To secure its future as a low cost carrier (LCC), Cebu Air Inc. (Cebu Pacific or CEB), has obtained US$250 million fresh funds from the International Finance Corporation (IFC), the IFC Emerging Asia Fund, and Indigo Philippines LLC, an affiliate of Indigo Partners LLC.
The investment of the triad, in the form of convertible bonds, will provide CEB with a longer liquidity to withstand the effects of the pandemic until travel demand recovers, the airline today (May 10) announced.
It will also help CEB maintain competitiveness to provide affordable transportation in this island nation where maritime transport alone cannot address the connectivity needs of people, goods, and services.
“We view Indigo, IFC, and IFC Emerging Asia Fund not only as capital providers but also long-term partners in driving improvements in the business, as well as accelerating our sustainability agenda,” according to Lance Gokongwei, CEB President and Chief Executive.
“This will further strengthen CEB as we recover, so we may continue fulfilling our commitment to improve the lives of people in the communities we serve for a long time to come," he explained.
As an archipelago of over 7,600 islands and a major tourist destination, the Philippines relies heavily on air travel.
Tourism generated 12.7 percent of the country’s gross domestic product in 2019, while remittances, which depend on the movement of Filipino workers abroad, generated a further 8.9 percent.
As the largest domestic airline in the Philippines and one of its leading international carriers, CEB plays a critical role in the country’s recovery post-COVID-19.
Air travel is an important contributor to the global economy.
Air transport supported 87.7 million jobs worldwide prior to the pandemic, including 11.3 million direct jobs and 44.8 million tourism-related jobs, according to a report by the Air Transport Action Group.
It contributed $3.5 trillion to the world economy in 2018, while air freight carries 35 percent of global trade by value.
However, COVID-19 devastated the sector, resulting in grounded fleets, significant financial losses and a loss of customer confidence.
“We are delighted to partner with CEB, a market-leading carrier and one the region’s best-performing airlines,” remarked Jean-Marc Arbogast, Country Manager for the Philippines at IFC.
“Maintaining low-cost travel services is essential in an island nation like the Philippines, and airlines will play a critical role in driving the country’s economic recovery," he pointed out.
"CEB will play a leading role in that recovery, providing connectivity and jobs, preventing disruptions in supply chains, and supporting the tourism sector at a time when it’s needed most.”
IFC has been an active investor in private-sector airlines in emerging markets around the world, with 19 investments since 2000.
Projects with low-cost carriers include supporting the expansion of Brazil’s GOL Airlines and helping to launch Mexico’s Volaris.
For its part, “Indigo is excited to invest in CEB, and work with their team to take advantage of the many growth opportunities ahead as travel demand increases post-pandemic,” says Bill Franke, Managing Partner of Indigo Partners.
“We have a great deal of respect for what the Gokongwei family has achieved with the airline, and we look forward to a strong partnership.”
Indigo Partners specializes in investing in the aviation sector.
Its current airline investments include Frontier Airlines in the United States, Volaris in Mexico, Wizz Air in Europe, and JetSMART in Chile.