Cebu Air, Inc. (CEB) Earnings Call Transcript & Summary

Good day, everyone. We're thrilled to have you with us as we share our performance highlights, strategic progress and vision for the future. We're happy to report strong fourth quarter and full year results marked by continued network, fleet expansion, growth and increased capacity. Beyond our financial results and business updates, we'll also provide early insight into key commercial and economic trends that will shape our outlook for 2025 and beyond. To kick things off, I'll hand it over to Xander, who will walk us through the latest commercial and operational developments.

Thanks, Trina. The fourth quarter of 2024 showed remarkable growth, reflecting a strong demand for air travel. We carried 7 million passengers during the quarter, marking a 32% increase from the fourth quarter of 2023 and surpassing our seat capacity growth of 31%. This led to an improved seat load factor of 83.1%, up from 82.8% in the previous year. Domestically, we carried 5.3 million passengers, marking a 32% growth over the same period in 2023. Internationally, we saw a 30% increase with 1.7 million passengers flown. These figures clearly demonstrate that demand for air travel remains robust across all market segments, especially during the holiday season. Our strategic expansion outside Manila played a key role in our accelerated growth. Last quarter, we expanded our Clark Hub with flights to Davao, General Santos, Iloilo, Puerto Princesa and Bohol. Cebu also grew its network with the launch of new flights to Masbate, Osaka and Don Mueang in Bangkok, enhancing connectivity for both domestic and international travelers. Additionally, Iloilo saw the addition of flights to Tacloban, Zamboanga, Singapore and Hong Kong followed by further expansion in December with new routes to Bohol, Dumaguete and Legazpi. We also expanded operations in Davao with additional flights to Puerto Princesa, Tacloban and Boracay as well as international flights to Bangkok and Hong Kong. Beyond growing our hubs and flights, we introduced new destinations, including San Vicente via Cebu and Chiang Mai via Manila. Additionally, with the acquisition of AirSWIFT in the fourth quarter, we also added El Nido to our network. Looking at the year as a whole, it's clear that Cebu Pacific concluded 2024 on a high note. We successfully added 27 routes and carried 24.5 million passengers, reflecting an 18% year-on-year growth. This contributed to a solid seat load factor of 84.4%, slightly up from our 84% average in 2023. Domestically, we served 18.5 million passengers, a 15% increase compared to the previous year. Internationally, we carried over 6 million passengers, marking a 25% year-on-year surge. By year-end, Cebu Pacific had the widest network in the Philippines, serving 123 routes with over 3,800 weekly flights. CEB has been the leader and the driver of aviation industry growth in the Philippines. By the fourth quarter of 2024, our seat capacity had surpassed 2019 levels by 27%, while the combined seat capacity of other Philippine carriers remained 16% below prepandemic levels. With this, our domestic market share for the year strengthened to 54%, up from prepandemic levels of 52%. And in the fourth quarter, with the growth of our operations throughout the year, this rose further to 58%. We also outperformed competitors in the international market. In 2024, we captured 20.6% of the total international market, an increase of 1.1 percentage points from our 2019 share. And in the fourth quarter, our international market share had risen to 22.5%, making us the leading international carrier in the Philippines. I'm happy to report that Cebu Pacific has secured its position at the forefront of both the domestic and international markets, solidifying its position as the leader in Philippine aviation. Cebu Pacific triumphed over the complexities and challenges of 2024. We've kept you informed about the evolving landscape of the aviation industry. Factors such as global supply chain constraints, delivery and maintenance schedules and engine reliability have required us to adapt and innovate. In response, we have taken decisive steps, investing in additional aircraft and engines to enhance our operational resilience and ensure a more reliable and efficient service for our passengers. These efforts position us well for sustained growth and continued leadership in the industry. I'm pleased to report that these initiatives have delivered positive results. Our on-time performance or OTP has improved, averaging 73.6%, an improvement from our 2023 OTP of 71.4%. Even in December, despite the busy peak and rapid growth of our operations, our OTP kept resilient at 72.6%, still better than December 2023. We also saw notable improvements in customer sentiment across all touch points even as our passenger numbers and overall operations grew. We ended the year with an average Net Promoter Score or NPS of 28, a significant jump from 14 in 2023. In the fourth quarter, our NPS reached 32, reflecting steady progress from plus 31 in the previous year. Additionally, we saw higher customer satisfaction scores for airport experience, agent service and cabin crew service. Looking ahead, we will continue to optimize our capacity to meet the growing demand for travel. Our focus will remain on providing the best value to our passengers while ensuring affordability, safety and reliability along with our commitment to exceptional service. I will now turn you back to Trina who will provide an update on CEB's financial performance.

