School of Business and Economics

Department of Hospitality Management

Hospitality Section
_______________________

CBMEC 2
Cebu Air Inc.
________________________

By:

Arañas, Arvy

Castilla, Luigi

Chang, Hui-ya

Francisco, Francis Dale

Loayon, Austin Matthew

Sabalones, Lovely Earth

Sarong, Sofia

Bachelor of Science in Hospitality Management

3rd Year
 Executive Summary

Cebu Pacific is an aviation company that is based on the grounds of Mactan-Cebu

International Airport, Lapu-Lapu City, Metro Cebu, in the Philippines. This paper is a study
concerning the current performance of the company and divided into three parts: the External
Factors Evaluation, Internal Factors Evaluation, and the Strategic Plan with each part dependent
on each other.

The External Factors Evaluation evaluates the external position of the organization or its
strategic intentions The purpose of this is to identify all the external and internal elements, which
can influence the company’s performance. The analysis requires evaluation and assessing the
level of threat or opportunity the factors might present. The highest weight opportunity factor is
the Technological Convenience with the weight of 0.52 since self-check-in and seat reservations
are a trend in today’s aviation industry to limit the physical interaction between the passengers
and the employees. Mobile Payments and Fintech Services Acceptance – Mobile Payments is
one of the advancements in technology especially in times of pandemic. Traveling has become
more environmentally friendly and time-efficient owing to technological advancements.
Contrastingly, the highest threat factor is the Pandemic Surge which has a weighted score of 0.48
caused by the COVID-19 virus that has brought several effects on both the environment and
financial stability of the community. Conversely, because of the movement restrictions and the
significantly slow down of social activities, the quality of air has improved due to the reduced
number of flights all over the world. The sudden drop in greenhouse gases has allowed people to
experience cleaner air to breathe.

However, the Internal Factor Evaluation is another strategic management tool used to
analyze the working conditions and strategic position of Cebu Pacific. The purpose of this is to
know the organization's market competency, financial stability, and competitive viability in the
marketplace. The strongest strength is the Strong Captured Marketing since they are good with
promotional advertisements that could obtain and gain passengers with the weight of 0.56. While
the highest weakness is the Net Income with a weighted average of 0.20 because of the

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customers complaining about frequent flight delays and unfavorable planning needs to stand up
because it affects the establishment’s economy and domestic market share price.

On the other hand, in the Strategy Formulation, we used four tools which are SWOT
Analysis, SPACE matrix, McKinsey Model, and Internal-External Matrix. Based on these
formulation tools, it implicates that Cebu Pacific Air should pursue an aggressive strategic
position. This shows that their company has a stable organization, with low growth. The
company should focus on existing successful products. This will help maintain the company’s
performance level. Also, to invest in research and development for new products. Lastly,
potential product penetration through expansion. It also indicates that Cebu Pacific should hold
and maintain its performance.

Through the strategies that were used to analyze, the researchers recommended reducing
cost on the overall operation and opening new routes to have a wider market. Because of the
pandemic affecting the current operation, Cebu Pacific has been slowly shifting to the digital
world. In the recommended marketing strategy, since a lot of people are now on social media,
creating opportunities through this trend to market the products and attract a wider customer
range. With this, it can also help reduce the cost because social media platforms are inexpensive.
Also, one reason to use media as the source of marketing is that the website of Cebu Air Inc. has
a user-friendly interface that is accessible and comprehensible to everyone.

In addition, due to the limited passengers and flights, one of the solutions in reducing
cost is laying off employees and cutting costs such as fuel, before and improvement of supplier
contracts. Minimizing the number of contact points is a more profitable approach. Opening new
international routes can also help in gaining profit. By expanding internationally, it can gain a
broader market. The bigger the company, the more bargaining power it can have. More supplies
needed more discounts to suppliers.

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 TABLE OF CONTENT

Title Page
Executive Summary

Introduction
About the Company

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I. INTRODUCTION

Cebu Pacific Airlines was founded in August 1988 and started operating in March 1996.
It is the Philippines' largest airline and is based primarily at Ninoy Aquino International Airport
in Manila, and Mactan-Cebu International Airport in Cebu. In 2008, JG Summit, their parent
company, ranked fifth in Asia in terms of total passenger growth. In 2008, the business
transported 5.38 million passengers, up 20.7 percent from 2007. As of 2010, has added several
international destinations, which gives Filipinos an opportunity to visit countries like Brunei,
Japan, Vietnam, and more. Cebu Pacific is the leading company that provides low cost to both
domestic and international flights in the Philippines.

Cebu Pacific charges extras including meals, priority boarding, seat allocation, and
baggage to make up for revenue lost leading to decreased ticket costs. As of December 31, 2015,
it operates 56 domestic and 41 international flights with a total of 2,685 scheduled weekly
flights. It has a fleet of 55 aircraft, including 8 Airbus A319s, 33 Airbus A320s, 8 ATR 72-500s,
and 6 Airbus A330s. On its domestic and international routes, the company provides not only
passenger service but also the airport to airport cargo services, as well as related services such as
cancellation and rebooking options, in-flight merchandising, and travel-related products and
services.

In 2020, the Philippines banned air transport for almost three months as the majority of
cities and towns were put under lockdown. As a precaution against COVID-19, several local
governments have taken their time before opening their boundaries. Before the pandemic, Cebu
Pacific operated about 400 flights a day. In 2020, the budget airline increased from 47 flights a
day in the third quarter to 76 flights a day in December. The December estimates were about
20% of the pre-pandemic levels. Cebu Air, the listed operator of budget carrier Cebu Pacific,
recorded a net loss of P22.2-billion in 2020 as the COVID-19 pandemic decimated the aviation
industry. Cebu Air disclosed to the local stock exchange on Tuesday, March 30, that its sales
from January to December in 2020 totaled just P22.6 billion, 73 percent less than in 2019.

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 Cebu Pacific would be required to wear face masks for the duration of the flight. This is
in addition to the need to wear facial masks from the time the passengers reach the airport
terminal before and after destination. CEB aims to introduce improved biosecurity prevention
measures to ensure the safety of our travelers and employees. These safety precautions include
thorough cleaning and disinfection processes for all aircraft and equipment regularly before,
rapid antibody testing on all front liners and crew, and contactless flight procedures. They are
focused on global best practices that follow the tightest safety requirements.

