Cebu Air, Inc. ($CEB)

Good day, everyone. Cebu Pacific delivered a robust financial performance in 2025 despite a year marked by contrasting conditions between the first and second halves. The first half saw passenger volume rise by 21% year-on-year, supported by stable load factors and yields, demonstrating that demand continued to absorb the additional capacity we have placed into the market. The second half, however, proved more challenging, where passenger volume remained relatively flat year-on-year due to seasonal patterns, operational disruptions, including 2 significant typhoons, a higher number of aircraft on ground and an overall softening of economic growth and consumer sentiment. Revenue for the fourth quarter reached PHP 32.3 billion, up 6% year-on-year, supported by 6.9 million passengers and higher passenger yields supported by holiday travel. Ancillary revenue grew by 8% to PHP 9.3 billion, while cargo revenue continued to post a steep growth of 19% to PHP 2 billion, supported by the increase in capacity from our wide-body aircraft. For full year 2025, Cebu Pacific generated PHP 120 billion in revenue, up 14% from the previous year as the airline carried a record 26.9 million passengers, a 10% increase, and with improved passenger yields while maintaining a healthy 84% load factor. Lower fuel prices, a steady peso, a more cost-efficient fleet and various other cost efficiency measures all contributed to significantly improved profitability. Full year EBITDA grew 21% to PHP 30.9 billion for an improved margin of 26%, while operating income or EBIT grew 25% to PHP 11.5 billion, reflecting a healthy 10% margin. Core income before tax grew 54% to PHP 4.8 billion. And with additional gains from engines received as compensation from our OEM, Cebu Pacific's net income for full year 2025 more than doubled to PHP 12.3 billion. We entered 2026 with continued growth, supported by healthy bookings and resilient demand across both our domestic and international markets. At the same time, we remain mindful of the crisis and uncertainty in the Middle East and the potential impact of elevated fuel prices on our business. In times like these, it becomes even more important that Cebu Pacific is operating from a position of relative strength. As the largest low-cost carrier in an archipelago of more than 7,000 islands, we play a critical role in connecting communities across the country. Our robust domestic network and our new more fuel-efficient fleet provide operational advantages that support our resilience, both commercially and financially. Let me now turn it over to Trina to discuss the financial results.