Thank you, Xander. I am pleased to present Cebu Pacific's financial results for fourth quarter and full year 2024. The fourth quarter was Cebu Pacific's strongest for the year in terms of revenue as we generated PHP 30.4 billion, 28% higher year-on-year. Revenue from passenger business grew 23% to PHP 20.2 billion while ancillary revenues grew 36% to PHP 8.6 billion. Average fares softened by 6% to PHP 2,866 while ancillary yields improved by 2% to over PHP 1,047 per passenger. Cargo revenue grew 51% year-on-year to PHP 1.6 billion. We carried 53.2 million kilos, 28% higher at 18% higher yield per kilo. This growth can be attributed to the increase in our wide-body aircraft, which allows for greater capacity in both weight and size. With PHP 30.4 billion in revenue, Cebu Pacific generated an operating income of PHP 3.5 billion for the quarter, a 43% increase versus the same period in 2023. This also delivered an operating margin of 11%. After financing costs, we generated a pretax core income of PHP 1.7 billion. This is a 119% improvement year-on-year giving us a pretax core margin of 5.5%. With PHP 244 million in noncore gains, Cebu Pacific's net income for the quarter closed at PHP 2 billion. This was lower than same period 2023 mainly from last year's recognition of tax benefits from net operating losses carried over. Allow me now to summarize our full year financial performance for 2024. Cebu Pacific generated total revenue of PHP 104.9 billion, a 16% increase from 2023. Passenger business grew 14% to PHP 71.3 billion, while ancillary grew 16% to PHP 28 billion. To support passenger growth, average fares softened by 3% to PHP 2,905 while ancillary yields remained steady at PHP 1,013 per passenger. Cargo generated over PHP 5.6 billion in revenue, 39% higher than 2023. We carried close to 169 million kilos, 32% higher than 2023, with yields improving by 5% to PHP 33.5 per kilo. With a bigger fleet, we faced higher repairs, maintenance and crew expenses as well as higher airport costs. Despite these, operating income for the year improved to PHP 9.2 billion, 7% higher than 2023, yielding a steady operating margin of 9%. Higher financing costs, on the other hand, reduced our pretax core income to PHP 3.1 billion, lower than the PHP 4.2 billion earned in 2023. With additional gains of PHP 2.2 billion, Cebu Pacific generated net income of PHP 5.4 billion for 2024, yielding a stable 5% net income margin. While this is lower than our 2023 net income, this marks our strategic investments in aircraft and engines to sustain our growth while ensuring reliable and efficient services to our passengers. As Xander mentioned, these efforts have already positioned CEB for stronger and continued leadership in the industry. With a fleet of 98 aircraft, we ended 2024 with total assets of over PHP 238.2 billion and total liabilities of PHP 228.1 billion. Net debt was PHP 156.2 billion, 31% higher than 2023. The current ratio was 0.5 while average net debt-to-EBITDA was 5.4x. Our equity position ended at PHP 10 billion, up from PHP 4.8 billion at the end of 2023. But through the quasi-reorganization we undertook last year, our retained earnings improved to PHP 5.4 billion, a turnaround from PHP 16.3 billion deficit at the end of 2023. Cash from operations amounted to PHP 23.8 billion as cash income of 30.9 billion was reduced by working capital requirements, interest and tax payments. Cash outflow for investment totaled PHP 15.6 billion. CapEx for property and equipment amounted to PHP 36.5 billion. This excludes the asset values of right-of-use aircraft and engines, which are funded via operating leases. But if we include these, CapEx for 2024 was PHP 64.7 billion. These were partially offset by PHP 21.7 billion in proceeds from sale and sale and leaseback transactions. Net cash outflow for financing reached PHP 5.9 billion as proceeds from new borrowings were offset by PHP 31.5 billion in debt and lease payments. These combined provide CEB with a net cash inflow of PHP 3.1 billion ending 2024 with a net cash balance of over PHP 19.9 billion. Before I end, I'd like to share some economic indicators affecting our financial outlook. Fuel prices trend in our favor. Prices as of first half of March this year were about 7% below February and forward prices have declined as well. Similarly, the dollar-peso exchange rate has slipped as of mid-March 2025, the peso has hit its strongest value versus the U.S. dollar since the past 5 months. This is favorable for Cebu Pacific since 60% to 70% of our costs are pegged to the U.S. dollar. Lower fuel prices, a stronger peso and steady interest rates bring optimism to our financial outlook. I now turn you over to Mike to share Cebu Pacific's outlook for 2025 and beyond.