About the Company

Figure 1. Cebu Air, Inc. Logo

Cebu Air, Inc., called "Cebu Pacific Air" by the public, is the Philippines' largest low-cost
airline. As of January 2013, the company has 3,297 employees. 2,565 were from operations, 429
from the commercial departments, and 303 from the support departments. It established itself in
the Philippines as a carrier of the “Low Fare, Great Value” approach, offering lower fares than
traditional full-service airlines and providing passengers with a pleasant travel experience and
quality services. It is one of John Gokongwei's assets at JG Summit Holdings. The airline is a
subsidiary of JG Summit Holdings, which is owned by the Gokongwei family, one of the
Philippines' wealthiest Filipino-Chinese families. President and CEO Lance Gokongwei, the
presumptive successor of John Gokongwei, the chairman emeritus of JG Summit, currently leads
Cebu Pacific

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Company Organizational Structure

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Company Board of Directors

Figure 3. Cebu Pacific Incorporation Board of Directors

Products and Services

CEB X
​The fastest and most effective way to get your URGENT or RUSH cargo to its
destination. CEB X requires confirmation from the CEB ​Cargo office and is on a first-come,
first-served basis. Cargoes are accepted only up to two (2) hours prior to the published schedule
of flight departure.
​
Blocked Space Arrangement
​This service is offered to cargo customers who require a fixed and guaranteed space with
CEB Cargo. For a guaranteed space allocation on selected flights, we negotiate rates on a per
requirement basis. Cargoes are accepted only up to two (2) hours before the published schedule
of flight departure.
ATR Charter
​CEB Cargo offers chartered services using the ATR 72-500 aircraft. It has an average
capacity of 5,500kg loose cargo with a maximum gross weight of 50kg per piece.
​
Transshipments
​CEB Cargo provides efficient and seamless inter-island connections via Cebu Pacific's
four major hubs: Manila, Cebu, Clark, and Davao. Move your cargo shipments to onward
destinations that have no direct flights from the point of origin.

Cargo Interline
​CEB Cargo has interline partners for cargo to and from Europe, Africa, and the Americas.
Send your cargo through our 15 interline partners listed here.
​
Packaging Services
​Protect shipments from getting wet or damaged for all flights from Manila to destinations
in Luzon, Visayas, and Mindanao. Offerings are:

● Plastic jack wrap services

● Plastic sheets
● Bubble wrap
● Styro boxes
​
II. RESEARCH DESIGN AND METHODOLOGY

The following sources were used by the researchers to gather data:

Primary Data

The Cebu Pacific Airlines data was gathered from various internet sites. The researchers
have gathered data that will require them to further analyze Cebu Pacific Airlines' business
approach strategy. In addition, researchers have gathered a variety of data, including the
company's revenues, profits, and business overview. The data were analyzed using David's
Framework for Vision and Mission Statements, PESTEL for the external macro-environment,
PORTER'S 5 Forces for competitor research, SWOT Analysis, SPACE matrix, and
Internal-External Matrix. Based on these formulation tools, Cebu Pacific Air must pursue a more
aggressive strategic approach as a result of all this.

Secondary Data

Secondary data was gathered from a range of internet sources. An overview of the
company to identify new business opportunities and make better business decisions. The
researchers used the internet to gather additional information about company competitors.

Scope and Limitation

This research aims to determine the detailed information on Cebu Air Inc required for
business, competitors, total sales, and marketing performance of the company based on the data
gathered in the research.

Major Assumptions

The researchers came up with the following assumptions:

● Cebu Pacific was the first airline to use the “low fare, great value strategy.”
● Cebu Pacific led the country’s aviation industry in terms of innovation and creativity.
● Cebu Pacific has earned a COVID-19 compliance rating of 7/7 stars from Airline Ratings
as it continues to implement a multi-layered approach to safety.
III. COMPANY’S VISION AND MISSION

In March 1996, Cebu Pacific entered the market with a promise to give “low fare, great
value” to every Juan who wanted to fly. After offering fares to domestic destinations, CEB
launched its international operations in November 2001. On-time performance, schedule
reliability, and a smooth, comfortable flight are just some of the things that the air traveling
public has come to expect from Cebu Pacific.

Vision Statement. “The most successful low-cost carrier in the world.”

- Cebu Pacific is internationally renowned as the most successful low-cost carrier in the
Asia-Pacific Region.

Mission Statement. “Why everyone flies”

- Cebu Pacific brings people through air travel that is safe, convenient, reliable, and
exciting.

Core values. “Service, Integrity, Trust, Courage, and Best of Filipino spirit.”

B. Comment or evaluate the vision and mission statements using David’s framework and
other criteria discussed in class. Recommend changes if needed.

Cebu Air Inc’s vision is to continue to be a leader in innovative pricing strategies, as it

consistently offers the lowest fares on any route it operates. Cebu Pacific is the leading company
not only in terms of low fares but also in terms of innovation and creativity. Cebu Air Inc’s
mission has also learned to expect a new flying experience, one that provides fun in the sky with
its onboard games. The aim of the company, as described in its vision statement, is to be the most
successful low-cost carrier in the country. This vision sets out the company's direction, making it
a good starting point for determining the company's direction and developing its mission
statement. This mission statement could have projected the company's interest for continuous
growth.
Customers - Who are the enterprise’s present and future customers?
Cebu Pacific Air’s target market is those leisure and business travelers who travel
frequently, or during vacations/holidays and demand an affordable airline service. Cebu Pacific
prioritizes the needs and wants of the customers. By providing low-cost fares to their valued
customers, they aim to find what can satisfy and make the customers satisfied, resulting in repeat
business.

Product and Services - What are the firm’s major products or services?
Cebu Pacific made good use of technology to market their goods and services.
Furthermore, because of the low flight rates, more passengers come to experience their service.
The company offers not only passengers but also products and services including CEB X,
Blocked Space Arrangement, ATR Charter, Transshipments, Cargo Interline, and Packaging
Services.

Markets - Where does the firm compete?

Cebu Pacific offers a low-cost flight that is accessible to a wide range of customers. Cebu
Pacific dominated the target market’s ability to travel and provide consumers with experience as
a result of this. This will help the airline's expansion plan while also benefiting the travel
industry. The leisure and business travelers who want less comfort and more travel fare Cebu
Pacific Air's target market.

Technology - What is the firm’s basic technology?

Cebu Pacific, as stated in its mission statement, "Why everyone flies.” They bring people
together through safe, affordable, reliable, and fun-filled air travel. Cebu Pacific's equipment,
services, and systems enable passengers to prefer great, high-quality service and put people at the
heart of service.
Concerns for survival, growth, and profitability - Is the firm committed to growth and
financial soundness?
Cebu Pacific aims to provide investors with stable financial returns while maintaining financial
stability. Cebu Pacific is recognized for innovation, commitment to excellence, and the industry
for success.

Philosophy - What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
Among their core values are service, integrity, trust, courage, and the best of the Filipino spirit.
Cebu Pacific is the most profitable low-cost airline in the Asia-Pacific region. Cebu Pacific has a
strong sense of family that extends beyond the airline and includes the communication services
they provide as well as family love.

Self-concept - What is the firm’s distinctive competence or major competitive advantage?

This segment corresponds to the company's mission and vision statements. Cebu Pacific
enhances the quality of life in the communities it serves as well as being an active partner in the
country's growth.

Concern for public image - Are employees a valuable asset of the firm?
Cebu Pacific provides many opportunities for professional and personal growth in learning. Cebu
Pacific employees provide passengers with a fun, reliable, and safe experience.
IV. EXTERNAL ANALYSIS
General Environment

Figure 4. PESTEL Analysis

Political Aspects

Opportunity - Role Local Governments Play

Local governments have a significant impact on policy development and implementation

since most legislation and regulations are enforced by local governments, and compliance
agencies typically report to local governments in their states on different laws. Because of the
criteria for inbound and outbound visitors, this has a major impact on the tourism industry.