Thanks, Mike. The fourth quarter of 2025 was quite challenging for the airline as we experienced a higher number of aircraft on ground than anticipated, unexpected operational disruptions, including 2 significant typhoons, and an overall softening of consumer sentiment. These conditions limited Cebu Pacific's seat capacity in the fourth quarter to 8.5 million, remaining relatively flat compared to same period last year. We carried 6.9 million passengers during the quarter, 1.5% lower, resulting in an average seat load factor of 82%. On the other hand, average fares increased by 6% to PHP 3,046 per passenger, supported by the Christmas holiday period, resulting in total passenger revenue of PHP 21.1 billion, up 5% year-over-year. Ancillary revenue rose 8% to PHP 9.3 billion, supported by a 15% increase in ancillary yield per passenger, supported by the repricing of some administrative fees and improved take-up of conversion bundles. Cargo business delivered a strong growth, with revenue up 19% to PHP 2 billion as cargo volume reached over 61 million kilos, up 15%, coupled by a 4% improvement in yield per kilo. This was supported by Cebu Pacific's additional widebody capacity which captured the growing demand in this segment. With these, Cebu Pacific's total revenues for the quarter reached PHP 32.3 billion, 6% higher than same period last year. With 6% growth in revenue, EBITDA for the fourth quarter grew by 11% to PHP 8.7 billion, reflecting an improved EBITDA margin of 27%. Lower general and administrative costs helped offset the increases in crude maintenance costs. Fleet ownership costs also increased. We had 7 new aircraft deliveries throughout 2025, which replaced 5 older exiting aircraft, and we also had some additional spare engines. This brought our operating income to PHP 3.7 billion, a 6% year-on-year increase, which sustained our EBIT margin of 11%. Excluding fuel, cost per ASK increased 3% to PHP 2.13, but total CASK remained flat at PHP 3.06 despite the higher cost of a larger fleet. Financing costs remained flat as well despite the increase in financing for new aircraft and engine deliveries. This resulted in a pretax core income of PHP 1.9 billion, a 13% increase year-on-year. And with additional PHP 1.6 billion in noncore gains from sale and leaseback transactions, FOC engine revaluation and a stronger peso, Cebu Pacific delivered a net income of PHP 2.8 billion for the fourth quarter, a 40% increase from the PHP 2 billion earned in the same period last year. This brings us to Cebu Pacific's full year 2025 results. Total revenue reached a record PHP 119.9 billion for 2025, a 14% increase from the previous year. Passenger revenue rose 13% to PHP 80.8 billion, driven by a 10% increase in total passengers carried, supported by a healthy 84% seat load factor and a 3% improvement in average fares. We flew 26.9 million passengers in 2025, with an average fare of PHP 3,005 per passenger. Ancillary revenue grew over 14% to PHP 32 billion. In addition to passenger growth, ancillary yields improved 11% to PHP 1,125 per passenger. This was partly tempered by the absence of PHP 1.3 billion in non-passenger-related revenues recognized last year. Cargo revenue grew 27% to PHP 7.2 billion as we carried 215 million kilos, up 27%, with only a 1% trade-off on cargo yield. It is worth noting that CEB is now the largest operator of A330neo aircraft in Asia with our fleet of 14 aircraft. With close to PHP 120 billion in revenue, EBITDA for full year of 2025 reached PHP 30.9 billion, up 21% year-over-year, expanding our EBITDA margin to 26% from 24% last year. Operating expenses increased 13% to PHP 108.4 billion, supporting a 6% increase in flights. The deployment of more wide-body aircraft and higher-density narrow-body configuration drove a faster 15% expansion in available seat kilometer or ASK. Excluding fuel, cost per ASK increased 5% year-on-year to PHP 2.13, mainly due to higher airport, traffic servicing and fleet repair and maintenance expenses. However, lower fuel prices and the continued introduction of new generation aircraft reduced our total cost per ASK by 1% to PHP 3.05, reflecting the benefits of ongoing productivity initiatives. As a result, operating income grew 25% to PHP 11.5 billion, with operating margin improving to 10% from 9% last year. Pretax core income reached PHP 4.8 billion, up 54% year-on-year. And finally, with the additional gains from 5 FOC engines, Cebu Pacific's net income for 2025 expands to PHP 12.3 billion, more than double the PHP 5.4 billion earned in 2024. Overall, these 2025 results reflect the continued strengthening of Cebu Pacific's operating fundamentals and financial resilience. Cebu Pacific ended 2025 with total assets of PHP 264.7 billion, a PHP 26.4 billion increase since the start of the year, and total liabilities of PHP 245.7 billion, a PHP 17.5 billion increase. With 7 aircraft delivered replacing 5 exiting aircraft, including 2 ATRs which have been classified as held for sale, CEB ended the year with a total fleet of 100 aircraft. In addition, CEB took delivery of 10 spare engines during the year. Net debt ended at PHP 169.7 billion, a PHP 13.4 billion increase from start of the year, while total equity rose to PHP 19.9 billion, an PHP 8.9 billion increase. These resulted in an improved net debt-to-equity ratio of 9x as well as an improved net debt-to-EBITDA multiple of 5.5x. Cebu Pacific maintained its healthy cash position as we generated PHP 39.4 billion in cash income for the year. After outflows for working capital of PHP 10.8 billion and PHP 1.5 billion in net interest and tax payments, cash inflow from operations amounted to PHP 27.1 billion. Cash outflows for CapEx amounted to PHP 18.9 billion. This was offset by the PHP 11.3 billion in proceeds from the sale of aircraft and engines, and another PHP 1.3 billion increase in other assets. These resulted in a net cash outflow of PHP 6.4 billion for investing activities. Financing activities recorded a net outflow of PHP 19.4 billion, reflecting debt and lease repayments, including the repayment of PHP 5.5 billion in short-term debt as well as the PHP 2.8 billion dividend payout to preferred shareholders in October of 2025. Overall, these movements resulted in a net cash inflow of PHP 1.8 billion, ending the year with a cash balance of PHP 21.7 billion. This liquidity position underscores our ability to fund operations, meet obligations and support strategic initiatives while maintaining financial flexibility. I now turn you over to our President and Chief Commercial Officer, Xander, to share Cebu Pacific's commercial and operational highlights.