Thanks, Trina. Let me say everyone at Cebu Pacific is proud of what the company achieved in 2024, turning various obstacles faced by the industry into strategic opportunities to embrace change and accelerate our growth whilst much of the competition was unable. While our investments in fleet expansion, operational improvements and the development of new routes had an impact on our 2024 margins, these efforts and investments are now beginning to pay off. We have seen noticeable improvements in our reliability, resiliency and overall customer experience in the face of continuing challenges in our industry. Just as important, these investments have laid a strong foundation that we can further build on to sustain and enhance our market-leading position. We have always been optimistic about the potential of Philippine aviation driven by the country's strong economic, geographic and demographic advantages. Strategic investments in our hubs and aircraft fleet have been key catalysts for Cebu Pacific's growth. By seizing these opportunities early, we have not only outpaced the competition, but also further solidified our position as the industry leader. This gives us great confidence as we look into 2025 where we expect to continue our rapid growth. Our seat capacity is projected to increase by as much as 25% year-on-year. Our traffic performance reports for January and February already show a 30% year-on-year increase in passenger traffic with higher load factors than last year. These indicate that the additional capacity added in the second half of last year has already been absorbed by the market in the first quarter. Furthermore, we will leverage the aircraft investment made in the second half of last year. And our CapEx were reduced by half to about PHP 30 billion to PHP 35 billion. This will improve our returns, enhance our financial leverage and strengthen our overall financial position. I would also like to highlight our commitment to sustainability. Cebu Pacific has reached a new milestone with an environment, social and governance, or ESG, rating of 46 in the 2024 S&P Global ESG score. This reflects the airline's progress in strengthening its climate strategy, enhancing risk management and deepening its commitment to responsible business practices. We also established our digital office in the fourth quarter of last year. This team is dedicated to leveraging technology to drive innovation, streamline processes and create more seamless and convenient journeys for our passengers ensuring Cebu Pacific continues to thrive in an increasingly digital world. We look to the future of Cebu Pacific with great optimism. In 2024, we made a historic investment with the largest aircraft order in Philippine aviation history, securing our position well into the next decade. This milestone reinforces our commitment to supporting the Philippines continued growth and development. Thank you for your continued trust and support. Let's continue flying high every Juan.

Good afternoon. This is Robbie Pilares from Cebu Pacific's Corporate Communications Department. Thank you for joining us this afternoon for CEB's Fourth Quarter and 2024 Full Year Investor Briefing. Joining us this afternoon to help answer any questions you may have are Cebu Pacific's Chief Executive Officer, Mr. Michael Szucs, CEB's President and Chief Commercial Officer, Xander Lao; CEB's Chief Financial Officer, Mr. Mark Cezar; and CEB's Vice President for Controllership, Financial Analytics and Investor Relations, Trina Asuncion. [Operator Instructions] Okay. We will begin with a question, which was sent earlier. How do the yields look so far in the first quarter considering the new capacities and routes launched by CEB?