Threat - Transition of Government and Changes in Policy

The "Open Skies Policy" is one of the most significant developments in the aviation
industry. Open Skies agreements have greatly increased international passenger and freight
flights to and from the United States, encouraging increased travel and trade, increasing
productivity, and spurring high-quality jobs and economic growth. Open Skies agreements do
this by removing government intervention from air carriers' business decisions about routes,
capability, and pricing, allowing them to provide customers with more affordable, easy, and
effective air service.

Threat - International Trade & Other Treaties

In 2016, the ASEAN Economic Community (AEC) was officially launched. The
organization should give ASEAN members (including the Philippines) a greater role in regional
and global economic affairs. The Philippines claim the Malaysian territory of Sabah which, it
argues, was illegally ceded to the new Malaysian state by Brunei. The dispute has been dormant
since the late 1970s, however. The Philippines has also claimed the Spratly Islands in the South
China Sea, and brought its case to the Permanent Court of Arbitration in The Hague in 2016. The
Court ruled that there was no evidence China had historically exercised exclusive control over
the waters or resources. China has said it will not be bound by the ruling and the Philippine
president has recently suggested that he may withdraw the claim.

Economical Aspect

Opportunity - Demand Shifts from Goods Economy to Service Economy

 In comparison to manufacturing, commodities, and agriculture, the share of services in
the economy is steadily growing. The contribution of tourism direct gross value added (TDGVA)
to the Philippine economy, as calculated by GDP, is expected to be 12.7 percent in 2019. The
TDGVA reached PhP 2.48 trillion in 2019, up 10.8% from PhP 2.24 trillion the previous year.

Source: statistica.com

Figure 5. Percent Share of Tourism

Advocating for sustainable tourism, according to Puyat (2021), has enhanced air
connectivity and the hosting of major tourism events. It has also aided in the promotion of digital
and online marketing, various tourism product portfolios, such as culinary tourism and farm
tourism, healthy public-private collaborations, and international accolades and recognitions. The
comprehensive visitor arrivals report for 2019 will be published in early January of the following
year. In 2019, the Philippines hopes to surpass its goal of 8.2 million international tourist
arrivals, which is a million more than last year. The Philippines has received a total of 1,499,524
Chinese visitors in the first ten months of 2019, up 41% from the same timeframe last year. More
than 300 flights fly between China and the Philippines every week. Tourism contributed 12.7
percent to the Philippine economy in 2018, according to the Philippines Statistics Authority
(PSA).

Opportunity - Increased spending on infrastructure on the Philippine Development Plan

More public-private partnerships should be encouraged, and one million new jobs should
be created. Agribusiness, manufacturing, construction, information technology, business process
management, logistics, and tourism are among the priority sectors. Higher public capital
investment, on the other hand, would necessitate the generation of additional revenues, which
will be backed up by a more pragmatic fiscal system that ensures debt sustainability.

According to government officials, the investment rate should be raised to about 40% of
GDP (up from 25% today) to prepare the economy for a sustained growth rate of around 7%. The
economy seems to be on the upswing. The government's medium-term growth goal is 7-8% per
year. In 20182020, however, real GDP growth will average about 6.9% per year. Due to
bureaucratic roadblocks, the government might not be able to completely meet all of its budget
goals.
In the medium term, the country's demographics could fuel consumer spending. While
well-educated Filipinos aged 25 to 34 make up just 3% of the population, they account for more
than 20% of discretionary consumption, or spending on things other than basic needs. By 2020,
this demographic group is projected to account for half of all discretionary spending in the world.

Threat - Level of Household Income and Savings Rate

Savings, in economic terms, is a decision to forego some current consumption in
exchange for increased future consumption, so the savings rate represents a person's or group's
rate of time preference. The marginal tendency to invest is also linked to the savings rate.
According to Luan (2019), strategies to increase active travel usage may promote healthy weight
loss and maintenance, but low income can restrict one's ability to benefit from active travel.
Household income, or household income per person when normalized to family size, has a
significant effect on mode preference. On the data shown, the average monthly salary in the
Philippines from 2016 to 2020 has greatly affected the Pandemic that we are currently
experiencing.
 Source: statistica.com

Figure 6. Average Monthly Salary in the Philippines

The poor will often choose to live closer to their jobs to save money on transportation,
which is highly unlikely in the case of the wealthy. They will live a long way from their
workplaces and commute there. Often, when the poor use public transportation, access is a major
problem because, in many areas, feeder services are still inadequate and costly, particularly when
compared to what a typical poor person can afford for travel (Daniels, 2012).

Threat - Inflation Rate

For the aerospace and airline sectors, fuel prices are one of the most significant expenses.
Fuel costs account for 29 percent of total operating expenditures and 27 percent of total airline
revenue on average. The airline industry's bottom line benefits from the fall in fuel prices per
gallon, which fell by 6.4 percent in 2014. The 6.4 percent drop in the cost of fuel increases the
airline industry's profit margin by almost 1.7 percent in absolute terms, assuming full
pass-through and all other variables remain constant.
 However, since airline carriers also sign forward purchasing agreements that set the fuel
price a few years in advance, the fuel cost savings are not always realized immediately.

Year-on-Year Inflation Rates in the Philippines, All Items In Percent

January 2016 - December 2020

Month Year

2017 2018 2019 2020 2021

January 2.5 3.4 4.4 2.9 4.2

February 3.1 3.8 3.8 2.6

March 3.1 4.3 3.3 2.5

April 3.2 4.5 3.0 2.2

May 2.9 4.6 3.2 2.1

June 2.5 5.2 2.7 2.5

July 2.4 5.7 2.4 2.7

August 2.6 2.6 6.4 1.7

September 3.0 6.7 0.9 2.3

October 3.1 6.7 0.8 2.5

November 3.0 6.0 1.3 3.3

December 2.9 5.1 2.5 3.5

Average 2.9 5.2 2.5 2.6

Source: Survey of Retail Prices of Commodities for Consumer Price Index, PSA
 Table 1. Year-on-Year Inflation Rates in the Philippines

The Philippines' headline inflation rate increased to 4.2 percent at the start of 2021,
continuing its upward trend. This is the fastest rate of inflation since February of this year. In
December 2020, inflation was 3.5 percent, while it was 2.9 percent in January 2020. The higher
annual increment of heavily-weighted food and non-alcoholic drinks at 6.2 percent during the
month, up from 4.8 percent in December 2020, drove up overall inflation.

Higher annual increases in the indices of transportation, at 8.6%, and restaurant and
miscellaneous goods and services, at 3.0%, have contributed to the country's inflation rate. The
majority of the product groups maintained their annual rates from the previous month, except
leisure and culture, which saw its annual rate fall by -0.7 percent during the month.

Threats - Fluctuation in oil prices

For the aerospace and airline sectors, fuel prices are one of the most significant expenses.
Fuel costs account for 29 percent of total operating expenditures and 27 percent of total airline
revenue on average. The airline industry's bottom line benefits from a 6.4 percent reduction in
fuel prices per gallon in 2014. The 6.4 percent drop in the cost of fuel increases the airline
industry's profit margin by almost 1.7 percent in absolute terms, assuming full pass-through and
all other variables remain constant. The savings in fuel costs, on the other hand, are not always
realized. Since airline carriers also sign forward purchasing agreements that set the fuel price a
few years in advance, they must accrue entirely and instantly.