Thank you, Trina, and good day, everyone. Our fourth quarter performance reflected strong holiday travel demand, with Cebu Pacific carrying close to 7 million passengers. While demand remained robust during the peak holiday periods, the quarter was operationally challenging overall. Two successive typhoons, elevated aircraft on ground or AOG levels and a global software update created disruptions that constrained available capacity. As a result, seats remain broadly flat year-on-year and passenger volumes came in slightly below last year. System-wide load factors for the quarter stayed healthy at 81.8%, with international passenger volume rising 5% to 1.8 million, helping offset the 4% decline in domestic traffic to 5.1 million. For full year 2025, CEB carried a record 27 million passengers, up 10% year-on-year. Domestic passenger traffic increased 8% to 20 million, while international traffic surged 14% to 6.9 million. Throughout this expansion, we maintained a stable load factor of 84%, underscoring disciplined network management and healthy underlying demand. CEB continues to offer the largest network in the Philippines, consisting of 63 destinations, 37 domestic and 26 international, through 124 routes across 5 hubs with over 3,200 flights per week. Throughout 2025, we've added additional frequencies to high-demand destinations, including Coron, Davao, Bohol, Da Nang in Vietnam and Shanghai in China. As we move forward, we will continue to leverage our scale in the Philippine domestic market, the better economics of our larger and more efficient aircraft and our disciplined cost structure. We will support Manila with higher capacity aircraft while growing our ex Manila hubs, enabling a multi gateway strategy. We will remain selective in adding new routes, prioritizing markets with clear sustainable demand and strong LCC potential. On the other hand, we will also remain responsive to the ongoing crisis and make adjustments to our network, if and when needed. CEB consistently outperformed its competitors in 2025, maintaining clear leadership over its main competitors in the domestic segment, while steadily expanding its share in the international market. These gains reflect our disciplined capacity deployment, strong network connectivity and sustained recovery in passenger demand. For the full year of 2025, CEB strengthened its domestic market share to 56.2%, up from 54.1% last year. International market share expanded to 22% from 20.6% despite the heightened competitive activity. In fact, December 2025 saw us widen our lead on domestic with a market share of 59% while being the leading carrier in international with a market share of 24%. CEB expects to build on this positive trajectory in 2026 as newer aircraft enter the fleet. Continued improvements in operational reliability are expected to support further gains in both domestic and international market shares. These developments position CEB to reinforce and potentially extend its market leadership in the year ahead. Our on-time performance in the fourth quarter softened, largely due to heightened airport congestion combined with some operating restrictions during the peak holiday travel period. December marked the busiest month on record for Manila's main gateway, which managed 4.9 million passengers and contributed to a system-wide operational strain. Despite these pressures, our customer experience metrics continued to strengthen. Our quarterly Net Promoter Score, or NPS, improved to plus 41, our highest level in the post-pandemic period, and lifted full year NPS to plus 35 from plus 28 last year. Net sentiment also rose to plus 11 for both the fourth quarter and full year 2025 compared with plus 3 in the prior year. These gains underscore the positive reception to our ongoing efforts to enhance the end-to-end travel journey, including digital booking and payment improvements, more reliable operations and better service delivery. Let me also share an update on our ESG initiatives as we continue to strengthen our commitment to sustainable growth. Consistent with our uncompromising safety culture, we were rated as one of the safest airlines in the world, with no aviation accidents in 2025. Aside from embedding safety in all functions internally, the safety workshop conducted with regulators, partners and key stakeholders allowed us to integrate safety within airport traffic services and airports all over the Philippines. We also recognize our responsibility to manage our environmental footprint. Our approach is to prioritize practical levers we can deliver now. As of December 2025, 72% of our jets are Neo aircraft, and we are on track towards 100% by the end of 2030. This fleet modernization delivered almost 80,000 tonnes in fuel savings from Neo operations alone, avoiding 252,000 tonnes of carbon emissions. Other fuel efficiency initiatives generated an additional 11,000 tonnes in fuel savings and 35,000 tonnes of CO2 avoided. Every tonne of fuel saved also strengthens our cost position. We are also proactively exploring pragmatic approaches towards sustainable aviation fuel, given its current supply and demand variability. We have also integrated sustainability into financing. In 2025, we achieved 76 tonnes of CO2 per revenue passenger kilometer or RPK, outperforming our sustainability-linked loan target of 79 tonnes of CO2 per RPK. Building on this, we entered a second sustainability linked loan for 2 spare engines. This scales our upside from preferential interest rates and further reinforces our commitment to decarbonizing our operations. With our performance in 2025, we are seeing tangible external recognition of our ESG trajectory. Our S&P Global ESG score improved to 47, placing us in the top 30% of global airlines and significantly above the industry average of 38. Our CDP rating also improved to B- from C, reflecting Cebu Pacific's stronger climate governance, disclosures and performance management. While ratings are not the objectives in themselves, these are useful indicators that our strategy is credible, our execution is effective and our approach will continue to expand our impact. Finally, we are actively working on extending our positive footprint beyond our network through high-impact partnerships focused on resilient communities and sustainable tourism. Our purpose is clear, to provide safe, affordable, reliable and sustainable air transport for every Filipino. We deliver on that purpose through measurable performance. In Cebu Pacific, we are integrating sustainability to power our disciplined growth. I now turn you over to our Chief Financial Officer, Mark, to share some insights on our fleet outlook.

