANCE AND IMPORTANCE OF STRENGTH- WEAKNESSES-OPPORTUNITIES-
THREATS (SWOT) ANALYSIS OF CEBU PACIFIC

STRENGTH
S1. Cebu Pacific holds 59.5% market share

It is a major strength for Cebu Pacific because they hold the majority share in the market
and they are dominating the airline industry which makes them number 1 airline or the trusted
airline in the Philippines

S2. Passenger volume up by 9% during 2017 and 13% during Quarter 1 of 2018
It is a minor strength for Cebu Pacific because the number of passengers is increasing
every year. For 2017 the number of passengers goes up because of the increased flight
frequencies in key domestic and foreign destinations. Overall the main reason for the increase in
passengers is the main goal of Cebu Pacific it is to provide low cost but high quality of services.

S3. Travel Sure Travel Insurance

It is a major strength to Cebu Pacific because they can assure their passengers that they
can refund necessary expenses they incurred due to negligence of Cebu Pacific and because of
that they can attract more passengers because they will be ensured if something unlikely will
happen. This Travel Sure covers unexpected travel circumstances like delayed or cancelled
flights, personal accident, baggage protection, and many more.

S4. PayPal (global payment option)

It is a major strength for Cebu Pacific because they are the first airline in the Philippines
to offer PayPal to the public as mode of payment. This will benefit not only Cebu Pacific but also
their passengers because PayPal is globally so it means that wherever you are provided there is
PayPal, they can avail the services of Cebu Pacific.

S5. Piso Fare promo that Cebu Pacific offers

It is a major strength to them because this became famous when they launched it. In fact,
their website crashed when they started offering it because of many visitors that accessed their
website. It is a promo that given by Cebu Pacific that will make their air fare affordable and
because of that they are committed to their vision which is to be a low -cost provider of air services
globally.
 S6. Cebu Pacific’s “Fun in the Skies”
It was stated in the Cebu Pacific’s site, guests have also learned to anticipate a uniquely
upbeat flying experience with CEB, as the only carrier offering fun in the skies with “Fun Games”
on board. It is a major strength in a way that it turns out to be the reason why customers would
choose Cebu Pacific Airline over any other airline, being it the only one who offers it.

WEAKNESSES
W1. Working capital is valued at -27.62

It is a major weakness for Cebu Pacific because it means that its current assets are not
sufficient or its current assets is less than its current liabilities. This means that the liabilities that
need to be paid within one year exceed the current assets that are can be converted to cash over
the same period.

W2. Cebu Pacific still do not offer Europe as their destination

Though Cebu Pacific offers many destinations it is considered as their minor weakness
because their competitor offers it. Europe is one of in demand destinations because it has many
tourist spots. Cebu Pacific must expand in Europe so that they can compete with their competitors.

W3. Cebu Pacific’s flight delays and cancellation

This is a major weakness for Cebu Pacific because it affects their efficiency. Cebu Pacific
holds the highest market share in order to maintain and continue increase in market share they
should improve their services so that they can attract more competitor. In fact, they were fined 52
million for delayed and cancelled flights. Some passengers express their frustrations to Cebu
Pacific in Skytrax. According to D Pang he is from Taiwan and according to him his experience in
Cebu Pacific was terrible because he experienced a flight cancellation, and two flight delays and
also according to him he will not recommend Cebu Pacific and he will not consider flying again
with Cebu Pacific.
W4. Cebu Pacific’s delayed refunding

Cebu Pacific’s poor services makes their passengers angry and they express that through
Skytrax an airline review website. According to K. Baranorn (2017), he will not recommend Cebu
Pacific and he rated Cebu Pacific’s service 1/10 because he booked a flight for October 2017 and
a month later they cancelled it without notice and when he asks for refund they keep on
postponing that and as a result he incurred different cost because he’s from Netherlands and he
is communicating in the Philippines. According to Mark Eaton he also experiences delayed
refunding he wants to refund his payment because the airline did not honor their tickets, he was
granted a refund and after 30 days he still did not receive a refund.

W5. Poor in-flight staffing

One review in Skytrax summarized his experience in Cebu Pacific. According to C.