Social Aspect

Opportunity - Consumer attitude towards leisure

More Filipinos are spending money on travel during the holidays, whether it is to a local
destination such as Boracay or Palawan, or a foreign country. Young professionals who earn
year-end bonuses, 13th-month pay, and other financial benefits from their employers, as well as
affluent households with spare cash, are especially fond of traveling. These vacations are usually
taken during the Christmas and summer vacation seasons. Among the reasons why Filipinos are
using their holiday time to travel is the increasing affordability of domestic and international
airfares, as well as the wider availability of deals from group buying sites such as Ensogo and
Groupon.
According to the Department of Tourism, 47 million Filipinos visited local tourist
attractions in 2014, up from 44.1 million in 2013. Meanwhile, due to their proximity and lack of
visa requirements for Filipinos, Hong Kong, Singapore, and Thailand remain common overseas
destinations for Filipinos. However, more Filipinos are visiting Japan, South Korea, the United
States, and the United Kingdom. Even though younger Filipinos are naturally more adventurous,
older Filipinos still enjoy traveling with their families. A 61-year-old mother recently returned
from a trip to the United Kingdom said, "Traveling with my husband and children is a way to
experience various cultures and beautiful places together."

Opportunity - Education Level in Society

The education level of the social impacts both the quality of jobs and level of income. A
high level of education often results in better jobs, higher income, and higher spending on
complex and aspirational products. Education level will not only benefit personally but the
society and community will also benefit from the education learned. According to the University
of the People, “Societies with higher rates of degree completion and levels of education tend to
be healthier, have higher rates of economic stability, lower crime, and greater equality. For more
surprising benefits of education, read on.” Higher levels of education may help oneself expose to
diversity and may be able to learn about different cultures.

Threat - Pandemic surge

Due to the emerging pandemic, there are limited flights, and flights have been canceled.
Since the airline industries are now slowly getting back, Cebu Air Inc. according to Lao the chief
strategic officer has also been flying over thirty countries, which has thirty different regulations.
According to Flightglobal “Lao notes that before the pandemic the airline operated some 400
flights daily. In June last year, when the country emerged from its first major lockdown, the
carrier was operating about 10 sectors daily. This has since risen to 100, comprising both
passenger and cargo services. Of Cebu Pacific’s 73 aircraft, half are in storage either in Alice
Springs, Australia or at Cebu Pacific hubs.”

Threat - Consumer attitude towards Health & Safety

The attitude towards health and safety is often reflected in the quality of the products and
cost structures of manufacturing processes. Cebu Gokongwei has stringent norms for health and
safety norms so, in emerging economies, it may have to compete with players who don’t have
high-cost structures that of Cebu Gokongwei. Now, the airline industry is slowly rising again,
there are safety measures implemented or to lessen the trace of the virus. Cebu Air Inc. has
implemented a contactless flight order to avoid close physical contact. From the airport to the
aircraft there has been a strict implementation of the regulations. All cabin crews on the flight
have also been tested and have been given PPE’s for their safety.

Technological Aspect

Opportunity - Technological convenience

Self-check-in and seat reservations are also available on several airlines' websites. Mobile
Payments and Fintech ServiceE-s Acceptance – Mobile Payments is one of the places where the
United States lags behind China. Traveling has become more environmentally friendly and
time-efficient thanks to technological advancements. Travel will become a lot more eco-friendly
if you want to, thanks to the invaluable support of technology.
“Low-cost carriers and online travel agencies were the obvious winners of the online
travel boom over the past 15 years,” according to Rossini, “changing the way today travelers
schedule and book their trips.” Because of the rise of independent travel, tour operators are now
adopting online and mobile platforms to remain competitive.

Opportunity - E-Commerce & Related Infrastructure Development

Air Asia pioneered a new trend in price ads toward the end of the review era. Following
allegations of false advertising against Cebu Air, online seat sales are now advertised with all-in
rates. Furthermore, all-in fares have greatly enhanced the online booking experience for
customers.
The development of technology has been a driving force in increasing airline operating
performance. Using advanced aircraft engine technology, IT solutions, and mobile technology,
airlines have been able to cut costs and increase operations. Better connectivity and a better
travel experience for passengers have been made possible by technology.

Opportunity - Integration of Technology to achieve Sustainability

The most expensive part of an airline's budget is fuel. It currently accounts for more than
a third of all operating costs. Advanced aircraft technology, according to Boeing, one of the
world's largest aircraft manufacturers, has the following advantages: As opposed to older aircraft,
new aircraft such as the Boeing-787, 747-8, and 737 MAX minimize fuel consumption by
double-digit percentages. Aircraft performance also improves by using advanced technology
winglets. Some of the technologies used for fuel efficiency reduce noise by as much as 30%.
They also increase the range distance an aircraft can travel with a given amount of fuel
and payload the amount of cargo an aircraft can hold measured in pounds. The airline will extend
its connectivity and network by increasing the range. Improved payload increases sales and
profitability. Some new aircraft designs, such as the 777-300ER, allow for the addition of ten
economy class seats. This increases the payload.

Opportunity - Acceptance of Technology in the Society

Improving customer convenience in using online booking services. People expect a

hassle-free booking experience, so airlines' websites and mobile applications are critical to the
success of the airline industry in the region. Competition is based on airline website handling
ability during major online seat sales, which are normally pre-scheduled at midnight. Leading
airlines in the country invest heavily in their websites and mobile applications.

Opportunity - Intensified Usage of Social Media

According to a new survey from Adweek, 52 percent of Facebook users dream about
vacation while on the channel, even when they aren’t planning a particular holiday. This is
attributed to FOMO. Fear of losing out, which is particularly prevalent among Millennials. When
asked why they didn't take a last-minute trip because of their #FOMO, 69 percent of millennials
said they regretted it. As a result, user-generated content has become a common source of
inspiration for modern travelers, and it often influences the decision to travel among the younger
generation. Due to the authenticity of user-generated, or earned, content there has been a
transformation in not only the travel buying process but also the post-travel experience.
It's time for travel marketers to take notice and capitalize on this trend, which includes
users finding new destinations, offers, and places to stay via Instagram, as well as how
vacationers are visually sharing their journeys through a variety of other social media platforms.
According to a new survey, 87 percent of Millennials on Facebook claim they use the social
media platform for travel inspiration, while 20 percent use Twitter and Pinterest.
According to Global WebIndex, 54 percent of social media users use social media to
study goods and 71 percent are more likely to buy products and services based on social media
referrals. The effect of Stories can also significantly affect consumer purchasing decisions.
Ephemeral content is a newer trend, but it's still gaining popularity among social media users and
brands. While Snapchat was the first to use Stories as a format, Instagram was the one to
popularize it, with over 500 million daily active users.

Figure 7. Number of Daily Active Users

The content shared through Instagram Stories is usually more raw and unfiltered, which
enables brands to create a more authentic image. It allows businesses to take customers behind
the scenes to demonstrate how they function, their work culture, and the team behind the goods.
All of this contributes to a genuine bond with a brand.

