Cebu Air, Inc. ($CEB)

Good morning, everyone. Welcome to the Annual Stockholders' Meeting of Cebu Air, Inc. It is my honor to give you an overview of the company's business and operational highlights for the full year 2025. Cebu Pacific delivered a strong financial performance in 2025, closing the year with solid operational momentum despite a more challenging second half, marked by seasonal demand moderation, weather-related disruptions, higher-than-expected aircraft on ground and softer consumer sentiment. Strong demand in the first half supported capacity expansion, while the latter part of the year tested the resilience of our operations. Despite these headwinds, the business remained firmly on track. For the full year, we generated PHP 120 billion in revenue and carried a record 26.9 million passengers. Profitability improved significantly with EBITDA reaching PHP 30.9 billion and net income more than doubling to PHP 12.3 billion. More about this later, but these results reflect disciplined execution, improved passenger yields, a more efficient fleet and continuous focus on cost management. We also sustained strong passenger volumes, strengthened our international performance and expanded our leadership in the Philippine market through disciplined capacity deployment and a scalable multi-gateway network strategy. In the next parts of our meeting, my colleagues will give you a deeper look into our accomplishments for 2025. Joining us are Cebu Pacific's Chief Executive Officer, Mr. Michael Szucs; Cebu Pacific's Chief Financial Officer, Mr. Mark Julius Cezar; and the Corporate Secretary, Attorney Josine Mendoza. But for now, let us proceed with the first agenda. May I request the Corporate Secretary to please certify on the sending of notices to the stockholders and to the existence of a quorum for this meeting.

Mr. Chairman, I hereby certify that notice of this meeting has been sent to the stockholders of record as of April 1, 2026, via the following methods: first, by delivery to the stockholders of record to their addresses as registered in the books of the corporation; second, by posting on the website of the corporation; and third, by disclosure to the Philippine Stock Exchange. The stockholders have thus been notified of this meeting in compliance with applicable rules and regulations. I hereby certify that there are present in this meeting via remote communication or by proxy, stockholders entitled to vote representing 80.46% of the corporation's total outstanding voting shares and that this meeting is therefore competent to transact the business provided for in the agenda. A quorum is present, Mr. Chairman.

There being a quorum, the Annual Meeting of the Stockholders of Cebu Air, Inc. is hereby called to order. May I request the Corporate Secretary to share the rules and procedures for this meeting.

The rules and procedures are set forth in the definitive information statement and the explanation of the items in the agenda is integrated into the notice of this meeting. All tabulation results of this meeting are subject to validation by [ Puno ], [ Bay ] and [ Aral ]. In case there are stockholders who are with us now during this broadcast, you may send your questions to us at our e-mail address, and we will reply to your questions. The corporation will reply to the questions and comments not taken up in this meeting through e-mail. The e-mail address of the corporation is flashed on the screen. We would also like to remind everyone that for stockholders participating in live voting during the ASM that they will have 40 seconds per question to cast their votes. Voting will take place concurrently with the ASM following the timing of each question as it is presented. Our secure voting system safeguards the integrity of the process, ensuring that stockholders cannot revisit previous questions or advance ahead. A timer will be flashed at the bottom of the screen.

Let us now proceed to the next item in the agenda, which is the approval of the minutes of the Annual Meeting of the stockholders held on May 8, 2025.

Mr. Chairman, the minutes have been made available to stockholders through a link included in the information statement and by displaying the QR code on the screen before the meeting. Stockholders participating in the live voting may now cast their votes. [Voting]

The minutes of the Annual Meeting of the Stockholders held on May 8, 2025, has been approved as submitted by votes representing 80.46% of the total outstanding voting shares of the corporation.

Thank you. The minutes of the Annual Meeting of the Stockholders held on May 8, 2025, is hereby approved as presented. Moving on to the next item in the agenda. May I now call on Mr. Mark Julius Cezar, Chief Financial Officer of the corporation, to present his financial report, together with the audited financial statements for the preceding fiscal year.