Thank you, Xander. We entered 2026 with a constructive outlook. Cebu Pacific's growth remains healthy, and our trajectory continues to outpace competitors across the domestic market as well as most regional routes. Demand conditions remain favorable and market fundamentals continue to support expansion. However, our ability to fully capture this growth was moderated by ongoing industry challenges, particularly around aircraft availability, supply chain constraints and engine-related issues. These required some operational adjustments, but we manage them proactively while continuing to support our growth plans. In 2025, we managed through a range of 8 to 16 aircraft on ground or AOG. The impact was significant enough to limit our annual growth to 10% versus our original 15% to 20% guidance earlier in the year. This year, as we continue to modernize our fleet, we expect to receive 7 aircraft deliveries, comprising of 5 narrow bodies and 2 wide bodies while retiring 7 older aircraft. This will bring our fleet size to 100 aircraft by year-end and increase the proportion of seats on new-generation aircraft by 32% year-on-year. This shift meaningfully enhances fuel efficiency, reduces unit costs and support sustainable growth in the years ahead. We have remained in close coordination with Pratt & Whitney and have maintained strict oversight of our line of balance to actively manage engine shop visits. Encouragingly, we are now beginning to see improvements in turnaround times, indicating that their industrial position is gradually stabilizing. Based on current projections, we expect AOG issues to progressively ease through 2026 and 2027. Our 2026 growth forecast already incorporated an estimated 8 to 10 AOGs. And while conditions in 2027 remain fluid, the trajectory has undoubtedly improved. We anticipate a steady reduction in grounded aircraft over the next 2 years before achieving a fully operational fleet by 2028. As engines return and aircraft reenters service, we will be positioned to scale more efficiently, enhance network reliability and regain operational leverage. Overall, despite near-term constraints, Cebu Pacific is emerging stronger. Disciplined operational management, modern fleet and a favorable demand environment together create a solid foundation for sustained long-term growth. I will now turn you over back to Mike.

Thanks, Mark. Cebu Pacific closed 2025 with solid operational momentum despite a more challenging second half, marked by seasonal demand moderation, weather-related disruptions, more-than-expected aircraft on ground and softer consumer sentiment. The airline sustained robust passenger volumes, strengthened international performance and continued to expand its leadership in the Philippine market through disciplined capacity deployment and a scalable multi gateway network strategy. Over the past 30 years, Cebu Pacific has transformed Philippine aviation by pioneering a disciplined low-cost model at a time when the concept was still emerging in the region. Through focusing on affordability, network expansion and digital self-service, CEB democratized air travel in the Philippines and has carried more than 270 million passengers, strengthening connectivity across the archipelago. Investments in a young fuel-efficient fleet and high-frequency routes have not only sustained market leadership, nearly 60% share domestically, and a growing share across ASEAN, but it's also delivered a compelling value proposition that is now an integral part of life for so many Filipinos. Today, Cebu Pacific continues to scale responsibly, expanding hubs, opening new international routes and enhancing digital platforms. As it looks to the next decade, CEB aims to elevate this impact further, aspiring to carry over more passengers annually and deepen the Philippines integration with the global economy. Thank you for being with us today. Let's fly everyone. Good afternoon, everyone, and thank you again for joining us today. I'm sure all of you have been closely following the recent developments in the Middle East, particularly the evolving situation involving the U.S.A. and Iran. In light of these rapidly changing events, we intentionally limited our prerecorded briefing to our full year 2025 performance so we can provide a timelier update on the potential implications for Cebu Pacific, especially given the sharp rise in fuel prices. Over the past 2 to 3 weeks, jet fuel prices have increased significantly, from an average of around $86 per barrel in February, to a run rate currently of approximately $180 through the month of March. And in recent days, it's exceeded $200 per barrel. These levels are clearly not sustainable for Cebu Pacific if they persist, but alongside the rest of the airline industry. Ultimately, the industry will face losses. The key uncertainty is how long these elevated prices will last, which depends largely on how the geopolitical situation unfolds. While there were earlier signs of de-escalation, recent developments suggest that pressure on global markets may persist for some time. As an airline, fuel is our largest operating cost, making CEB highly sensitive to jet fuel price movements. Current price levels will effectively double our fuel bill, all else being constant. We have started taking steps to pass on incremental cost through fare adjustments and are encouraged by continued resilience in demand for March and April. However, we know from history that there are limits to fare increases before demand softens. Our commercial team also continues to actively manage pricing and optimize our network across multiple scenarios, with a clear focus on ensuring flights cover variable operating costs. We have already implemented temporary network adjustments, including frequency reductions and flight cancellations. These network adjustments have been carefully implemented to address the current impact, with the rest of our network expected to operate as scheduled. That said, we want to emphasize that Cebu Pacific remains very well positioned in the current environment relative to the competition as we have several advantages that provide us some commercial and financial residuals. Firstly, 80% of our flights and 70% of our seats are domestic, where the impact of higher fuel prices on these shorter sectors is significantly less than the price rises required on long-haul sectors. And of these seats, about 70% of our domestic routes are what we call trunk routes, and only 30% are purely leisure driven. This means that the majority of our network serves essential travel, including VFR and business traffic, where demand is more resilient. This underscores how air transport has become an essential public service in the Philippines. As an archipelago of 7,600 islands, without a mid- or long-distance train or ferry network, the country relies heavily on airlines for the movement of people and goods. And our Neo fleet also provides a structural advantage, giving us a natural hedge, since they are 15% to 20% more fuel efficient and also carry 10% to 20% more seats per flight. It's worth noting that as of today, 72% of our jet fleet are already Neo aircraft. Finally, CEB is coming from a very resplendent financial performance and position in 2025. A 10% passenger growth, 14% revenue growth, a 25% operating income growth and more than doubling of net income. Strong free cash flows in 2025 gave us a cash balance of PHP 22 billion. This, plus access to extensive credit lines, will provide us a long liquidity runway to ride through the worst of conditions for at least a couple of years. This is an industry-wide issue. And whilst it may present immediate challenges, it may also present longer-term strategic opportunities. What matters most is starting from a position of strength. Cebu Pacific remains both commercially and financially resilient, supported by our low-cost model and our critical role in connecting an archipelago of over 7,000 islands. Amidst all the noise, we are no less bullish on the fundamental advantage of CEB and its growth outlook as the LCC in the Philippines and in the region over the medium to long term. With that, we're happy to take your questions.

