In a presentation delivered at the inaugural Philippine Aviation Summit, Mike Szücs, Cebu Pacific Chief Executive Officer, outlined a compelling vision for the future of the Philippine aviation industry, illuminating key opportunities while keeping a close eye on current challenges and those that lie ahead. His insightful analysis shed light on the industry’s resilience and the strategic initiatives driving growth, and strongly affirmed the two-day summit’s theme, “Philippine Aviation: Ready for Takeoff.”
The Philippines’ Strategic Advantage
According to Szücs, the Philippine advantage, characterized by consistently robust GDP growth and a young, educated population, lays a solid foundation for the growth of the country’s aviation sector.
Touching on the healthy GDP growth forecasts following a brief downtrend due to the COVID pandemic, Szücs commented, “The Philippines is back on that treadmill, it is the envy of most in the world,” underscoring the nation's economic resilience.
Regarding the nation’s population, he noted that the country has a “demographic dividend,” referring to the economic growth potential that can result from changes in the age structure of a country’s population. In the Philippines’ case, this is a major strength as its working-age population now outnumbers those who are too young or too old to work, an emerging problem in many industrialized countries. “The Philippines has a moment here with this young, increasing middle class coming through, increasing the wealth of the nation, but also wanting to travel,” Szücs said.
With the Philippines being positioned strategically in the Asian region, another major advantage, the country is emerging as an important connectivity hub. Manila is a short flight from 25 out of the 40 most populous metropolitan areas in Asia, a potential market of more than 2 billion people. “Southeast Asia is the fastest growing region in the world, period! It’s forecast to be for the next 20, 30 years, and the Philippines is very much at the forefront of that.”
Overcoming Challenges
While there are many opportunities to seize, Szücs took time to acknowledge current challenges in the sector. These include issues with certain engines that affect “time on wing”, the total amount of time an aircraft engine has been in operation since its last overhaul or repair. Closely related to this concern are the ongoing supply chain disruptions, which have impacted not only the time it takes to service grounded aircraft, but also delayed deliveries of new aircraft orders.
In the face of these hurdles, Szücs pointed out that Cebu Pacific is carefully planning well ahead for any contingency that may affect its business. “This is aviation after all,” Szücs quipped, going back to his earlier remark that aviation is a meaningful and exciting industry, but one that also has many challenges.
Emerging Revenue Streams and Economic Impact from Tourism Growth
The imminent growth in tourism presents a lucrative revenue stream for the aviation sector. Comparing the rates of travel per capita among Asian countries, Szücs points out that the Filipinos still lag behind our Asian neighbors – which is an opportunity waiting to be tapped. A study by the ADB suggests that Filipinos took just 0.6 trips per year per capita in 2019, behind Vietnam at 0.8; Thailand at 1.8; Malaysia at 2.5; and far behind Singapore at 11.6. Based on this, Szücs believes that the demand for air travel among Filipinos “is going to surge.”
Pointing to another study, this time by the consulting firm McKinsey, Szücs gives another compelling argument to be bullish, as its projections up to the year 2023 show that expenditures in Philippine tourism are expected to rise by 2.5 times from where they were in 2019, up from $83 billion to $190 billion.
Commitments for the Infrastructure Revolution
The final piece of the puzzle comes by way of improved aviation and tourism infrastructure. With the growing cooperation between the government and the business sector by way of successful PPPs, Szücs shared that he’s never been more optimistic about the industry’s future.
One of the most eagerly anticipated PPPs – the project to upgrade and operate the Ninoy Aquino International Airport – is finally taking shape, having gained the necessary approval by the National Economic Development Authority (NEDA) in September. According to Szücs, the project will take the country’s primary international gateway to the next stage. It will be great for “NAIA, it will be great for the Greater Capital Region (GCR), and great for the Philippines as a whole.”
Other developments, such as the upcoming Bulacan International Airport and the Sangley Point International Airport in Cavite, will further contribute toward increasing the level of capacity required by the GCR. Elsewhere in the country, Szücs says that development and upgrade projects should continue to be rolled out to relieve congestion and improve connectivity.
Airline operators including CEB have a responsibility to serve the public as well. Projected RPK (Revenue Passenger Kilometers) metrics peg travel growth from 2023 to 2042 at 9.5%. What this means, say Szücs, is that “To service the Filipino market over the next 20 years, we need to grow the fleet that's servicing this country at least four times.”
Taking steps toward this goal, Szücs revealed CEB’s intention to submit a Request for Purchase (RFP) for 100 to 150 narrow-body aircraft to the two major aircraft manufacturers, Airbus and Boeing. The order, which could be worth between $12 billion to $18 billion at current listed prices, “will be the largest order, by far, that we will have ever made,” said Szucs at the aviation summit. “This is about us lining up our commitment to coincide with the commitment of the government, and that the private airport operators are making, in terms of this country and developing the sector as a whole.”
Concluding his presentation, Szücs said that the confluence of positive factors should serve as a “call to arms” for the country’s aviation sector, which was once the undisputed leader in Asia. “Now's our time to get back on that pedestal at the very, very top. So, come on, let's go for it! Let's fly, every Juan!"
The inaugural Philippine Aviation Summit was organized by the European Chamber of Commerce of the Philippines and the Asian Business Aviation Association in partnership with the Department of Transportation. Cebu Pacific co-presented the event.
For more information on Cebu Pacific, visit cebupacificair.com