Good morning, everyone. I am pleased to present Cebu Pacific's commercial and operational highlights as well as the financial results for full year 2025. Cebu Pacific delivered a robust financial performance in 2025 despite contrasting conditions between the first and second halves. The first half saw passenger volume rise 21% year-on-year, supported by stable load factors and yields, demonstrating that demand absorbed additional capacity deployed into the market. The second half proved more challenging with passenger volume remaining relatively flat year-on-year due to seasonal demand patterns, operational disruptions, including two significant typhoons, a higher number of aircraft on ground and softer economic growth and consumer sentiment. Cebu Pacific carried a record 27 million passengers, up 10% year-on-year. Domestic traffic increased 8% to 20 million, while international traffic grew 14% to 6.9 million. Load factor remained stable at 84%, reflecting disciplined network management and healthy underlying demand. Throughout 2025, additional frequencies were deployed to high-demand destinations, including Coron, Davao, Bohol, Danang and Shanghai. Cebu Pacific continues to operate the largest network in the Philippines with 63 destinations that 37 domestic and 26 international across 125 routes and 5 hubs, supported by over 3,200 weekly flights. The company outperformed competitors in 2025, maintaining leadership in the domestic segment while expanding its international presence. Domestic market share increased to 56.2% from 54.1% in 2024, while international market share rose to 22% from 20.6% despite heightened competition. In December 2025, domestic market share reached 59%, while international share stood at 24%, positioning Cebu Pacific as the leading carrier in both segments. These gains reflect disciplined capacity deployment, strong network connectivity and sustained demand recovery. Cebu Pacific expects to build on this momentum in 2026 as new aircraft enter the fleet. Improved operational reliability is expected to support further market share gains, reinforcing its leadership position. 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 system-wide operational strength. Despite these pressures, our customer experience metrics continue to strengthen. Our quarterly Net Promoter Score 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. This brings us to Cebu Pacific's full year 2025 financial results. Cebu Pacific's full year 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 from last year from early termination options, liquidated damages for delivery delays and sale of certain purchase rights. Cargo revenues grew 27% to PHP 7.2 billion as we carried 215 million kilos, up 27% with only 1% trade-off on cargo yield. It is worth noting that Cebu Pacific is now the largest operator of A330neo aircraft in Asia with our fleet of 14 aircraft. With nearly PHP 120 billion in revenue, EBITDA reached PHP 30.9 billion, up 21% year-on-year with margin expansion to 26%. Operating expenses increased 13% to PHP 108.4 billion, alongside a 15% increase in available seat kilometers. CASK declined to PHP 3.05 as lower fuel prices and deployment of new generation aircraft offset higher airport ownership and maintenance costs. Operating income rose 25% to PHP 11.5 billion, with operating margin improving to 10%. Pretax core income increased 54% to PHP 4.8 billion. Cebu Pacific received 5 spare engines from Pratt & Whitney as compensation for ongoing AOG issues contributing additional gains. With these, net income reached PHP 12.3 billion, more than double the PHP 5.4 billion recorded in 2024. Overall, these results reflect strengthening operating fundamentals and financial resilience. Cebu Pacific ended 2025 with total assets of PHP 264.7 billion, with 7 aircraft delivered replacing five exits, we ended the year with a total fleet of 100 aircraft. Cebu also took delivery of 10 additional spare engines during the year. Total liabilities ended at PHP 245.7 billion with net debt at PHP 169.7 billion, while total equity rose to PHP 19 billion. These resulted in an improved net debt-to-equity ratio of 8.9x and net debt-to-EBITDA multiple of 5.5x. Retained earnings after considering year-to-date income, net of dividends declared ended at PHP 14.9 billion. Cebu Pacific generated PHP 39.4 billion in cash income. After working capital outflows of PHP 10.8 billion and net interest and tax payments of PHP 1.5 billion, operating cash flow totaled PHP 27.1 billion. CapEx outflows amounted to PHP 18.9 billion, partially offset by PHP 11.3 billion in proceeds from asset sales and PHP 1.3 billion from other assets, resulting in a net outflow of PHP 6.4 billion for investing activities. Financing activities recorded a net outflow of PHP 19.4 billion, reflecting new borrowings less debt and lease payments and a PHP 2.8 billion payout for preferred share dividends. Overall, net cash inflow was PHP 1.8 billion, ending cash balance at PHP 21.7 billion. This liquidity position supports the company's operational needs, financial obligations and strategic initiatives while maintaining flexibility. This concludes my report, Mr. Chairman.