Good afternoon, everyone. Joining us today for today's Q&A session are our Chief Executive Officer, Mike Szucs; President and Chief Commercial Officer, Xander Lao; Chief Financial Officer, Mark Cezar; and VP for Investor Relations, Trina Asuncion. As a reminder, this Q&A session is being recorded. [Operator Instructions] First, we'll be addressing the questions that were submitted in advance via e-mail. Our first question is with regard to fares. How much fare increase equivalent will be needed to absorb this fuel price increase? Any guidance on how you plan to implement these increases in light of the approved fuel surcharges? Do you intend to pass this on fully to passengers? Xander, if you can take this question?

Yes. Thanks, [ CJ ]. So good day, everyone. I guess, really in light of the sharp spike in fuel costs, we really had to raise our average fares. And we've done that through a combination of a couple of levers that we currently have. First of which is we've closed the lower fare buckets or maybe the more affordable fares. We've also started pushing up the allocations in terms of what fare availability looks like. So I guess, over -- I guess, across the board, we've seen an increase in the pricing. We've also applied and implemented fuel surcharges in jurisdictions that allow us to. In fact, the Philippines already does allow for a fuel surcharge level, but we are expecting higher fuel surcharge level come the 1st of April. Now assuming roughly $160 per barrel, we think that we should be passing on roughly we think around PHP 700 for domestic routes and possibly up to PHP 5,000 per passenger on long-haul sectors. But we have already started implementing these increases in tranches. And really, it will vary by route. But I guess, effectively over the next few months, March, April and May, in particular, we are seeing average fares or all-in average fares now roughly higher by 20% to 26% compared to that in early March. So clearly, we've had to make adjustments in light of this fuel spike.

Okay, Xander. So our second question is regard to the fuel charges. How does the approved fuel charges minimize the impact of fuel prices going up ahead of flights that have already been booked and paid for by passengers?

Yes. Thanks, CJ. So let me take that again. I guess, having said it earlier, we already have the ability to raise our pricing within our approved fare structures, and we are actually doing so today across multiple levers, whether that's passenger or ancillary or even cargo. So we are looking forward to the -- I guess, here in the Philippines, the fuel surcharges to be increased starting April 1. The regulator has been kind enough to, I guess, shorten also the windows where the fuel surcharges are applied. So it used to be something like 60 days. Now it's come down to 15. We will continuously work with the regulator to see if we can adjust that even further. In any case, these fuel surcharges are really for sales and bookings starting the 1st of April. So we've had to get ahead of this fuel surcharge increase in the 1st of April. But again, ultimately, that's something we have to actively manage with or without the fuel surcharge mechanisms.

Our next question, with regards to jet fuel, how much of CEB's jet fuel requirements are dependent on supply coming from the Middle East? Mark?

Look, only -- I think I read somewhere it's only about 3% of the Philippines' refined petroleum products are imported directly from the Middle East. And for CEB, specifically, that number is 0. However, it's clear now that the shortages of crude oil in the regional refineries, whether it be China, Japan, South Korea, Thailand is undoubtedly having an impact. And you've seen a few countries with refineries already impose restrictions on exports of refined products. We have been managing the situation proactively. We have secured our fuel supply up until the end of April, and we are already working on supply for May and beyond.

Thanks, Mark. Next question, CEB has just started its Riyadh flights when the war with Iran broke out. How does your Middle East flights impact CEB's flight routes? Trina, can you address that?

Sure, I can take that. Dubai which was already canceled for March and mid-April. Our total seat exposure is at 2%. But on an ASK basis, that would definitely be longer, maybe about close to 7%. On Riyadh, yes, we've already started flights back to Riyadh. So probably no further impact on that.