Environmental Aspect

Threat - Pandemic Surge

The global disruption caused by the virus has brought several effects on both the
environment and climate. Because of the movement restrictions and the significantly slow down
of social activities, the quality of air has improved due to the reduced number of flights all over
the world. The sudden drop of greenhouse gases has allowed people to experience cleaner air to
breathe. According to the Managing Air Quality, the levels of pollutants have increased in May
2020, as industries restarts, The report compiles data of two major air pollutants that are emitted
from fossil fuel combustion: nitrogen dioxide (NO2) and fine particulate matter (PM2.5).
Analysis of these two pollutants from March 15 to May 15, 2020, shows an initial and dramatic
drop in air pollutant concentrations at the beginning of the lockdown, and the gradual rebound
during the quarantine.

Threat - Influence of Climate Change

Climate change is prompting a greater scope of outrageous temperatures. Increasing
temperature can affect the aircraft’s performance, for example reducing lift, and this has a
knock-on effect on runway length requirements. Aircraft payload and range will also be affected.
Climate change will further affect the infrastructure, for example, warming and cooling
requirements and heat Temperature change harm runways. The temperature change can also be
expected to change demand patterns, both seasonally and geographically.

Threat - Influence and Effectiveness of Environmental Agencies

Environment quality regulatory organizations play a vital role in maintaining norms.
However, in developing countries, these organizations often use delaying tactics to collect bribes.
The aviation industry is not resistant to the effects of climate change on the environment. When
the number of people flying increases, so does the effect of CO2 emissions. The aviation industry
is responsible but for a small but increasing proportion of GHG emissions. Aircraft are
responsible for about three percent of global carbon dioxide emissions. However, at near
stratospheric levels where commercial jets travel, concentrations of nitrous oxides (NOx) and the
creation of condensation trails (contrails) from water vapor indicate the real effect on global
warming is far higher - perhaps as much as ten percent (GLOBE-Net, 2007).
The influence of Environmental Agencies will significantly affect the organization’s
overall performance and process. It may build friction between the environmental agencies and
could restrict the establishment’s organizations. As a result, the aviation industry should be able
to develop initiatives that aid in climate change reduction and mitigation.

Legal Aspect

Opportunity - Data Protection Laws

Cebu Air Inc takes privacy seriously. Keeping the personal information and corporate
identity of their users and customers with respect and sensitivity. According to the Cebu Pacific
website, the privacy policy does not apply to the practices of the company. When collecting
information from the passenger, Cebu Air Inc, ensures that these data are secured and protected,
however, states on their official website “To the extent permitted by law, Cebu Pacific shall not
be liable for any loss, damage or injury whether direct, indirect or consequential, incidental,
punitive, exemplary or any other loss, damage or injury arising out of or in connection with the
inaccuracies, incompleteness, falsity or errors in the information provided.

Opportunity - Employment Laws

The Labour Code of the Philippines (“Labour Code”) is the primary source of
employment law. The Constitution provides guidance and is supplemented by numerous
employment-related legislation, decisions/ruling by the Philippine Supreme Court, and the
administrative issues of the Department of Labour and Employment. Employment Laws will
affect the operational process of the Company since there are rules and regulations to follow
regarding the policies of the employee rights.

Threat - Strict implementation of Social Rules due to pandemic

Due to the pandemic, aviation, especially Cebu Air Inc., has strictly implemented rules
and regulations to prevent spreading the virus. In line with the Philippine government, the
passengers are required to follow the health protocols such as wearing a face mask and face
shield for the whole duration of the flight, physical distancing, and contactless service. This
significantly affects the overall process of the aviation industry because it limits the number of
passengers thus creating loss and inconvenience for the establishment.

Industry and Competitor Analysis

 Cebu Air Inc. is one of the fastest-growing airline companies in Asia. With a lot of
competitors in the industry, Cebu Air Inc. remains one of the leading and low-cost airlines in the
Philippines. With high demands from all the people traveling across the globe, as of now, there
are no new entrants in the industry.

Figure 8. Porter’s Five Forces Framework

Analysis using the five forces model of competition reveals that the intensity of rivalry in
this segment of the airline industry is beginning to increase. The strength of competitive forces in
Cebu Air Inc.’s external environment is summarized in the graphic below and is further
explained in the section which follows.
 PORTER’S FIVE FORCES

Bargaining Power of Buyers High

Bargaining Power of Suppliers Low

Threats of Substitute Product or Services Medium

Rivalry among the existing competitors High

Threats of New Entrants Low

Table 2. Porter's Five Forces

Bargaining Power of Buyers - High

Prices from various airlines can be found on the internet. Customers can easily pick and match
airline rates and choose the one that best suits their needs. Since airlines compete among
themselves, passengers have a lot of negotiating power because of the high degree of
connectivity.

Bargaining Power of Suppliers - Low

Since there are few vendors on the market, Cebu Pacific is unable to easily switch suppliers. The
majority of them share suppliers, and Cebu Pacific's essential parts were gasoline, aircraft, and
labor.

Threats of Substitute Product or Services - Medium

Such options for connecting to domestic destinations should be considered as well. Shipping
lines are one of Airlines' main competitors in the Philippines. Gothong Southern Shipping Lines,
Trans-Asia Shipping Lines, 2go Travel, and Cokaliong Shipping Lines are among the companies
that can take the place of Cebu Pacific in terms of transportation. However, it remains a
moderate challenge to Cebu Pacific because shipping lines have few destinations compared to
them.
Rivalry among the existing competitors - High

Philippine Airlines is Cebu Pacific's main rival, according to our research. They've been out on
the market for quite some time. Even if they are in different price ranges, PAL has a greater
advantage over Cebu Pacific. PAL supplies its jet parts, engines, and even the plane's interior
furnishings.

Threats of New Entrants - Low

When the current regulatory system introduces such barriers to new companies involved in
entering the market, Cebu Pacific Air will face a low threat to new entrants. New entrants would
be expected to meet strict, time-consuming regulatory criteria in this situation, which will deter
others from entering the industry. Some have already built up a large and dedicated client base.

Competitor Analysis

Figure 9. Cebu Pacific Logo

Cebu Pacific Airlines

The Philippines‘ leading airline, Cebu Pacific (CEB) entered the aviation industry in
March 1996 and pioneered the low fare, great value‖ strategy. The airline continues to be a
leader in innovative pricing tactics, offering the lowest year-round rates for any of its routes.
CEB, the country's aviation industry's pioneer in innovation and imagination, was the first to
launch online check-in, E-ticketing, and seat selection in the Philippines. It recently launched
GetGo, its newest lifestyle loyalty program, to reward frequent fliers with additional perks and
free CEB flights.
 Figure 10. Philippine Airlines Logo

Philippine Airlines
Philippine Airlines Inc. is also known as PAL, it is the national airline of the Philippines
which carries the flag of the country. Headquartered in the Philippine National Bank Financial
Center in Pasay City, the airline was founded in 1941 and is the oldest commercial airline in Asia
operating under its original name. Philippine Airline Inc. hubs at Ninoy Aquino International
Airport of Manila and Mactan-Cebu International Airport of Cebu City. PAL serves not just
Philippine destinations but 24 international destinations.