Johnson they experience delay in their flights and rude and improper trained staff because they
are asking help to the flight attendant and they did not respond and did not help the friend of C.
Johnson and because of that according to him he will not recommend the airline and he gave
Cebu Pacific a 1/10 rating. According to Simon Carter there is a poor communication between
the staff and their customers because they are not notifying their customers about delay or for
how long will be the delay.
OPPORTUNITIES
O1. Brazil allows fully-foreign ownership of airlines

Many passengers may plan to go to Brazil and it will be good if there are additional carriers
from different countries for an increase in number of tourists (Mano, 2017). With the fact that
Philippines is a foreign country for Brazil, it would be an opportunity for the Airline Industry to
invest there and maximize wealth. It could be an extra income that would make the airline’s
income to increase and a may be a great way for them to be one of Brazil’s carriers especially
when the carrier offers low cost service for their passengers.

O2. Export opportunities rooting from ASEAN Economic Communities

The Department of Agriculture secretary, Emmanuel Piñol plans to export pork and poultry
products to Singapore and also searches for other opportunities offered by ASEAN. Their target
was Singapore because it is dependent on food exports. Aside from Singapore, he also tries to
discover the needs of neighboring Asian countries like Cambodia, Myanmar, Laos, and Vietnam
making it a good start of establishing good relationship with these countries (Venzon, 2017).
Relevance. If there is good relationship with other neighboring countries like Singapore,
Cambodia, Myanmar, Laos, Vietnam, Laos, and Myanmar, opportunities will grow among
countries. The number of tourists may increase and it will be good for the airline industry
specifically, those who negotiate with businesses in and out of the Philippines, most of them will
go in and out the country using the airline service as their mode of transportation.

O3. Duterte funds infrastructure projects by selling $500M new bonds

Duterte wants a nationwide development of infrastructure to spread the economic benefits

in the whole country. In relation to this, the Philippine government sold $500million in new global
funds and switching $1.5 billion previously issued bonds successfully to fund the increase in
infrastructure spending. Because of the nationwide development in the infrastructure, economic
benefits will be spread out and there are lots of business opportunities not only for local employees
but also for foreign investors. If the economy of the country is growing, it will be attractive for the
people in other countries especially in Asia. The investments may be in for m of imports and
exports and tourists (De Vera, 2017).
 A progressive country is a good indicator of growing economy, one reason for this growth
may be in form of increasing number of tourists. Many tourists will be a great opportunity for the
airline industry since people prefer this mode of transportation because aside from incurring less
travel time, they can also save other travel expenses.

O4. NASA developed an innovation that could help cut carbon emissions

NASA researched to cut fuel consumption, pollution and noise from airplanes that causes
different types of pollution in the world. By reducing or cutting the carbon emissions, NASA stated
that Green technologies developed a research that are expected to save billions of gallons of fuel
if implemented. Aside from saving billions of gallons of fuel, they may also save the Earth from
the harmful substances like greenhouse gases and carbon that destroys the ozone layer. This
innovation aims to reduce airplane’ carbon footprint by cutting down airplane’s weight and drag
which reduces excess fuel burn in the engine. The use of lighter-weight materials in the aircraft
and redesigning wings is the key in reducing the carbon emission (Harvey, 2016).

Lighter materials used in manufacturing aircraft would affect to lesser cost because it will
yield to less fuel consumption; from that they can incur lesser use of fuel and when accumulated
would be a great savings for the industry making it an addition to their working capital or even net
income.

O5. Building of new airport was proposed by CAPA-center for Aviation

CAPA said that a more permanent solution for the limited expansion option of NAIA is to
replace it. Two private-sector proposals have emerged in relation to this. One is San Miguel Corp.
It offered more than 2,000 hectares of land in Bulacan and the other proponent is the group that
is led by Wilson Tiend and Henry Sy Sr. which offered a land in offshore Sangley Point in Cavite.
both projects are projected to handle 50 million passengers yearly and the number can be doubled
if there is an additional runways and terminals. This is also linked to the P75billion NAIA public-
private partnerships project approved by President Duterte in the previous year (Camus, 2017).

The opening of new airport would be a great opportunity for the airline industry since it will
be able to accommodate greater number of customers in and out of the country since the newly-
proposed airport can be able to accommodate larger number of passengers.

O6. Obstacle to country’s tourism and aviation due to small number of flights

CAPA-Center for Aviation mentioned that the Philippines is missing out valuable tourism
prospects at a time of robust economic growth. The government was moving slow in establishing
of new international airport and it still cannot cope up with other Asian countries. There is rapid
passenger growth over the recent years, if the Philippines had just been able to add more flights
then it will be good for our economy. NAIA can handle 31 million passengers yearly and in the
recent year it accommodated about 39.5 million passengers.