Thanks, Trina. Our next question is on hedging. Can you share any further detail in CEB's fuel hedging costs and fuel hedging policy in general? Mark can take that.

Look, we're unhedged on fuel at the moment because of the broad view and that the oil markets are oversupplied. That was just before the Middle East conflict. And it was reemphasized in the forecast through late 2025. Our approach to hedging has been more dynamic rather than systemic. We haven't really been using regular periodic trades to hedge our fuel exposure. And we've taken that house view that prices are -- should be in a down trend because of the oversupply. So in this environment, we are fully exposed. But also it's worth noting that no one else is hedged in the Philippines and among our direct competitors. I think -- and given the recent events, I think it's safe to say that it's probably too late now to be looking at further hedges. But it's clear, there is an opportunity, the firms are still in backwardation. If we wanted to, we would -- we can still hedge some of our exposures, particularly on crude, but it's something that we're still exploring at the moment.

Thanks, Mark. Our next question, we'll take the questions coming in from the Q&A box here in Zoom. Our first question is, could you discuss your sensitivities to the rising fuel prices of jet fuel and the dollar peso fluctuations?

I can take that one as well. Our monthly consumption is about -- of fuel is about 550,000 barrels jet fuel. So every $1 is $550,000 of incremental cost. And between -- just before the war started up until last week, we've seen our fuel cost double as Mike mentioned earlier. So we're looking at incremental cost of about $50 million just on our -- on the fuel. On FX, every PHP 1 -- at current fuel prices, every PHP 1 depreciation or appreciation in the exchange rate would equate to about 160 million, 170 million a month of incremental OpEx. So that is about the exposure. And of course, we also have like the U.S. dollar-denominated debt, both the convertible bonds and various loans for aircraft financing. That's about gross about $600 million, which is subject to translation, although we also have about 2/3 of our cash that we hold in U.S. dollars, so there is also a natural hedge.

Thanks, Mark. I think this question is also for you. If the Iran conflict is prolonged, what is the group's strategy on debt management? And is the group capable of taking on more debt?

Firstly, I hope not. But look, as Mike mentioned also in his prelude to the Q&A, we have access to bank lines. So we have about PHP 22 billion, similar to the end of last year, PHP 22 billion of cash in cash and then access to about PHP 15 billion of committed lines from local banks. And clearly, because of our parent company, JG Summit, we have access to more shared lines, way more than that, even just with the local banks. We also have a number of unencumbered assets, engines, a couple of aircraft, if we chose to. And then I think the other thing is we have a number of our jets, which are encumbered, are financed with various banks, but the remaining principal is much, much lower than the market value of those assets. So if we wanted to monetize equity, there's still the opportunity available to us. So yes, there are still other ways for us to tap debt in this market. And -- but clearly, that's not the first go to. I think the first avenues we would be looking at here would be more cost discipline, CapEx reductions and such.

Thanks, Mark. On demand for tickets, how are both domestic and international demand for future tickets, meaning next quarter, how is it looking with this conflict in Iran?

Sure. So let me maybe touch on first, I think the more recent demand trends, so March has picked up quite well, and we think we're going to be landing above our initial forecast. I think second quarter, historically, in the Philippines is really a peak travel period. We continue to actually see demand actually taking up the higher fares. And we're quite encouraged by that on both domestic and international shortfall. So we do think there's also an opportunity, for example, on international shortfall. So instead of going to Europe, maybe people would want to visit around Asia. So we have seen some of that. Clearly, there will be some uncertainty in the third quarter. But right now, for what we're seeing in terms of the second quarter, people seem to be -- continue to make bookings, our load fasters continue to be improving on both domestic and international short haul. The one that's obviously hardest to read has been in the Middle East given the uncertainty. But outside of that, it's been pretty healthy.

Thanks, Xander. Next question is on dividends. Are dividends to common and preferred shareholders still on the table for this year?

I'll take that one. I was asked this question about a month ago, and it just goes to show how a week is a long time in aviation or maybe even 24 hours. I mean a month ago, we were expecting to be -- we -- I answered the question and said that we were considering the reinstatement of common dividends. Given our liquidity situation, it was a question of do we look to pay down some debt or do we look to reinstate the common dividend? Clearly, that is no longer on the table given that there will be some sensible disciplines put in place by the company to keep its cash flow balance as -- cash balances as healthy as possible. So common dividends are off the table for now. And in addition, as you all know, we did restate or started the pref share dividends. We will be deferring that for now, again, with a view to cash preservation. As I say, I answered this question very differently a month ago, just goes to show how quickly things can shift.

All right. Thanks, Mike. Our next question is with regard to CapEx. What is the company's expected CapEx for this year? And how does that manage -- how does management plan to fund these requirements particularly in the context of rising oil prices and macro volatility stemming from the Middle East conflict?

