January 13, 2015

CEB fined P52m by regulator

Cebu Air Inc (CEB) was reportedly ordered by the Civil Aeronautics Board (CAB) to pay P52m in fines for the “operational lapses and mishandling of passengers” that led to flight delays and cancellations during the Christmas season. The regulator rejected the company’s argument that the problems arose from the sudden absence of ground crew, airport congestion and bad weather.

Meanwhile, CEB has reportedly lifted the fuel surcharges last 9 Jan in compliance with the regulator’s directive to local carriers. Based on the regulator’s estimates, the lifting of fuel surcharges should significantly reduce ticket prices.

Our take: The P52m fine was based on the provisions of the Civil Aeronautics Act stronger consumer spending that should provide a boost to tourism. While the lifting volatility in fuel prices, this becomes less relevant in a low oil price environment. We of 1952. We believe that the amount will not materially affect CEB’s earnings and regulator’s ruling will enable CEB to put this issue behind.

Going forward, we believe the company faces brighter prospects amid dropping fuel costs as well as of the fuel surcharges will remove a mechanism that shields local carriers from any are not also worried about the foregone revenues resulting from lower ticket prices as this may be cushioned by any potential boost to passenger traffic and margin improvements given the sharp drop in fuel costs. – WealthSec