Figure 11. Air Asia Logo

Air Asia
AirAsia is Asia Pacific's leading travel and finance platform firm, offering air
transportation, travel, and lifestyle products, as well as financial services. AirAsia began as a
low-cost airline with operations in Malaysia, Indonesia, Thailand, the Philippines, and India, and
has since flown over 600 million passengers to over 160 destinations in Asia, Australia, the
Middle East, and the United States. Following its continuous advancements to ensure the best
safety and hygiene levels are upheld at all times, AirAsia has been given the top 7/7 stars among
all airlines in the Group for Covid-19 health and safety measures by the aviation experts at
airlineratings.com.

Cebu Pacific Airlines Philippine Airlines Air Asia

LOGO

Strengths -Cebu Pacific Air has the -Company Services -Low-cost business
most aircraft for a low cost -Modern Facilities model with lean,
carrier in the country. -Strong Alliance with simple, and efficient
-Cebu Pacific Air operates big International operations.
one of the youngest fleets in Airlines. -High focus on
the world. technology and
-Good long-term relationship innovation.
with reliable suppliers.

Weaknesses -Additional costs that are -Higher maintenance -Overcapacity

being paid by their
passengers due to website
administration fees.
-Brand loyalty is elusive
-Unpleasant Public Image
due to delayed flights
cost -AirAsia receives a
-Expensive services lot of complaints from
-Future productivity customers about their
service.

Vision “The most successful “To be the airline of “To be the largest
low-cost carrier in the choice in all markets low-cost airline in
world.” we serve.” Asia and serving the 3
“To be the source of billion people who are
pride for Pilipinos currently underserved
everywhere.” with poor
connectivity and high
fares.

Tag Line “It’s time every Juan flies.” “The Heart of the “Now Everyone Can
Filipino.” Fly.”
 Revenue 22.6 billion PHP (2020) 45.29 billion PHP 6.3 billion PHP
(2020) (2020)

Table 3. Competitor Analysis

According to the above analysis, it is the list of competitors that can affect the overall
status of the airline industry.

Competitive Performance Matrix (CPM)

1 = Major Weakness 2 = Minor Weakness 3 = Minor Strength 4 = Major Strength

Cebu Pacific Philippine Airlines Air Asia

Airlines
Critical Success Factors Weight Rating Weighted Rating Weighted Rating Weighted
Score Score Score

Economies of Scale 0.2 3 0.6 3 0.6 3 0.6

Perceived Quality and Brand 0.1 2 0.2 4 0.4 3 0.3

Financial Stability 0.1 2 0.2 3 0.3 2 0.2

Price Competitiveness 0.1 4 0.4 1 0.1 2 0.2

Market Share 0.2 3 0.6 2 0.4 1 0.2

Geographical coverage 0.2 2 0.4 3 0.6 3 0.6

Advertisement 0.1 2 0.2 4 0.4 4 0.4

Total 1 2.6 2.8 2.5

Table 4. Competitive Performance Matrix

According to the competitive matrix listed above, this CPM identifies the firm's major
competitors, AirAsia and Philippine Airlines, as well as its strengths and weaknesses concerning
the strategic position of a sample firm. Philippine Airlines has the highest score of 2.8, followed
by Cebu Air Inc. and AirAsia, which have scores of 2.6 and 2.5, respectively. Cebu Pacific
Airlines’ competitive advantage is price competitiveness. On the other hand, the advertisements
of Philippine Airlines and AirAsia have more prominent advertisements than Cebu Pacific
Airlines because it is well-known to the public at large. In comparison to Cebu Pacific,
Philippine Airlines has a larger number of destinations.

C. Summary and Conclusion

When the COVID-19 pandemic struck, the country was caught off guard and worried. As
the number of confirmed cases grew by the day, several courageous frontline fighters stepped
forward to combat the global pandemic, including health care workers and medical frontliners
who worked around the clock in hospitals to the supermarket and retail staff ensuring that
supplies remained in stock, riders ensuring that food could always be distributed, and even
government officials looking out for their constituents. Along with the country's frontliners,
Cebu Pacific Airlines is another group of unsung heroes fighting their battles in the skies and on
the airport grounds. Ground crew members such as freight, passenger, and ramp officers, as well
as pilots and cabin crew members, have all heroically assumed the burden of serving the people
and ensuring that everyone returns home safely to their loved ones.

Opportunities and threats are variables that are assessed in terms of market forces as well
as other factors such as social, health and safety, technical, political, economic, and legal, and
environmental concerns.

Opportunities Threats

Increased spending on infrastructure on the Pandemic Surge

Philippine Development Plan

Consumer attitudes towards leisure Strict Implementation of Social Rules due to

Pandemic

Technological Convenience Inflation Rate

Education Level Society The transition of Government and Changes in

Policy

Accessible to a wide range of customers International trade and other treaties

Table 5. Opportunities & Threats

EFE MATRIX

Opportunities

External Factors Evaluation Weight Rating Weighted

Score

Increased spending on infrastructure on the 0.06 2 0.12

Philippine Development Plan

Consumer attitudes towards Leisure 0.12 3 0.36

Technological Convenience 0.13 4 0.52

Education Level Society 0.12 1 0.12

Accessible to a wide range of customers 0.06 2 0.12

Threats

External Factors Evaluation Weight Rating Weighted

Score

Pandemic Surge 0.16 3 0.48

Strict Implementation of Social Rules due to 0.12 2 0.24

Pandemic

Inflation Rate 0.03 2 0.06

The transition of Government and Changes in 0.09 2 0.18

Policy

International trade and other treaties 0.11 2 0.22

TOTAL 1 2.42

Table 6. EFE MATRIX

The most significant aspect for Cebu Pacific Airlines, according to the EFE matrix or
External Factors Evaluation, is Technological Convenience, which has a total weighted score of
0.52. Cebu Pacific Airlines has an overall total weighted ranking of 2.42, which is considered
average. This indicates that the company's strategies aren't well-designed to meet the
opportunities and defend against threats.

V. INTERNAL/COMPANY ANALYSIS

The Philippines’ leading airline, Cebu Pacific (PSE-CEB) entered the aviation industry in
March 1996 and pioneered the “low fare, great value” strategy. It has flown over 100 million
passengers. They are the first airline to introduce web check-in, E-ticketing, and seat selection in
the Philippines. It recently rolled out its newest lifestyle rewards program called GetGo, to
reward frequent fliers with more benefits and free CEB flights. CEB also partnered with
WWF-Philippines for a climate adaptation program, and various online hotel reservation
companies, car rental service, travel insurance, and entertainment ticketing service to provide its
passengers a more convenient travel experience.

A comparative Sales Revenue over the three different periods a big drop occurred
specifically 51,501.81M in the year 2020 due to COVID 19.