Thanks, Robbie. Let me take that. I think we've published already the traffic report for January and February. And right now we continue to see that traffic has remained strong, and we've flown roughly 4.7 million passengers for the first 2 months of the year. This marked a 30% increase compared to 2024 and this was on the back of 28% more seats, which showed an improvement of our seat load factor on both our domestic and international network. You can see domestic passengers grew to around 3.5 million by around -- or close to 32%. International passengers, on the other hand, grew by around 1.2 million to around 25%. On the other hand, we do see some yield trade-offs, part of which was -- I think Mike had mentioned earlier, we're making some investments in some of the new hubs, but also this has something to do with seasonality. Easter of this year falls in the second quarter as compared to last year it was in the first quarter. So we will see some shift in average fares. We do think this is okay, and we do think overall revenue growth will continue to be strong in the first quarter.

Thank you, Xander. We will take our first question now from the room. Mr. Danbryan Go, please go ahead.

I just wanted to check if I'm audible.

Yes.

Okay. I'm actually from BPI Securities Corporation, and I have just 4 questions here. So firstly, I wanted to tackle your CapEx. You mentioned that for 2025, it will be much lower, around PHP 30 billion to PHP 35 billion. So I just wanted to know, going into 2029, will it be constantly at PHP 30 billion to PHP 35 billion or are you planning to increase it when the newer planes arrive at the latter part of the decade, so around 2029 to 2030?

Would you like to finish your 4 questions or we'll just let me answer -- I can answer that one.

I'll say it one by one.

All right. Sure. I think over the course of the next -- to 2028, I think the CapEx will be about these levels, PHP 30 billion. It's no surprise, a large -- a vast majority of our CapEx is for aircraft and we're in period now where we're just going through the remainder of the first -- the older purchase agreements with Airbus and the residual aircraft there. And we don't really have another ramp-up of deliveries up until 2029. But just as a reminder, 2023, we took 18 aircraft, '24 we took 17. So you saw the spike in the CapEx. In the years going forward, we're in the more like 5 to 7 aircraft per year range. So you can do the math in term of what the CapEx will look like. But yes, I mean 2029 is where we expect the next spike in CapEx probably similar to what we saw in 2024. Does that answer your question?

Yes, it does. For my second question, I wanted to ask with regards to the CapEx of PHP 30 billion to PHP 35 billion, how many percent of it is actual cash expense? Like I just wanted to get a picture of CapEx excluding right-of-use assets and leased assets.

How much of CapEx is cash meaning cash based or non-right of use?

Yes, all of it is.

So technically financing leased versus...

Yes. All of it's cash. But of course, substantially 95% of it is financeable. We're able to raise financing on the back of the aircraft delivery.

Okay. So for my third question, I just wanted to ask I understand you have convertible bonds, I just wanted to recap when is it maturing? And how many shares will be -- or like how many shares will be added to your float once it's matured?

The maturity is in 2027. Trina, do you have the exact numbers or not? We're adding 318 million shares assuming full conversion.

Okay. And this is excluding the preferred shares, which are also convertible?

Correct. The preferred shares would be roughly the same number -- would have roughly the same number.

Okay. For my last question, I just wanted to ask -- it's actually an administrative question. I just wanted to ask where your Investor Relations office is because actually when I saw your disclosure, it mentioned Cebu. When I actually visited the site, but I found the office empty, so I just wanted to ask.

The investor relations office is here in the Cebu Pacific building Airline Operations Center here in Manila. The principal office remains to be in Cebu where the company remained -- was originated, but since most of the operations are already held in Manila, the corporate office is also here. So most investor calls or meetings, we may have it here at the AOC along the Domestic Road in Pasay City.

Thank you, Mr. Go. We'll go to the next person in line, [ Julian Cook ], you may ask your question.