Thank you, Mr. Cezar. May I call on the Corporate Secretary to proceed with live voting and to present the results for the approval of the audited financial statements for the corporation preceding fiscal year.

Stockholders participating in the live voting may now cast their votes. [Voting]

Mr. Chairman, we are pleased to report that stockholders representing 80.46% of the total outstanding voting shares of the corporation have approved the audited financial statements of the corporation for the preceding fiscal year as presented.

Thank you, Ms. Corporate Secretary. The report of the Chief Financial Officer is accordingly noted and the audited financial statements for the preceding fiscal year are hereby approved as presented. May I now call on the corporation's Chief Executive Officer, Mr. Michael Szucs, to present Cebu Pacific's outlook and strategic plans for the upcoming year and beyond.

Thank you, Mr. Chairman. Good morning, everyone. Before I proceed to fleet and business outlook, allow me to first highlight Cebu Pacific's commitment to sustainable growth through its ESG initiatives. First and foremost, the airline remains one of the safest globally and safety is embedded across all functions and integral to every decision. This commitment is reinforced by robust governance, both at executive level and through the Board Risk Oversight Committee chaired by an independent director. It is further supported by safety workshops conducted with regulators, partners and key stakeholders to further integrate safety across airport traffic services and airports nationwide. In its most recent assessment, airlineratings.com ranked SEB as one of the top 25 safest low-cost airlines for 2025. Fleet modernization remains a cornerstone of our sustainability strategy. As of December 2025, 72% of the jet fleet consisted of neo aircraft with a target of 100% by 2030. Fleet modernization has delivered nearly 80,000 tons in fuel savings, avoiding 252,000 tons of carbon emissions. Additional fuel efficiency initiatives generated a further 11,000 tons in fuel savings and reduced emissions by 35,000 tons of CO2. Sustainability has also been integrated into financing with a second sustainability linked loan secured for two spare engines, enabling access to preferential interest rates while reinforcing decarbonization efforts. Cebu Pacific's S&P Global ESG score improved to 47, placing it within the top 30% of global airlines and above the industry average of 38. Its CDP rating also improved to B- from C, reflecting stronger climate governance, disclosures and performance management. The company remains guided by its purpose to provide safe, affordable, reliable and sustainable air transport for every Filipino, supported by measurable performance and the continued integration of sustainability into disciplined growth. Now on fleet updates. Cebu Pacific closed 2025 with solid operational momentum despite seasonal demand, weather disruptions, elevated aircraft on ground levels and softer consumer sentiment. The airline sustained strong passenger volumes, expanded international performance and reinforced its leadership in the Philippine market through disciplined capacity deployment and a scalable multi-gateway strategy. Fleet modernization remains a key priority. In 2026, Cebu Pacific expects delivery of 7 aircraft, 5 narrow-bodies and 2 wide-bodies, while retiring 7 older units, maintaining a fleet of 100 aircraft. This transition will increase the share of seats on new generation aircraft by 32% year-on-year, enhancing fuel efficiency, lowering unit costs and supporting sustainable growth. Close coordination with Pratt & Whitney continues with active management of engine shop visits. Turnaround times are beginning to improve, signaling gradual stabilization. Based on current projections, AOG levels are expected to progressively ease through 2026 and 2027, with 2026 guidance already incorporating 8 to 10 grounded aircraft. While 2027 remains fluid, the trajectory is improving. A steady normalization is expected with a fully operational fleet targeted sometime in 2028. Over the past 30 years, Cebu Pacific has transformed Philippine Aviation. As a low-cost carrier, it pioneered the low fare, great value strategy that democratized air travel in the Philippines and has since carried more than 270 million passengers across the Archipelago. Investments in a young, fuel-efficient fleet and high-frequency routes have not only sustained Cebu's market leadership, but it's also delivering a compelling value proposition that is now an integral part of life for so many Filipinos. Cebu Pacific continues to scale responsibly, expanding hubs, opening new international routes and enhancing digital platforms. As it looks to the next decade, SEB aims to elevate this impact further, aspiring to carry over more passengers annually and deepen the Philippines integration with the global economy. I'm sure all of you have been closely following the recent developments in the Middle East. From February to March, jet fuel prices have increased significantly from an average of around $86 per barrel to a run rate of approximately $180 per barrel through the month of March. And in recent days, it's exceeded $200. These levels are clearly not sustainable for 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. Fuel is our largest operating cost, making SEB 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 costs 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 resilience. 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 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, SEB is coming from a very strong 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 advantages of SEB and its growth outlook as the LCC in the Philippines and in the region over the medium to longer term. That ends my report, Mr. Chairman.