I'll take that one. CapEx for this year is still PHP 35 billion. But as Mike noted, one month or even one week in aviation is a long time. I mean this is something we may have to review given the volatility of the whole situation and depending on what the outlook will be. And we do have already financing in place. We have mandated financing for all of -- most of this CapEx given they're 95%, 96% associated with aircraft delivery. And so it's primarily secure. But again, whether we pursue with this or we have discussions with our partners to defer some of this is something we'll have to explore given the -- how the situation evolves going forward.

All right. Thanks, Mark. Our next question will be coming from Kyle Garcia of First Metro Securities from the Q&A chat box. Question is some foreign airlines has recently announced that there's a risk that they might cancel unprofitable routes or unprofitable flights and trim capacity should fuel costs remain elevated. Does CEB share a similar view?

Sure. Let me take that question. I think, first of all, it's really business as usual for us to really review the network in terms of if flights are unprofitable. Now given this elevated fuel spike, I think maybe I'll refer to what I said earlier, demand so far has been strong. We have been able to raise fares and demand has not dropped off in, I guess, at a much -- demand has not dropped off, to be honest. And clearly, this is something we'll have to take a look at in terms of our network. So we are going to make or we have, in fact, today, announced some minor schedule changes, so some reduction in frequencies for certain routes. Some routes we are suspending for summer season and maybe just return back to the same in winter. So that's clearly something we have done, and that's really part of what Mike had mentioned earlier. So a couple of things. Can we make adjustments in terms of what revenue we can bring in? Secondly, can we continue to review what our network looks like and make sure that at the very least, it covers its direct operating costs and makes a margin contribution. So this is an activity that we'll continuously do. We are, I guess, fortunate in the sense that the second quarter is traditionally a strong quarter for us. And we are -- I guess, we're all hopeful that the war doesn't last as long, but should it do so, we will then take additional steps to review the network.

And I'll just -- if I can just add to that. I think this is a sensible action. This is what sensible airlines should be doing in this situation. One is clearly, we don't want to be operating flights that burn cash. But on the same time, we want to give confidence to the customers out there that we will be operating our schedule. And as Xander says, we're entering what is Q2, which is our peak period, and demand remains there. So we've gone out now to say you can be confident the schedule we have on sale now is one that we will be flying. But we did want to do that now, so people can understand the situation. And also, those few flights that were going to be burning cash, we pulled them down already.

Thanks, Xander and Mike. Our next question -- 2 questions coming from Alfred from Flight Global. Does a spike in fuel cost impact the tenant capacity growth for 2026, which is around 10%? Or are you still maintaining that outlook? And then the next question is, could you share what this frequency in network adjustments you're undertaking and are they on international or domestic? And for how long will these adjustments last for?

Okay. Let me kick off on this and Xander and Mark pitch in on anything in particular. But first of all, look, capacity growth for this year -- and it looks like Q1, by the way, is coming in, well, actually better than we anticipated and certainly ahead of last year. And so that's taking -- going to take a growth of around 10% through the first quarter. So that's very healthy. And we were looking for slightly more growth than that through the second quarter. Most of that growth will stay probably with the exception of the Middle East, where we'll obviously have to moderate. Dubai is canceled for now until mid-April. Riyadh, we're pleased to still be operating. But because it's the second quarter, clearly, our profitability is going to be massively impacted, but we've still got revenue that's sufficient to cover the variable costs and more. So we're going to continue going through the second quarter with pretty much what we had in place, which would have been close to mid-teens percentage between sort of maybe 12% to 15% would probably be our plan through the second quarter. Now the issue comes, what happens in Q3, and that's where we will have to look. And well, first of all, what goes on in the Middle East from here on? Are we looking at something which is temporary? Or are we looking at some long-term destruction of oil supplies that's going to impact the industry for maybe a very, very long period of time. I think it's too early to tell. It's very volatile. It's so unpredictable. What we don't want to do now is take drastic panic action when we're actually in a very strong place. We can clearly ride this out unlike others. So we've taken the adjustments that are sensible and disciplined for us to take now, and we're going to give ourselves a bit of time before we take action. Clearly, Q3 is our lowest performing period. And if this -- if we come to the conclusion that this is going to last for a long period of time, then we'll have to look at some stronger capacity reductions during the Q3 off-peak period. Now I don't know if that answered the second question that was in there. I think -- could you also share -- again, I think as we get into -- it's really a Q3 story. Q2, I think we've kind of answered the question. We've come out with our announcement today saying, hey, guys, this is what we're doing, right? Now when we get into Q3, we'll obviously do the analysis based on what our estimations are there. And the one thing I would say, the adjustments that you are going to make are more likely to come on longer-haul sectors than they are on the shorter domestic sectors. And that's one of the underlying advantages we have. Yes, it's a relative advantage because everyone is going to suffer. But relatively speaking, the domestic demand, and as we've said already, our flying -- domestic climate in the Philippines is part of the every day of life. It's a requirement here for everyday living. And so we think that's going to be resilient. The absolute pass on in fares that we have to put into a domestic flight are substantially smaller than what has to go into a short-haul international and certainly a long-haul international flights. So we think we've got a relative advantage as and when we get into Q3. But it's one thing that we'll just have to monitor. We're not making a decision on Q3 today. We made our decisions in the last week or so about what we're doing for Q2.