Yes. Three for me. The first one is on the CASK ex fuel, which increased 7%. What -- I saw the different items you mentioned, which contributed to that increase. Can you just maybe help me understand what is the, first one, which is higher airport and crew cost. It's obviously something that's going to remain as the other 3 are really one-offs. Can you maybe give me a sense of what's the proportion of the higher airport and crew cost, and therefore, where do you see CASK ex fuel for 2025? That's the first question. Second one is on the SLBs. I just have a -- do you run SLB gains through the P&L? And if so, what's the amount? What does it amount to? And the final one is just on China traffic. I don't know if you can comment on how the -- if you're seeing some kind of recovery in China demand or if it's still kind of weak?

Do you want to go first on the CASK, Trina?

Sure. This is Trina. I'll take the question on the CASK. You're right, if it was the fourth quarter, a big portion of that would be airport cost, which we started to feel in the fourth quarter alone. We estimate that the amount of that in the fourth quarter would probably be anywhere from PHP 400 million to PHP 500 million, which affected our cost per ASK as these are rate increase business. So FX also is a key driver in overall CASK ex fuel as about 2/3 of our expenses are pegged to the dollar. We did a sensitivity. If we remove the airport cost alone and the FX impact as well, our CASK ex fuel will be about 10% up year-on-year. And the remainder of that -- most of that really is fleet-related costs. It would be repairs and maintenance as we have 13 more aircraft and 13 engines and the financing -- and some of the additional costs as well, crew to support the flying and other client-related costs already.

[ Julian ], just on that, if we going forward, so last year, we were having to manage as well, obviously, the uncertainty in terms of the amount of capacity that we've got. So we've got through costs that are in excess of what they would normally be because we've kind of effectively carried some unproductive crew because we've got some aircraft that are grounded. Now we're better able to manage things like that going forward. We've still got obviously uncertainty with Pratt & Whitney engine situations, but better able to manage. So we anticipate our ability to manage CASK ex fuel with the exception of FX, which is obviously something that's beyond our control. The CASK ex fuel we would expect to manage that much more prudently through this year. We have other couple of questions, sale and leasebacks.

SLB. So we use IFRS. So it means we cannot recognize the full gain. I don't have the exact numbers. There's an amount that we can recognize outright, but most of it is deferred. So we can just pick that up as a follow-up item just the exact amount of what was recognized in the P&L, but I can tell you most of it was not. It was deferred.

Yes, just on China and whether we're seeing a recovery, we've taken a look at some of the Department of Tourism statistics. I mean, comparing to, say 2019, we are seeing better recovery from the other countries in terms of those visiting the Philippines. China continues to remain one of those countries that have a very poor recovery ratio. I think it's still minus 83% compared to 2019 levels. So we are not yet seeing any recovery at this point for China. And from our perspective, we have already redeployed some of the assets that were initially intended for China to other places within network.

Okay. Thank you. Our next question will come from the Q&A box. This is from Alfred Chua from FlightGlobal, he has 2 questions. The first is, you've mentioned that the AOG situation is improving. What's the number of aircraft on ground currently? And the second question is on the expansion of hubs outside Manila. What's the capacity mix now, Manila versus non-Manila? Are we on track to meet a 40% non-Manila seat capacity that was previously mentioned?

I'll take the first one. AOGs were at 12 aircraft at the moment. But I think the engagement with Pratt & Whitney is consistent, and there is a cautious expectation that situation will improve towards the end of the year. What's happened now though having 12 AOGs was a conscious decision that we took. We were putting more engines through the full shop visits just to give us more consistency in the operations going forward. So rather than what we went through last year where it was a lot of quick-turn shop visits, we've got more aircraft in the air, but then the engines are short built and would therefore have to come off again -- they would have to come off again after a short period of time. What we're doing now is more sustainable. It gives us a full run in the engines at the very least. Although there are -- a number of them are spending more time in the shop and thus we're sitting on 12 AOGs at the moment. But the expectation is there will be a rapid improvement towards the second half of the year.

Yes. So in terms of capacity contribution, what we're currently seeing in terms of hubs, Manila is roughly 70% of our total capacity and on non-Manila is the balance of that.

Did that answer the question, Alfred?

Yes.