Thank you, Mr. Szucs. We now go to the election of the members of the Board of Directors. May I request the Corporate Secretary to read the names of the incumbent members of the Board of Directors.

The incumbent members of the Board of Directors are Lance Y. Gokongwei, Jose Fernando B. Buenaventura, Robina Gokongwei Pei, David Gulliver G. Go, Brian H. Franke; and Alexander G. Lao. The independent directors are Bernadine T. Siy, Brian Matthew P. Cu and Richard Raymond B. Tantoco.

Thank you. May we now have the list of nominees for election to the Board of Directors and voting results after proceeding with the live voting.

Mr. Chairman, in accordance with the nomination process stated in the bylaws of the corporation, the following have been nominated as members of the Board of Directors: Lance Y. Gokongwei, Jose Fernando B. Buenaventura, Robina Gokongwei Pei; David Gulliver G. Go, Brian H. Franke; Alexander G. Lao; and as independent directors, Bernadine T. Siy, Brian Matthew P. Cu, Richard Raymond B. Tantoco. Stockholders participating in the live voting may now cast their votes. [Voting]

There being no other nominations, the affirmative votes in favor of those nominated have been tabulated and the following are hereby declared as the duly elected members of the Board of Directors of the corporation for the ensuing year until their successors shall have been elected and qualified.

Thank you. Let us move on to the next item in the agenda, which is the appointment of the external auditor of the corporation. May I call on the Corporate Secretary to present this agenda item as well as proceed to the live voting and subsequently present the results of the voting for this matter.

Mr. Chairman, the accounting firm of SyCip Gorres Velayo & Company has been nominated as the external auditor of the corporation for the fiscal year 2026. Stockholders participating in our live voting may now cast their votes. [Voting]

After tabulation of the votes, the appointment of SyCip Gorres Velayo & Company as external auditor of the corporation has been approved by the stockholders representing 80.39% of the total outstanding voting shares of the corporation.

Thank you. The accounting firm of SyCip Gorres Velayo & Company is hereby appointed as external auditor of the corporation for the fiscal year 2026. Let us proceed to the next item of the agenda, which is the ratification of the acts of the Board of Directors and its committees, officers and management of the corporation. May I call on the Corporate Secretary to explain this agenda item as well as the results.

Mr. Chairman, the list of acts for ratification of the stockholders are shown right now on the screen. Copies of the said list have also been distributed to the stockholders present by showing the link to the said list on the screen prior to the meeting. Stockholders participating in live voting may now cast their votes. [Voting]

After tabulation of the votes, we are pleased to report that stockholders representing 80.46% of the total outstanding voting shares of the corporation have confirmed and ratified the acts of the Board of Directors and its committees, officers and the management of the corporation for the period beginning from the last Annual Stockholders' Meeting up to the current stockholders' meeting as duly recorded in the corporate books and records of the corporation.

Thank you. The acts of the Board of Directors and its committees, officers and management of the corporation for the period beginning from the last annual meeting of the stockholders up to the current meeting of the stockholders as duly recorded in the books and records of the corporation are hereby confirmed and ratified. Are there any other matters to be taken up for consideration of the stockholders or questions raised via e-mail for the management?

We will now address the inquiries sent to us via e-mail by our shareholders. We have received several questions from our shareholders, and we will try to answer some of them. If we are unable to get to your questions, the corporation will reply to the questions and comments not taken up in this meeting via e-mail.

Our first question is, could you discuss your sensitivities to the rising fuel prices of jet fuel and the dollar peso fluctuations?