Thanks, Mike. The next question is actually about fight frequencies, but this is with regard to the looming, I guess, jet fuel shortage. Any potential reduction in flights or will...

No, we've secured supply through, as I said earlier, we've secured supplies through the end of April and we're actively working to secure our requirements for May and beyond. So there is no imminent risk of cancellations due to our fuel shortage. But again, probably similar to what -- if ever there were -- I mean, it's pretty clear. I think that we would prioritize in the same ways as we would in a BAU scenario where profitability would dictate which routes -- which would -- which flights we would keep or not. But as of now, this is not something that we see as an imminent case.

Thanks, Mark. Our next question is, what is the threshold you are forecasting for price increases you just pass on to travelers, how much room would you say CEB has for further price hikes?

Thanks, CJ. So let me take that. I think right now, what -- as I mentioned earlier, we are seeing the market continue to take up the roughly 20% to 25% increases in overall pricing. Obviously, load factors continue to strengthen for at least March, April and May. So we are looking at that. Obviously, the load factor trends are priced lower than compared to the same period last year. But that's also because it's an exchange for a much larger average fare increase that we are trying to pass on to consumers. Look, ultimately, we've seen this at some point in our history that the consumer will only take up to a certain level of fuel price increases. But right now, given that we are still in a relatively strong second quarter, people are still -- consumers are still taking it. I guess the question really is going to be from the third quarter, but I guess it's too early also for us to delve into that. We do have sufficient time. And as Mike also mentioned, we also have sufficient resources to have a longer view on some of these items. But right now as it is, people are taking on those increases in the ticket prices.

Thanks, Xander. [Operator Instructions] Our next question will come from Rona from Maybank. Given you are currently largely unhedged, at what point would you start rebuilding hedge coverage if volatility persists?

No. Look, I think probably 2 things here. I guess what this incident reminds us is that it may not be a bad idea to have some of those -- we used to have them. We call them the doomsday hedges, even if they're just wide band colors where we would give up some of the upside in like super low fuel price scenarios. But then we would get protection in the high-priced scenarios. And then anything in between would be no settlement. So those things, the few are what we call them the insurance -- ultimately, it's an insurance. So it's something we would look at again once prices normalize. But probably in terms of doing more traditional stuff, whether it be swaps or options, I think we probably -- the view -- I don't think the view has changed. Assuming there's not too much supply destroyed in the Middle East, the supply-demand view is fundamentally unchanged. So probably more looking again into -- towards jet fuel in the -- between 80 and 90 before we start actively building another layers of hedges for protection.

Thanks, Mark. Our next question will be coming from [ Matthew Young, BDO ]. What are your sensitivities of an increase in jet fuel prices towards the margins?

I can take that. Mark already answered it earlier, but it's simple. It's around 550,000 barrels a month. So every dollar increase or decrease in fuel prices will be effectively $550,000 on us. That's gross. That's not automatically on profitability. Worth noting, that's the gross increase in fuel prices, assuming no mitigation whatsoever or pass on, that's the impact on profitability. But of course, we have to consider everything that Xander and Mark has noted earlier on pass on the fuel prices and restructuring our network accordingly.

Thanks, Trina. So far, we've covered all the Q&A -- the questions on the Q&A box in Zoom. So far, we have no one raising hand in the audience so far. Would you like to say closing remarks, Mike?

My only closing remarks, I think we've been doing this for a long time now, and this is not an event that any of us have predicted. But I have to say that we just come off a very solid year when we built a very good first quarter as well, the impact of the fuel prices doesn't hit us until the second quarter. So we are incredibly well placed as we go into this, which means that we don't have to take panic decisions, we can make reasonable judgments and also look at the long term. And whilst this is an enormous challenge for the industry, and not just the aviation industry, I think the world at large is going to be facing inflationary pressures the longer this goes on, but we are incredibly well placed relatively to take advantage of whatever opportunities might come up in the longer term. Thank you very much for joining us today. It's been an interesting call, and we look forward to chatting to you again in 3 months' time.

Yes. Thank you, everyone. If you have any questions, feel free to e-mail us anytime at Investor Relations at cebupacificair.com. See you in the next call.