Cebu Air, Inc. 2 nd Quarter and 1 st Half 2018 Results of Operations. cebupacificair.com

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1 Cebu Air, Inc. 2 nd Quarter and 1 st Half 2018 Results of Operations cebupacificair.com

2 Disclaimer The information provided in this presentation is provided only for your reference. Such information has not been independently verified and, as such, is not guaranteed to be accurate nor complete. Neither Cebu Air, Inc. ( CEB or the Company ) nor any of its affiliates, shareholders, directors, employees, agents or advisers makes expressed or implied representations or warranties as to the accuracy or completeness of the information contained herein and neither of them shall accept any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising from any error or omission in compiling such information or as a result of any party s reliance or use of such information. The information and opinions in this presentation are subject to change without notice. EBITDAR, EBITDA, EBITDAR Margin, EBIT and core net income are not measures of performance under the Philippine Financial Reporting Standards ( PFRS ), and should not be considered in isolation or as alternatives to net income as an indicator of CEB s operating performance or to cash flow from operating, investing and financing activities as a measure of liquidity, or any other measures of performance under PFRS. Because there are various EBITDAR, EBITDA, EBITDAR Margin, EBIT and core net income calculation methods, CEB s presentation of these measures may not be comparable to similarly titled measures used by other companies. This presentation also contains certain forward-looking statements. These forward-looking statements include words or phrases such as CEB or its management believes, expects, anticipates, intends, plans, foresees, or other words or phrases of similar import. Similarly, statements that describe CEB s objectives, plans or goals are also forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Such forward looking statements are made based on management s current expectations or beliefs as well as assumptions made by, and information currently available to, management. There is no assurance that expected events will occur, that projections will be achieved, or that the Company and its management s assumptions are correct. 9 August

3 Business Updates

4 2Q 2018 Snapshot 5.5M Passengers Up 3.7% 90% Seat Load Factor Up 3.4 ppts Cargo 46.2M in kg, up 13.3% Php1.4B in Rev, up 30% 6.5B ASK, down 6.7% 5.8B RPK, down 0.3% 12.7 hours/day; 6.2 turns for our Airbus Fleet 67 aircraft 62 destinations, 100 routes and over 2,618 weekly flights Php19.6B Revenues Up 4.2% Php2.5B EBIT at 13% EBIT margin 9 August

5 Domestic Record Seat Load Factor of 90.9% up 1.9 ppts yoy Domestic network as of June 30, 2018, 36 destinations, 72 routes and 2,132 weekly flights CEB maintains domestic leadership Notwithstanding the closure of Boracay, total domestic passenger traffic increased 2.8% YOY to 4.0 million in 2Q18 PAL 29% AA 16% CEB 53% Posted a record Seat Load Factor of 90.9%, up 1.9 ppts YOY Source: 2Q 2018 internal estimates Newly-opened Mactan-Cebu International Airport terminal 2 CEB s 2 nd largest hub capturing 20% of total passenger traffic Domestic market leader holding 47% of the market What s coming up: Panglao Airport in Bohol 9 August

6 And a solid 86.8% SLF for international, up 7.3 ppts yoy 1.4 million passengers in 2Q18, up 6.4% leading to 86.8% SLF, up 7.3ppts Short haul: 1.3M, up 12.1% yoy 86.5% SLF, up 6.7ppts Long haul (SYD, DXB): 125k, up 18% yoy 89.3 % SLF, up 10.1ppts 26 destinations, 36 routes, 486 weekly flights Top performing destinations: Japan: Nagoya, Narita, Osaka, Fukuoka China: Xiamen, Guangzhou Bali, Dubai 2Q18 Pax Growth SLF Bali 110.3% 88.1% Xiamen 81.0% 100.0% Nagoya 77.7% 85.4% Guangzhou 59.4% 99.6% Narita 56.5% 79.8% Osaka 43.5% 85.6% Fukuoka 30.1% 83.8% Dubai 29.8% 95.2% 9 August

7 CEB orders 5 A320NEO in 2019 to accelerate expansion Key Opportunities and Challenges at a time of limited capacity: Domestic growth through hubs, including Cebu and Clark Need to optimize use of scarce Manila slots Protect domestic market share with capacity expansion of competitors, particularly in hubs outside Manila Additional aircraft will be used to accelerate expansion to: Defend fortress Philippines. Gain stronger foothold into China market Maintain short haul international growth 2Q18 Ave. Sector Distance (km) Dom % Intl 2, % Seats (M) Dom % Intl % ASK (M) Dom 2, % Intl 3, % RPK (M) Dom 2, % Intl 3, % Aircraft No. of AC Seats BH/day Turns/day A320CEO A321CEO A ATR ATR CEB to take delivery of 34 more A321s until 2022, but 20 A320s are also set to leave the fleet over the same period. Similarly, ATR to exit the fleet With 188 seats and higher fuel efficiency, the A320NEO will enable CEB to fly further and more economically. 9 August