Dec 2018 Dec 2019 Dec 2020

Sales/Revenue 74,113.77M 84,806.81.M 22,617.96.M

Sales Growth 8.94% 14.43% -73.33%

Gross Income 9,408.05M 15,597.45M 17,549.37M

Gross Income Growth -322.62% 195.26% -57.56%

Operating income 7,049.88M 12,621.01M -20,769.25M

Income before tax 3,483.16M 10,217.44M -10,217.44M

Net income 3,922.74M 9,122.95M -22,236.44M

EBITDA 16,635.50M 29,960.17M -1,562.56M

Diluted EPS 5.95 13.92 -33.98

Dividends Per Share 6.40 0 0

Total Current Asset 25,945.M 25,970.M 12,139.M

Total Assets 129,391.48M 157,732.57M 128,458.58M

Total Current 34,703.M 42,696.M 33,791.M

Liabilities

Total Liabilities 89,289.34M 112,831.59M 105,767.70M

Total Equity 40,102.13M 44,900.97M 22,690.87M

Inventory 426 36 102

Operating Expense 67,063.89M 72,185.79M 42,579.82M

Cost of Goods 55,120.M 51,870.M 20,961.M

Operating cash flow 15,360.07M 29,306.92M -12,120.18M

Table 7. Revenue and Sales in the past three years

Financial ratios

Liquidity ratio
Current ratio

RATIO FORMULA 2018 2019 2020

Current Ratio Current Assets 25,945M 25,970M 12,139M

/Current
Liabilities 34,703M 42,696M 33,791M

= 0.74% = 0.60% = 1.21%

Implication: The total percentage that is being raised is 0.47 from 2018 - 2020 that which
reached 1.21% of 2020 and it indicates that Cebu Pacific’s current ratio is too high, it may
indicate that the company is not efficiently using its current assets or its short-term financing
facilities.

Quick ratio

RATIO FORMULA 2018 2019 2020

Quick Ratio Quick Assets/ 129,391.48.M 157,732.57M 128,458.58.M

Current
Liabilities 34,703.M 42,696.M 33,791.M

= 3.73% =3.69% = 3.80%

Implication: The table indicates that Cebu Pacific’s Quick Ratios last year (2020) of 3.80%
means that the higher the ratio result, the better a company's liquidity and financial health; the
lower the ratio, the more likely the company will struggle with paying debts.
Conclusion: As of 2020 the Current Ratio Percentage was 1.21% it indicates the company is not
efficiently using its currents assets. As for the Quick Ratio of 3.80% which is a positive ratio that
indicates the company’s liquidity and financial health is better.

Profitability Ratio
Gross profit margin

RATIO FORMULA 2018 2019 2020

Gross Profit Gross Profit / 9,408.05M 15,597.45M 17,549.37M

Margin Sales Revenue
74,114.77M 84,806.81.M 22,617.96M

=0.13% =0.18% = 0.78%

Implication: the increase of the percentage of 0.65% indicates that the company is earning
enough money from business operations to pay for all of the associated costs involved in
maintaining that business.

Operating profit margin

RATIO FORMULA 2018 2019 2020

Operating Gross Profit - 9,408.05M - 15,597.45M - 17,549.37M -

Profit Margin OPEX / Sales 67,063.89M 72,185.79M 42,579.82M
Revenue
74,114.77M 84,807.81M 22,618.96M

= -0.78% = -0.67% = -1.11%

 Implication: A low percentage of negative 0.33
means that a company uses an ineffective cost structure and/or poor pricing strategies.

Net profit margin

RATIO FORMULA 2018 2019 2020

Net Profit Net Profit / Sales 3,922.74.M 9,122.95.M -22,236.44.M

Margin Revenue
74,114.74M 84,807.81M 22,618.96M

=0.05% =0.11% = -0.98%

Implication: Cebu Pacific’s negative profit margin means that the firm is making less money
per dollar of sales. This can be the result of a lower sales price or higher cost, or both due to
COVID 19.

ROA

RATIO FORMULA 2018 2019 2020

Net Return on Net Profit After 3,922.74M 9,122.95M -22,579.41M

Total Assets Tax/ Total
(ROA) Assets 129,391.48M 157,732.57M 128,458.58M

3,922,740,000 9,122,950,000 -22,579,410,000

129,391,480,000 157,732,500,000 128,458,580,000

=3.03% =5.78% = -17.58%

Implication: With the decrease of -14.55 % last 2018 wasn’t efficient enough in management
 of its assets to generate things.

ROE

RATIO FORMULA 2018 2019 2020

Net Return on Net Profit After 3,922.74M 9,122.95M -22,579.41M

Total Equity Tax/ Total
(ROE) Equity 40, 102.13M 44,900.97M 22,690.87M

3,922,740,000 9,122,950,000 -22,579,410,000

40, 102.13M 44,900.97M 22,690.87M

=0.10% =0.20% = -1.00%

Implication: With a decrease of 0.90% last 2018 the company is decreasing its profit
generation that needs much capital and it also indicated how the company’s management
needs shareholder capital.

Conclusion: All of these ratios in profitability are going negative due to the loss of profit and it’s
a sign that the company is spending too much on operating costs.

Leverage Equity Ratio

Debt to equity ratio
 RATIO FORMULA 2018 2019 2020

Debt - to - Total Debt/ Total 89,289.34M 112,831.59M 105,767.70M

Equity Ratio Equity
40, 102.13M 44,900.97M 22,690.87M

89,289,340,000 112,831,590,000 105,767,700,000

40,102,130,000 44,900,970,000 22,690,870,000

= 2.27% = 2.51% = 4.66%

Implication: With the increase of 2.39 % over the past 3 years, it indicates that Cebu Pacific
may not be able to generate enough cash to satisfy debt obligations.

Debt to Assets Ratio

RATIO FORMULA 2018 2019 2020

Total Debt - to - Total Debt/ Total 89,289.34M 112,831.59M 105,767.70M

Assets Ratio Assets
129,391.48M 157,732,57M 128,458.58M

89,289,340,000 112,831,590,000 105,767,700,000

129,391,480,000 157,732,570,000 128,458,580,000

=0.69% =0.72% =0.82%

Implication: The firm's long-term repayment potential is marginally less than 0.13 percent.
This also demonstrates that debt provides 0.13 percent of a company's assets. Cebu Pacific, on
the other hand, has an acceptable total-debt-to-assets ratio since it has been below 1 for three
years in a row.

Conclusion: The ratios above are getting higher and higher by the year from 2018-2020 and a
high ratio indicates that the company would expect higher risks than usual.
Activity Ratio
Inventory turnover

RATIO FORMULA 2018 2019 2020

Inventory Cost of goods 55,120M 51,870M 20,961M

Turnover sold / Inventory
426 36 102

= 129.39 = 1,440.83 = 17,467.5

Implication: The year 2020 inventory turnover ratio of 17,467.5 indicates fast-moving
inventories and both in terms of sales performance and inventory that it is more favorable.