If the Philippines lack in flights, it will be an opportunity for the airline industry to add more
international flights. This may not only contribute to our economic state but it can also bring higher
revenue for the industry.

O7. Philippines, seen as a hub in aerospace parts manufacturing and allied services in
Asia

The Board of Investments (BOI) mentioned that qualified aerospace companies are to
undergo AS9100 certification, a training that will assist them in implementing Aerospace Quality
Management System. This certification will be mandatory as a condition of doing business with
them. After two decades the Philippines can be seen as a hub for manufacturing and aftermarket
services in the aerospace and aviation industries in the ASEAN region. The training program
according to BOI is set to commence this year following the recent signing of agreement between
DTI and Metal Industry Research and Development Center of DST and Aerospace Industries
Association of the Philippines (AIAP).

If the Philippines will be a hub in in aerospace parts manufacturing in Asia, it will be an

opportunity for the airline industry first because there will be additional business opportunity in the
Philippines leading other countries to go in and out of the Philippines making them as one of the
primary providers of transportation. Second is that, if they need aerospace parts in case of
maintenance in the aircrafts, they are not required to import parts from other countries because
the manufacturing house of the parts is already here.
THREATS
T1. Implementation of Carbon Offsetting and Reduction Scheme for International Aviation
(CORSIA)

The European Commission races the “Stop the clock” countdown on International Aviation
Carbon Emissions. It aims to prevent the emission or carbon that can be harmful to the
environment. It was stated in the news that this will take effect worldwide, making the airline
industry to be greatly affected. According to the news, it was currently applied to intra-European
flights, and becoming mandatory for most airlines in 2027. Carbon Offsetting and Reduction
Scheme for International Aviation (CORSIA) is a program for saving the environment but then,
the use of an airplane does have carbon emission for it to fly, it would be a delay of flights in some
instances. In that point, customers won’t be able to book flight on the day they wished to, and that
can be an inconvenience for them.

Because of the new regulation for international aviation, airline industry must adopt to this
and make new strategies on hot to cope up and get in line regardless of having this new
implementation. This will be mandatory so the airline industry must really adjust to this. This will
be a threat to the industry because they will incur costs in adopting to this system and if they don’t
have plan for this yet, they must do some research on how to deal with this issue.

T2. The website of Global Petrol Prices projected that fuel prices will remain at a relatively
stable price at around 1.04 USD per liter

According to the website of global petrol prices, the expectation for fuel prices will increase
in the future at 1.04 USD per liter. This increase is the weighted average of retail gasoline prices
in 100 countries which represents over 90 percent (90%) of the world petroleum consumption.
Airline industry uses fuel as their primary supply to manage day-to-day operations and flights.
Fuel is one of its necessities, an aircraft will not would not work without it.

Few increases in price of fuel is still big when accumulated especially in airline industry
because they use fuel as one of the greatest costs that they incur to regulate and manage their
airline operations. The accumulated increase in fuel price will be a huge cost for the company
making it as a threat.
T3. Cyclical Nature of Airlines Business already on its peak

Global Airline business is already at its peak and this business typically follows 8 to 9
years business cycle-trough to trough or peak to peak, as stated by the article of Quora. Some
factors that explain this phenomenon are when airlines start to make profits, labor unions become
active and they start to charge labor up increasing the cost of operations. The other factor is there
are always changes in the economy which requires the industry to cope up and in order to do this
they sometimes need to borrow money because of lack of working capital. Since interest rates
fluctuate costs again goes up affecting the return on shareholder’s investment.

This is related to a theory in economics that the businesses has life cycle. Airline industry
being at the peak may go down in a year or two. People’s preferences change throughout the
years. Technology also is a great influence in this change making the people to not take air
transportation anymore and to just stay in their homes as long as they use internet and social
media. There will come a time that no one wants to travel anymore

T4. Slowing down of Global Economy

An article of Quora mentioned about the main challenges of airline industry, one is the
slowing down of global economy. Global economy affects all of the industries in the world and for
sure airline industry will be affected by this. Interest rates are fluctuating and it is possible that
international trade growth will also slow down. The slowing down of economy can also slow down
the operations of the businesses in the world making it a reason for their income to decrease.

The business operations in the world are just interacting with each other so when the
global economy slowed down other economies in the world may also slow down since they just
trade with each other. Airline industry is somehow related to interaction of people or trade among
countries, the slowing down of the global economy may also be of great effect to the said industry.