8 Meanwhile, cargo outperforms with 2Q18 revenue up 30% yoy Carried 46.2M kg of cargo in 2Q18, up 13% yoy, bringing 1H18 volume to 97.4M kg, up 26% yoy Yields also increased 14.8% in 2Q18 to P29.7/kg Per 1Q18 CAB statistics, CEB holds 50% share in domestic cargo market, up 3ppts from FY17 Containerized cargo hold for both A330 and A321 ATR Freighters: Strong cargo demand in the Philippines as well as regional, and supply limited. CEB will become the first LCC globally to operate freighters Two ATR s to be converted into Large Cargo Door (LCD) allowing standard containers and pallets to be loaded Operations expected to commence 1Q 2019 is 9 August

9 Financial Results

10 Income Statement Highlights 2Q18 % YOY 1H18 % YOY Total Revenue (Php M) 19, % 37, % Passenger 14, % 28, % Ancillary 3, % 6, % Cargo 1, % 2, % Average Yields 3, % 3, % Average fare/pax 2, % 2, % Ancillary/pax % % Cargo yield / kg % % Revenue/ASK (RASK) % % Cost/ASK (CASK) % % CASK ex-fuel % % Income (PHP million) EBITDAR 6, % 11, % EBIT 2, % 4, % Pre-tax Core Income 2, % 4, % Net Income 1, % 3, % Margins EBITDAR Margin 31.7% -6.5ppts 31.7% -4.2ppts EBIT Margin 12.8% -8.9ppts 12.6% -6.1ppts Pre-tax Core Margin 10.4% -9.9ppts 10.7% -6.5ppts Net Margin 9.6% -6.7ppts 8.7% -3.4ppts 1 source: Published MOPS and PDS rates 2Q18 %YOY 1H18 %YOY ASK (M) % % Jet $/bbl % % P/US$ % % Fuel P-M 6, % 12, % 1) Average jet fuel prices rose 44% in 2Q and 33% for 1H. Fuel savings initiatives help lower total fuel cost. 2) Aircraft Lease cost increased as we sold and leased back 6 AC in 2H17. Maintenance also increased as we provide for asset retirement obligations to new lessors 3) Peso depreciation increase about 60% of our operating expenses. Benchmark interest rates Libor and PDSTR2 likewise increase steeply; 4) Investments for safety, security, digitalization and scaleability increase administrative expenses 9 August

11 Balance Sheet Highlights In Millions of PHP Jun. 31, Dec. 31, vs 2017 Cash 20,143 15,614 4, % Other current assets 8,608 6,078 2, % Property, plant & equipment 91,686 81,279 10, % Goodwill and others 7,792 6,106 1, % TOTAL ASSETS 128, ,077 19, % Current Debt 7,020 5,969 1, % Noncurrent Debt 46,467 35,013 11, % Other liabilities 34,374 28,309 6, % TOTAL LIABILITIES 87,861 69,291 18, % EQUITY 40,368 39, % New PPE and Debt: 5 new A321CEO 2 new ATR Other assets include advance payment to suppliers Loans breakdown Php vs USD: 1H18 FY17 USDM PHPM 20,141 13,546 Cash to Sales Ratio 28.7% 23.0% Current Ratio Net debt 1 to Equity Adjusted Net debt 2 to Equity NOTE: 1 Net debt is total debt less cash and cash equivalents 2 Adjusted net debt is net debt plus capitalized lease and ARO liability based on the present value of future operating lease commitments. 9 August

12 Cash Flow Highlights in Millions of PHP 1H18 CASHFLOWS FROM OPERATING ACTIVITIES Income after noncash adjustments 8,894 Net changes in working capital 1,043 Interest and taxes paid net (727) Net cash provided by operating activities 9,210 CASHFLOWS FROM INVESTING ACTIVITIES Acquisition of PPE (14,106) Dividends from JVs 42 Other non-current assets (1,946) Net cash used in investing activities (16,010) Investing activities Additions to PPE: Predelivery payments and final payments for 5 A321 CEO and 2 ATR Php11.6B Loan availment: for 7 AC deliveries in 1H18 CASHFLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 25,905 Repayment of debt (15,212) Net cash used in financing activities 10,693 Net foreign exchange difference 637 NET INCREASE IN CASH AND CASH EQUIVALENTS 4,529 CASH AND CASH EQUIVALENTS, beginning 15,614 CASH AND EQUIVALENTS, END 20,143 9 August