On fuel, our monthly consumption is approximately 550,000 barrels of jet fuel. This means that for every $1 increase in jet fuel price, we incurred an additional cost of about $550,000 per month. Since just before the onset of the conflict, fuel prices have nearly doubled, as Mike mentioned earlier. This translates to an incremental cost of roughly $50 million per month. On foreign exchange, at current fuel price levels, every PHP 1 movement in the exchange rate, whether depreciation or appreciation, impacts operating expenses by approximately PHP 160 million to PHP 170 million per month. That gives you a sense of the sensitivity of our cost base to FX movements. In addition, we have U.S. dollar-denominated debt comprising our convertible bonds and various aircraft financing facilities amounting to approximately $600 million on a gross basis. This exposes us to translation effects. With that said, we do benefit from a natural hedge as roughly 2/3 of our cash holdings are also denominated in U.S. dollars, which helps mitigate some of this exposure.

Our second question is, how is demand building up in the coming months since the Middle East conflict and implementation of fare increases?

Thank you for that excellent question. For March, demand came in stronger than our initial forecasts, lifting our first quarter traffic performance above last year's levels. For second quarter, we initially saw customers absorbing higher fares across both domestic and international short-haul markets. However, booking momentum, particularly for May, began to moderate, suggesting some sensitivity to the recent fare increases. It's worth noting that the second quarter is historically a peak travel period in the Philippines. That said, a meaningful portion of second quarter bookings, particularly those for April, were made prior to the onset of the current crisis and at lower fare levels. As a result, margins for these bookings will be impacted by the rise in fuel costs. We are also seeing some opportunity. Within the current environment, there appears to be increased interest in regional travel within Asia, possibly as some passengers opt for shorter-haul destinations instead of long-haul trips to Europe. There is naturally more uncertainty as we move into June and into the third quarter, which is our lean period. We are monitoring booking trends closely and remain cautious given the evolving demand environment.

Our last question is, are dividends to common and preferred shareholders still on the table for this year?

On dividends, a month ago, we indicated that reinstating common dividends was under active consideration. At that time, and given our liquidity position, the key question before us was whether to prioritize debt reduction or resume shareholder distributions. Recent developments, particularly the ongoing situation in the Middle East and the resulting fuel price volatility underscore how quickly conditions can change in our industry. Considering this, the Board has taken a prudent view. Dividends for common shareholders are no longer on the table for this year. Our priority is to maintain a strong and resilient cash position, and we are implementing disciplined measures to preserve liquidity. Similarly, while we made our first preferred dividend payment last year, we will also be deferring preferred dividends this year, consistent with our focus on cash preservation. We believe this approach positions SEB to navigate current uncertainties while safeguarding long-term value for all our stakeholders.

Thank you, Mr. Chairman, and thank you to our shareholders for sending in questions. This concludes the Q&A session.

Are there any other matters that need to be discussed?

None, Mr. Chairman, thank you.

Before we wrap up, let me take this opportunity to thank each and everyone here for taking part in the Annual Stockholders' Meeting of Cebu Air, Inc. As I'm sure all of you know, this year, Cebu Pacific is celebrating its 30th anniversary. Over the past 30 years, Cebu Pacific has transformed Philippine Aviation by pioneering a disciplined low-cost model. By making air travel more affordable and accessible, we have carried over 270 million passengers and strengthened connectivity across an archipelago covering 35 domestic and 26 international destinations. Today, we continue to build on this foundation, expanding hubs, opening new international routes and enhancing our digital platform. But we must always be reminded that growth requires discipline. We need to keep our costs affordable, our standards high and our ambitions bold. We must never lose heart in the face of challenges as they often come with their own unique opportunities. More importantly, we must never lose sight of why we exist, which is to serve the Filipino people. Because Cebu Pacific has never been a company, it has always been a community of dreamers. And together, we will continue building a future where dreams fly. Thank you for being part of that journey. And as we look to the next decade, we remain committed to scaling responsibly, deepening connectivity and delivering great value to all our stakeholders. Our purpose remains the same. Let's fly everyone. With this, the 2026 Annual Stockholders' Meeting of Cebu Air, Inc. is hereby adjourned. A link where a replay of this meeting will be made available on the website of the corporation. Thank you very much for joining us.