Okay. We go back to the live room for the next question from Klyne Resullar.

I have a few questions. First is I appreciate the guidance on the aircraft deliveries and exits for this year. Would you be able to give us guidance as well for 2026? How much -- how many will be delivered and how many will exit?

You go ahead with the questions, Klyne, we'll just come after that.

Yes. So my other question is on your average fares. Can you just give some, I guess, more detail on the fare performance of the -- for the fourth quarter? I guess -- I understand it declined year-on-year. But I was just wondering if there's -- was this because of the new routes that you added? Or were the organic routes, the fares for the existing routes were also affected? And lastly, maybe you could comment on the competitive dynamics?

Let me take that first, Klyne, while Mark's putting together some of the data. So we saw average fares, for example, in the fourth quarter, down by roughly 6%. Well, one of which is average stage length is also down by 6%. So I think part of that average fare reduction has been driven by a lot of the new capacity that we've invested in, so a lot of it is shorter sectors, new flights. There still are some competitive dynamics still with some of our low-cost competition here in the Philippines. But having said that, it is a lot of expansion. We are growing quite a lot in terms of our overall capacity and these new routes as well.

On the deliveries, Klyne, next year, it's 7 deliveries. That's 5 narrow-bodies and 2 wide-bodies and we're exiting 5 aircraft -- 5 narrow-bodies.

Sorry, just a follow-up question. For 2025, for the exits, the 5 exits, what are these? Are these narrow-bodies or are these mostly the turboprops?

These are narrow-bodies.

So I have my last question. Could you also provide, I guess, an update on the balance of your unappropriated RE for dividends?

Right now, we're still negative meaning we cannot -- while we have the retained earnings already on the consolidated balance sheet, it's not yet sufficient on a regulatory perspective to give out because of the constraints on what portion of your retained earnings are available already for dividend distribution. But hopefully, given the outlook, especially that it's a positive outlook, we will be in that position within the later part of the year.

All right. Thank you, Klyne, for that. We go to the Q&A box again for the next question from Johann Jin Chan. I would just like to ask about the impact -- or potential impact of a depreciating peso against the company's foreign currency-denominated debt, interest expense, demand for international travel and CapEx?

Okay. Maybe I can take that. On the debt side, yes, FX hits us in several ways. On the debt, including interest side, we have about $700 million outstanding debt, which gets -- sorry?

That's gross.

That's the gross debt, yes, which gets translated on a mark-to-market basis every change in U.S. dollar to the peso. So PHP 1 appreciation or depreciation would retranslate that amount of U.S. dollar debt every period end. And then also, of course, on the cost side, about 2/3 of our total costs are actually pegged to the U.S. dollar. That would -- if we do the math, that would account to about 140 -- anywhere from $140 million to $160 million a month requirement. So any appreciation or depreciation of the peso, PHP 1 would be $140 million to $160 million a month impact.

In pesos.

Yes, million pesos a month impact, that's one. And also, yes, the CapEx. A significant portion of our CapEx is in U.S. dollars. So very little of that would be in peso as both aircraft and aircraft parts are really costed in U.S. dollars.

Probably also worth mentioning just on the -- as an adjunct to CapEx -- sorry, the debt. We hold most of our cash in dollars. So the net debt position, so net of the cash -- the net dollar debt position is I think roughly about [ $450 million ]. So if you're looking for a translation number, that's the number I would use.

Okay. [Operator Instructions] We have a question from the floor from Brendan Sobie.

I was wondering about AirSWIFT. It seems like you incorporated them in your -- for the first time in this last quarter. The turboprop numbers I see jumped up to 22, but they still go back down to 20 like your previous plan. So are you phasing out their aircraft or phasing out other ATRs? What is the plan there for fleet-wise? And also, I was wondering what kind of impact AirSWIFT has had on your traffic? I mean, obviously, 30% growth is good, but there might be 1% or 2% there that's AirSWIFT, which you didn't have a year ago, right?