T5. The merging of physical and cyber creates new vulnerabilities

Adopting the new system of using both virtual and physical system in regulating flights can
be threatening to every industry including airline industry. Some systems used by industries are
vulnerable. There are lots of emerging technically competent people in the world that can hack
the systems like reservation system, flight traffic management systems, access control
management systems, departure control systems, passport control systems, cloud-based airline
data storage, cargo handling, and shipping and hazardous materials transportation management.
This can also be a threat to the flight control systems of the airline industry, the GPS-based
systems, fuel gauges and consumption systems, maintenance of computers and other systems
related to the day to day operation of an airline industry (Kaspersen, 2016).

The growing cyber vulnerability is threatening to airline industry especially those whose
control is not so effective. This may ruin the airline industry and may cause delayed higher number
of delayed flights or even harm the passengers itself.

T6. The advancement of technology erodes human skills

According to the Former head of Geopolitics and International Security, World Economic
Forum, Anja Kaspersen, one threat to airline industry is the advancement of technology.
Automated system nowadays is becoming dominant. Automated cars can move on its own
without needing human inside it. They just need to intervene if something unusual or unexpected
happens. The skill of human needed in driving may not be exercised as often as before and may
lead to deterioration of practicing this skill. If this kind of technology would be improved throughout
the years, it is possible that it will also be applied to aviation or airline industry. It is possible that
instead of hiring professional pilots they would just hire technically competent people who will built
a system that controls the flight of the aircraft.

Advancement of technology is not absolute therefore it is bound to fail or to malfunction.

This may lead to a higher need of giving safety control which will be of great cost to the airline
industry. Besides, if this trend clicked and people want it, the industry must adopt on this to give
the customers the satisfaction that they need even if it will be costly to them.
 SUMMARY
Cebu Air Pacific is an airline industry and has known to be the low -cost carrier in the
Philippines. The opportunities emphasized were Brazil allows fully-foreign ownership of airlines,
Export opportunities rooting from ASEAN Economic Communities, Duterte funds infrastructure
projects by selling $500M new bonds, NASA developed an innovation that could help cut carbon
emissions, building of new airport was proposed by Capa-center for Aviation, Obstacle to
country’s tourism and aviation due to small number of flights and Philippines, seen as a hub in
aerospace parts manufacturing and allied services in Asia. On the other hand, threats observed
were Implementation of Carbon Offsetting and Reduction Scheme for International Aviation
(CORSIA), The website of Global Petrol Prices projected that fuel prices will remain at a relatively
stable price at around 1.04 USD per liter, Cyclical Nature of Airlines Business already on its peak,
Slowing down of Global Economy, The merging of physical and cyber creates new vulnerabilities
and the advancement of technology erodes human skills.

Strengths that serve as an asset of the company over its competitors were Cebu Pacific
holds 59.5% market share, Passenger volume up by 9% during 2017 and 13% during Quarter 1
of 2018, TravelSure Travel Insurance, PayPal (Mode of Payment), Piso Fare promo that Cebu
Pacific offers and “Fun in the Skies”. While the weakness indicated were Working capital is valued
at -27.62, Cebu Pacific still do not offer Europe as their destination, Cebu Pacific’s flight delays
and cancellation, Cebu Pacific’s delayed refunding and Poor in-flight staffing.

Strategic issues of company are the rivalry among competing firms, bargaining power of
buyers and suppliers. There are only few airline industries exist, but th en, knowing that Cebu
Pacific is a low-cost carrier, it receives lower revenues, while its competitors has enough
expenses to cover the comfort its clients’ needs, or sometimes even more of that. Also, the
competitors were still growing through grabbing opportunities of expanding their business by
giving as many destinations and improving main service source which is the airplane. Bargaining
power of suppliers is also high since very few companies manufactures aircrafts and fuels needed
to incur service. Lastly, bargaining power of customers seems to be high because, aside from
knowing the company’s feedbacks about CEB in Skytrax, they seem to be frustrated because of
delays and refunding time, the customer does not save its money in acquiring airline products,
also, undifferentiated products are offered by this industry.
 As to the strategy formulation tools and the inputs on the internal and external analysis,
it turns out the most recommended strategies were two, which is the Market Penetration and
Product Development that falls under Intensive Strategies. The company needs to focus on these
to be able to achieve its vision and continue its furtherance. The market penetration strategies
made were, giving additional insurance to passengers if delays will happen, developing system
that will prevent cyber vulnerabilities, which can make them inefficient, by properly
accommodating increase in passengers, Give more trainings and seminars to employees about
customer service to increase efficiency in work and addition of more airplanes to prevent any
delays that will make them more profitable.

