Cebu Air, the listed operator of budget carrier Cebu Pacific, posted a net loss of P7.3 billion (US$152.6 million) in the first quarter of 2021, as the Philippines struggles to contain COVID-19 infection cases, Business World reports.

Cebu Air’s net loss is 516% higher than the US$25.1 million net loss it sustained in the same period in 2020. Total net revenues dropped 83% to US$56.6 million from US$332.3 million previously, with passenger revenue plunging to US$18.5 million from US$238.0 million.

Cargo revenues saw a slight increase at US$27.6 million from US$21.1 million, which was primarily driven by higher yield from chartered cargo services.

On the bright side, expenses fell 43% to US$93.8 million in the first quarter from US$347.0 million in the same period year-on-year.

The slight drop in expenses was mainly due to “the suspension of the group’s operation” which resulted in flights and flight hours being reduced.

Unfortunate Timings

One of the major reasons for the huge losses was timing, as just last year, Cebu Pacific and other airlines had approximately one and a half months of normal operations before the Covid-19 pandemic arrived.

In the Philippines, lockdowns started on March 9, 2020, which resulted in countless flight cancellations and billions of dollars spent for passenger refunds.

“The overall decline in revenues was brought about by the impact of the COVID-19 outbreak,” the airline said in its financial disclosure.

Although vaccinations have been counted on to boost travel appetites this year, the slow pace of inoculations might mean that full tourism recovery would take many years.

Trying Out Different Measures

Cebu Air’s fleet restructuring and expansion program agreements still remain in effect as of March 31 despite the continuing global health crisis. The carrier says its capital expenditure commitments relate principally to the acquisition of aircraft fleet aggregating to US$3.3 billion and US$3.2 billion as of March 31, 2021 and Dec. 31, 2020, respectively.

“The group is actively engaged in planning and executing various measures to mitigate the impact of the COVID-19 global pandemic on its business operations. These include negotiations with key suppliers on capital expenditure commitments and related cash flows, as well as with other suppliers and stakeholders as they impact the group’s cash flows,” Cebu Air said.

The group also mentioned engaging “in the planning (of) staff right-sizing in addition to further optimization and digitalization of processes,” suggesting that cutting the workforce was going to be a necessity to save cash.

Furthermore, it was also reported that the group had secured a $250-million investment in the form of convertible bonds from International Finance Corp, IFC Emerging Asia Fund and Indigo Philippines LLC.

“The investment will provide [Cebu Air] with a longer liquidity runway to help the company withstand the effects of the pandemic until economic activity and travel demand recovers,” Cebu Air said in a separate statement.

“It will also help maintain trade and the competitiveness required to provide affordable transportation in an island nation where maritime transport alone cannot address the connectivity needs of people, goods, and services,” Cebu Air added.