No, Brendan. AirSWIFT, all the 5 aircraft are still there. We do have 2 of our turboprops, which are still the 72-500s still on our fleet, but it's not accounted for, meaning it's held for sale. So we've already rebooked it as other assets. That's not included in the fleet count anymore.

The 2 freighter conversions, Brendan.

Okay. So the reduction is the 2 freighters that are out of service. So the AirSWIFT planes actually and the AirSWIFT traffic is not included in the figures yet, then?

No, they are, they are. They are. In 2024, they're already part of the 98 aircraft.

As of the fourth quarter, right?

Yes. As of the fourth quarter, yes. At the end of the year, yes, they're already there.

And what kind of impact do they have on the traffic then?

Minimal on the traffic. I mean, it's quite small...

5 ATRs in the bigger scheme of things, Brendan. Small.

Yes. Okay. And how about -- and also talking about slots, are they still operating out in Manila at all? And are those slots going to be like transferred to larger aircraft under the Cebu Pacific family?

They continue to operate out of Manila. There is a slot ruling here in Manila, but AirSWIFT will not be impacted until March of 2026 -- until summer 2026 unless the regulation changes. So we'll just have to keep an eye on that.

Okay. And then Cebgo still operates out of Manila as well until summer 2026 or is that a different scenario?

That is covered by a different scenario. So the turboprop operators with 5 or more turboprops which Cebgo is a part of, 30% of their operations will have to move out of Manila by summer 2025. The balance of them will have to move out by winter of 2025. Unless the regulation changes, that is what we are planning to do.

And are you -- do you get to keep your slots? Like do you just transfer them to [indiscernible]?

Yes, we will be able to do that, Brendan. And in fact, we have transferred -- the turboprop operations that we have transferred out of Manila, we have up-gauged those into jet services already. Different routes, obviously, but we've been able to keep those slots.

So change of AOC but within the group basically, yes, okay.

Yes. Yes.

Thank you, Brendan. We have a couple of questions from the chat box. [ Rainier Yu ] is asking, is it safe to assume that profitability will be the company's target for 2025 to 2027? Do we expect average fares to grow at least single digits this year?

I think average fares -- we are in a growth mode now. So we are making the investments. So what we have seen, if anything, over the last 6 months has been a positive trend in terms of our unit revenues. So that's what we would look at, not necessarily average fares or load factors per se. But we have seen an improvement in the last 6 months in terms of our unit revenues. So that's what I would say about average fares. Whether we do that through the base fares or through the ancillary revenues will -- we are seeing positive unit revenue growth.

Okay. Another question from the chat box from Klyne. What is your market share in Manila today? Did this increase? And do you plan to increase your market share in Manila further over the next few years?

I think today, Klyne, based on our estimates as of January, this is the unofficial -- this is our internal estimate, obviously. But our Manila domestic market share, for example, was at around 53% for the month of January. Maybe if you looked in 2019, that was probably at around 50%, 51% or thereabouts. So we do expect that to grow, but that's primarily because of the upgauge that we've done. And clearly, as Brendan noted, we will be able to upgauge some of our aircraft from turboprops into narrow-body aircraft and so that should give us additional capacity share. So it is dependent on somewhat if the airport capacity can grow and if we're able to get our fair share of slots. So we're hopeful that we can continue to grow that. But again, Manila is, as you know, a very constrained airport. So that's something we'll have to take on an opportunistic basis.

But to add to that. We are still -- we still have 6 wide-bodies on order. And the way we have been able to grow our share in Manila has been through upgauges, putting in bigger and bigger aircraft. We still have a number of those coming, and yes, that will also certainly help our portion, to increase our share in Manila.

Follow-on question from Klyne again. Also, given current market conditions, when do you think you can revert back to pre-COVID margins?

Crystal ball question. I think probably fair to say for 2025, we expect to be closer to pre-COVID margins than to last year's margin. I think let's give that as a broad guidance.

Okay. Johann Chan once again, asked, can the management tell us more how the company plans to reduce or manage costs?

