Philippine budget airline Cebu Pacific is reportedly seeking sale-and-leaseback arrangements for its entire owned A320ceo fleet, sources confirmed Monday. It is considered a liquidity exercise, but also a strategic calculation to match deliveries with redeliveries so as not to increase the fleet’s size during the COVID-crisis.
Sale-and-leaseback of 17 A320ceo
Cebu Pacific is seeking to sell and leaseback its entire fleet of owned Airbus A320ceo aircraft, two sources confirmed to FlightGlobal on Monday. Initially, the carrier wanted to leaseback 14 but later changed its mind to encompass all 17 that it owns.
Besides the 17 A320ceo that Cebu owns itself, it has another 13 on lease from various firms. However, at the moment, due to far-reaching travel restrictions in the Phillippines, all but two have been parked. Both the A320s still in service are from the leased portion of the fleet.
Liquidity and fleet adjustments
One source told FlightGlobal on the sale-and-leaseback that,
“It’s a liquidity exercise, yes – but it’s also a residual value exercise because they have the [A320neo] delivery stream,” adding that as the airline has decided not to increase its fleet amidst the present crisis, it needs to match new deliveries to redeliveries.
Cebu Pacific is expecting to take delivery of 37 A321neos, including ten A321XLR, from August 2020 to February 2026, and an additional five A320neos in 2024.
Formal RFP already circulating
The formal request for proposal (RFP) has been in the market for several weeks. Still, Cebu Pacific was apparently talking to potential lessors and lenders beforehand, gauging how much they would be able to get out of a deal.
Another source, a lessor that hade been made privy to the RFP, said to FlightGlobal that his firm would not be making a bid on the aircraft as the proposed lease term of two to four years was too short.
Cebu Pacific is, since 2006, when it let three Boeing 757s go, an all-Airbus airline. Beyond the substantial order for new narrowbody jets, it is also expecting to welcome 16 new widebody A330neos to the fleet from 2021.
Dismal results due to domestic flight bans
The carrier joined so many other airlines in reporting dismal figures for the first quarter of 2020. It operated at a $13.7 million loss, compared to a $76 million profit for the same period last year. It did however grow its fleet with one leased A320neo in January.
Philippine airlines were particularly hard hit by the “community quarantine” first imposed on Manila in late March and then extended to several regions. Cebu Pacific and regional subsidiary Cebgo rely on domestic routes for over 80% of seat capacity. The numbers are similar for AirAsia Philippines, whereas flag-carrier Philippine Airlines‘ domestic routes account for just under 70% of capacity.
MECQ still in place
The metropolitan area of Manila and other high-risk areas are still operating under a protocol called Modified Enhanced Community Quarantine (MECQ) from May 13th until preliminary, May 31st. This means that all domestic flights are still prohibited, and only a few international are allowed. There is also no public transport, or any inter-island travel.
Simple Flying has reached out to Cebu Pacific for a comment on the sale-and-leaseback plans but was yet to receive a reply at the time of publishing.