The strategic objective of Cebu Pacific Airline is to be able to grow and sustain profitability
even if it offers low cost fares, since the vision tells it so. It also wishes to improve its services and
maybe able to prove to clients that it’s not low cost and low quality, but rather a money worthy to
purchase its products.
 RECOMMENDATION

Cebu Pacific’s main goal is to 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, using a strategy that imbibes certain characteristics of the other type of competitive
strategies, but more dominantly combines strategic emphasis on low cost and differentiation.

Cebu Pacific will use Best-Cost Provider strategy because goes well with the company’s
objective which is to become global, offer premium service that will attract customers, becoming
their preferred airline that will meet customers' needs. Using Best-Cost Provider strategy can
attain a competitive edge over rivals in hitting a broader market which is composed majority of
consumers seeking for a low-cost opportunity to travel. Aside from focusing in using a low -cost
strategy Cebu Pacific also push into achieving it through maintaining tight control over production
and overhead costs but still provide with an upscale product at much lower cost than the
competitor in the airline industry. Because of this advantage are competitors are likely to avoid a
price war, since the low-cost firm will continue to earn profits after competitors compete away their
profits especially in airline industry also powerful customers that force firms to produce
goods/service at lower profits may exit the market rather than earn below average profits leaving
the low cost organization in a monopoly positions. Buyers then loose much of their buying power.
It is also hard for new entrants to move in the industry because low cost leaders create barriers
to market entry through its continuous focus on efficiency and reducing costs. Aside from that
using this strategy also improve Cebu Pacific’s ability to adapt to environmental changes, learn
new skills and technologies, and more effectively leverage core competencies across business
units and products lines which should enable the firm to produce produces with differentiated
features at lower costs.

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. In microeconomics and strategic management,
the term horizontal integration describes a type of ownership and control. It is a strategy used by
a business or corporation that seeks to sell a type of product in numerous markets. Horizontal
integration in marketing is much more common than vertical integration in production. Horizontal
integration occurs when a firm in the same industry and in the same stage of production is being
taken-over or merged with/by another firm which is in the same industry and in the same stage of
production as of with the merged firm.

Cebu Pacific has a good financial position therefore; it has the capacity to merge with
another hotel company in the industry. If Cebu Pacific merge with another airline, it would be
possible for both companies to compete not only in the Philippine industry but also with the other
foreign countries as well. Renovation of Cebu Pacific facilities to a more modern and futuristic
style can also affect some good impact to consumers. New facilities design and development is
more than often a crucial factor in the survival of a company. In an industry that is fast changing,
firms must continually revise their design and range of facilities. This is necessary due to
continuous technology change and development as well as other competitors and the changing
preference of customers.

A system driven by marketing is one that puts the customer needs first, and only produces
services that are known to customers. Market research is carried out, which establishes what is
needed. If the development is technology driven then it is a matter of changing what it is possible
to make. The facilities are developed so that hotel processes are as efficient as possible and the
services are technically superior, hence possessing a natural advantage in the market place.
 CONCLUSION
The strategic objective of Cebu Pacific Airline is to be able to grow and sustain profitability
even if it offers low cost fares, since the vision tells that by 2070, it should be the most successful
low-cost carrier. It does now have known to be the low-cost carrier in the Philippines, but to be
successful, knowing that it has negative working capital and incurred losses, it should have ways
to increase return on investment. The company may provide other income, may do related or
unrelated diversifications to increase revenue. The company couldn’t modify at ease its product
prices since it needs to comply and maintain being the low-cost carrier. Likewise, better ways
would be reducing expenses.

Cebu Pacific should also prove that being a low cost doesn’t mean a low-quality service.
Often poor inflight staffing, cancellation, delays and refunding needs to be lessen or actually avoid
if possible. Customer notice of cancellation should be provided, proper time booking to prevent
delays and refunding should be in line as what is stated in Customer Service Plan which is a
maximum of 30 working days. Loss of customers is a big deal since CEB does have lower fares.
Knowing that the company is in a good strategic position to respond to the external environment
and has an above average rating internally, making improvements may still be inevitable to extend
services to a spectacular one, and continue its mission of being an unceasing provider of safe,
affordable, reliable and fun-filled air travel services.

In a strong competitive, market shares may be able to enhance by market penetration

and product development as those strategies receives the most recommended strategies resulted
in matrices.