13 1) Average jet fuel prices rose 44% YOY in 2Q18 and 34% in 1H18 but fuel-saving initiatives helped lower CEB fuel cost Fuel Price and Fuel Consumed per BH Jet Fuel (USD/bbl) Fuel Consumed/BH 3,250 3,200 3,150 3,100 3,050 3,000 2,950 2,900 Average Jet fuel prices in the global market for 2Q18 have increased by 44% YOY. Partially offset by decrease in fuel consumption brought about by the use of fuel efficient aircraft and other fuel saving initiatives: Single Engine Taxi Thrust Reverse 2Q18 %YOY 1H18 %YOY Fuel P-M 6, % 12, % Jet $/bbl % % P/US$ % % 9 August

14 2) CEB undergoes 6 sale and leaseback transactions as part of its fleet planning strategy Key Challenges at a time of fleet renewal: CEB has already exited its older A319 aircraft as early as 2015 to 1Q2018, limiting our capacity growth at time of strong demand. Airbus A320 New Engine Option (NEO), which promised delivery of bigger, more efficient aircraft, encountered technical problems, temporarily propping up the market value of the more mature A320CEO aircraft. However, the buoyancy in the market value of the A320CEO may be temporary and as the cautionary tale of the Boeing 737 Classic warns, an accelerated decline in the value of CEOs may be forthcoming as the A320 NEOs proliferate. At the same time, the low interest rate environment allowed for competitive rates on operating lease transactions Given the appropriate timing of exit vis a vis the continued requirement for capacity growth given strong demand, CEB entered into short term sale and leaseback transactions for 6 of its A320 aircraft. As a consequence of such transactions: a) Recognition of operating lease expense in exchange for depreciation and interest expense b) Recognition of Asset Retirement Obligation, to recognize its obligation to new operating lessor at the time of return 9 August

15 3) Risk management programs include Forex and AC finance Forex Average PHP to USD for 1H18 is Php51.98, up 4.1% YOY, which impacts about 65% of our monthly operating expenses. As part of our forex risk management program, we have started the following initiatives creating natural hedges 38% of our debt portfolio is now in local currency Moving towards like for like currency acquiring, creating match of inflows and outflows Ongoing USD spot purchase program brings our cash portfolio to 48% USD PHPUSD Closing Rates Interest Notwithstanding the significant hike in benchmark rates and increase in loan balance for new aircraft, our interest expense increased by only 46% due to: Refinancing of existing USD aircraft loans for both margin compression and increase in Php debt portfolio PHP financing of ATR H18 1H17 YOY 3mo libor % 3mo PDST R % Interest exp % Loans, end. 53,486 45,278 18% USD % Php 20,141 11,547 74% Fixed : Float 14 : : 77 USD : PHP 62 : : 26 9 August

16 4) Investments in safety, security, digitalization and scaleability Safety: Runway Overrun Prevention System (ROPS) Area Navigation (RNAV) Fatigue Risk Management System Increased security for cyber attacks CEB achieved full compliance with the International Air Transport Association (IATA) Operational Safety Audit (IOSA), joining a roster of 429 airlines worldwide. Information Technology Systems : Flight Operations (AIMS) Content delivery and Cyber security Airport Operations (Levarti) Revenue Management System Customer Command Center 9 August

17 Fleet expansion plan Fleet modernization program - bigger, new generation, fuel-efficient aircraft Seats (M) Total fleet ATR Freighter ATR A330 A321 A319/A Current fleet of 67 5 A321CEO, 36 A320, 8 A330, 8 ATR , and 10 ATR Fleet age is 4.85 years (as of June 30, 2018) Aircraft deliveries 2 more A321CEO for delivery in 2H18 32 A321NEO for delivery between 2H2018 and A320NEO for delivery in 2019 (via Operating Lease) 6 ATR for delivery between 2H2018 and 2022 Fleet profile as of June 30, 2018: AC Type Finance Lease Operating Lease A A321CEO 5 0 A ATR ATR Total August

18 Thank you cebupacificair.com