Sure. Certainly, I mean, a large part of it has to be in the fleet. I mean, structurally, the cost base -- the unit cost and the cost base benefits from bringing in a lot more of the A321neos, the 330neos or replacing our older-generation aircraft with a new-generation aircraft yields something like a 15% to 18% reduction in unit cost immediately. I think also a lot of it will have to be on -- benefit from economies of scale. We are in a high -- expansionary phase. We made investments in the past, which have, of course, added to the OpEx base, but we will start seeing, number one, the investments in digitalization, in infrastructure those will slow down at some point and actually they are starting to slow down, and we will start to reap the benefits of it. And yes, just generally, I think we're still -- I think as a low-cost carrier, cost control, cost discipline is in the very fiber of our DNA and just, of course, best operational practices, high utilization, best flight operations practices, those are embedded in our operation and we continue to look for ways to further enhance our efficiency.

There's another question. Another question from the chat box, John Liam Limbo is asking, is your overall SLF determining your average fares? If so, how are these dynamics being projected in the future years? And given that you're in growth mode, how long will this last? Is your SLF part of the benchmark?

I think the seat load factor is one of the metrics we look at. As a low-cost carrier, it's quite important for us to have a high seat load factor. I think Mark mentioned earlier as part of our low-cost -- I guess, as part of our low-cost, I guess, genes, it's quite important for us to make sure that aircraft is full. If you take a look at other LCCs throughout the world, it's quite consistent for them to have load factors of 85%, 90% on a consistent basis. Our seat load factor is an important metric for us. And we do think because we are in the expansionary mode as we are seeing, fares are going to be soft at the start as we build awareness and we build traffic and we expand into some of these new routes and build some of these new markets. So clearly, average fares should improve over time, but we continue to expect high seat load factors regardless of how the route is, whether it's in the beginning stage or it's in mid -- or whether it's in its beginning phase or it's in a mature phase already. A high seat load factor is important from an LCC perspective.

If I may just sort of add something here just in terms of how we've started this year because as Trina and Xander and Mark have explained, we went through a high-growth phase towards the second half and particularly in Q4 last year. We now publish our traffic stats on a monthly basis. So for those that follow our monthly publication, you'll see sort of February year-to-date load factor is at 86.7% whereas in the previous year it was 85.2%. And this is with a seat growth of 27.8% over those first 2 months of the year. So despite a very, very high seat growth, we are running passenger volumes in excess of that. Hence, we are getting the load factor increase. And that's particularly true on the international segments. So if I look at year-to-date February for international, in 2024, was 78.6%; in year-to-date, February 2025 was 84.3%. So a substantial uplift in international load factor. And the international capacity grew by close to 17% over that same time. So we've, in many ways, gone through the growth phase. We've seen that step-up in growth and it does take some time for the market to come and feel it. But we're now, we believe, into a situation, which Xander's describing where, on a unit revenue basis, we can start to see growth because we've got the demand. The demand is coming, it's filling the seats and we can now optimize the unit revenue on those flights. And that's what we're starting to see in the first quarter and we're seeing a continuation of it into the second quarter, which should be a very healthy quarter due to seasonality and especially because it's got Easter in it.

We have one more question from Renz Alvarado. What is the minimum amount of retained earnings before the company pays out dividends to your CEB CP or CEB convertible prepared shareholders?

Hard to say. You're not allowed to give out any unrealizing income like unrealized FX, unrealized -- there's a lot of regulatory conditions. But those are the 2 main things: any unrealized income or benefit has to be reduced from the retained earnings. So that would include any deferred tax assets because that would have to be realized in the future. So if we -- the retained earnings has to be reduced before that. And then also any retained earnings from subsidiaries, that's the second. So it can only be the parent company. So any earnings from AirSWIFT, from Cebgo are not distributable as dividends. So it can be volatile because FX can change differently. Those are some of the factors, any unrealized benefits or gains including tax benefits cannot be distributable as dividends. I hope that answers the question.

And with that question, I think that there being no other questions in the chat or from the floor, we'll be ending our call. Once again, thank you, everyone, for joining us for this quarter's and the full year investor briefing. Have a pleasant day, everyone.

Thank you.