DSO

RATIO FORMULA 2018 2019 2020

Day Sales Account

Outstanding Receivable / 3,922.74M 9,122.95M -22,236.44M
Total Sales x
360 74,113.77M x 84,806.81M x 22,617.96M x
360 360 360

= 19.05% =38.72% = -353.93%

Implication: Cebu Pacific had a big spike from 2018 to 2019 and badly decreased again in
the year 2020 due to the spread of COVID 19. A low DSO indicates that the company is
getting its payments quickly.
Conclusion: In Activity Ratio, both ratios show a big spike both increasing and decreasing and
the inventory tells about how inventory in the company is fast-moving so that it can
accommodate the performance. While in the other hand the DSO shows how low is the sales in
the year 2020 because of the pandemic it shows how it dropped very low.

MCKINSEY 7s MODEL

Figure 12. Mckinsey 7s Model

McKinsey 7s Model

Structure Cebu Air Inc. is associated with 1aviation

Ground handling Services Corp. South East
Asian Airlines, Inc. and Aviation Partnership
Philippines Corporation.
Strategy It established itself as the provider of “Low
Fare, Great Value” strategy in the Philippines,
by offering lower-priced fares than the
traditional full-service airlines while offering
the passengers fun travel experience and
reliable services.

Shared Value The company put people at the heart of

service. They do what is right, cultivate trust
and commit collaboration and relentlessly
pursue new ideas and better solutions.

Systems Cebu Air, Inc. provides air cargo services. It

operates as a carrier in the Philippine air
transportation industry, which engages in
transportation of passengers, mail,
merchandise and freight. The company has
distribution channels which includes Internet;
direct sales through booking; sales offices;
call centers and government/corporate client
accounts; and third-party sales outlets.

Skills Cebu Air Inc. ensures the safety of their

passengers while on board, they employ
people with outstanding customer service
skills and a pleasant personality. They provide
opportunities for professional and personal
growth.

Staffs Cebu Pacific brings people together through

safe, affordable, reliable, and fun-filled air
travel. They are committed to innovation and
excellence in everything they do. They make
flying enjoyable, memorable, and pleasurable
for their passengers.

Styles Since the work of a flight crew required

precision in approach and execution. The
culture is professional as every member of the
crew had to show proficiency and consistency

Table 8. Mckinsey 7s Model

Company Major Strengths and Weaknesses

STRENGTHS WEAKNESSES
 Highly Skilled Employees Customers complain about frequent flight
delays

Pricing Range Heavy reliance on outsourcing

Customer Services Brand Loyalty is elusive

Strong Captured Marketing Unfavorable Branding

Investment in Technology & Innovation Net Income

Table 9. Strengths and Weaknesses

Description of the Strengths and Weaknesses

STRENGTHS

Highly Skilled Employees Cebu Pacific Air company has made sure of training
and development programs for its workers to
improve their competencies.

Pricing Range All Cebu Pacific Air products are provided to

consumers at affordable and cost-effective rates. The
consumers can get different sizes and offers of the
corporation of different tastes.

Customer Services Social media managers of Cebu Pacific Air supply

24/7 help on their sites and social media platforms
through which they connect with clients. It likewise
develops an excellent relationship among the
customers and the franchisees.

Strong Captured Marketing They have actually recorded the minds of its
consumers through their emotional and strong
message ads.

Investment in Technology & Innovation Cebu Pacific Air has combined with other
technological companies.

WEAKNESSES
Customers Complain about Frequent Flight Since Cebu Pacific is stereotyped with delayed and
Delays canceled flights the potential passengers might avoid
availing Cebu Pacific’s service even if the marketing
and sales team works well

Heavy Reliance on Outsourcing Cebu Pacific does not have its maintenance, repair,
and operations facility. This is a weakness since it is
costly and the quality of work might suffer since no
one is specifically in charge of it.

Brand Loyalty is Elusive The company is a low-cost airline and it does not
give intangible benefits to passengers to look forward
to having “elite status” compared to the offerings of
other airlines.

Unfavorable Branding Cebu Pacific has a stereotype of cheap (which is true

since Cebu Pacific is a low-cost airline) with a
frequently delayed flight.

This affects the revenue of the company since some

of the potential passengers will avoid Cebu Pacific’s
services because of its unfavorable branding.

Net Income Cebu Pacific Air has analyzed that its net incomes
are not matching its real monetary evaluations and
predictions. The business has to work on its sales to
increase its network performance and income.

Table 10. Description of the Strengths and Weaknesses

D. Use the IFE matrix to evaluate the overall internal strengths and weaknesses of the company

KEY INTERNAL FACTORS WEIGHT RATING WEIGHTED

SCORE

STRENGTHS

Highly Skilled Employees 0.12 3 0.36

Pricing range 0.10 3 0.30

 Customer Services 0.05 3 0.15

Strong Captured Marketing 0.14 4 0.56

Investment in Technology & Innovation 0.11 3 0.33

WEAKNESSES

Customers complain about frequent flight delays 0.12 1 0.12

Heavy reliance on outsourcing 0.09 2 0.18

Brand Loyalty is elusive 0.07 2 0.14

Unfavorable Branding 0.10 1 0.10

Net Income 0.10 2 0.20

TOTAL 1 - 2.44

Table 11. IFE Matrix

The internal factor evaluation matrix presents the strengths and weaknesses that Cebu
Pacific is currently facing. Based on the IFE Matrix, strong captured marketing has the highest
weight ranking of 0.56 and rating among the strength due to most responded feedback in Cebu
Pacific Airlines. As for its weakness, the customers complain about frequent flight delays and
unfavorable planning needs to stand up because it affects the establishment’s economy and
domestic market share price.
Based on the results in the IFE Matrix, which identifies its strengths and weaknesses the
total weighted score which is 2.44 would determine that this is an average ranking, indicating
that the existing tactics are neither successful nor unsuccessful in exploiting strength or
protecting the company against the weaknesses.

E. Summary and Conclusion

The significance of weights is determined by the effect they can have on a company's
operations and decision-making. The highest factor in the strengths-based on the IFE matrix is
the strong captured marketing with a total weighted score of 0.56 and rated as 4 while the highest
weighted weaknesses that the company should focus on based on the IFE matrix is the net
income with a total weighted score of 0.20. Overall, the total weighted score on the IFE matrix is
2.44 and this suggests that the Cebu Pacific Airlines strategies are neither successful nor
unsuccessful in pursuing strength or countering the weaknesses. The Cebu Pacific Airlines
strategy should be improved, with a focus on how to build on Cebu Pacific Airlines’s strength.

The major strategic issue was mentioned in the net income of Cebu Pacific Airlines and it
has been determined that the net income did not meet its income statement and predictions. For
them to improve their network performance and income, the company must focus on its revenue.
Based on Miguel R. Camus’s article, due to higher fuel costs and wider foreign exchange
losses, Cebu Pacific Air, the country’s largest budget airline, reported earnings decline in 2018. It
was also reported that the Philippine Stock Exchange of Cebu Air Inc. net income for the year
was P3.9 billion, down 50% from the previous year. It was also stated that Cebu Pacific Airlines
said that the increase was due to a 5.8% increase in fares to an average ticket price of P2,676 and
a 2.7 percent increase in passenger volume to 20.3 million in 2018. Revenues from cargo
increased by 19.3% to P5.5 billion, while ancillary revenues increased by 6.4 percent to P14.36
billion. Overall spending increased by 15.8% to P67.1 billion.
It shows that the flying expenses alone increased by 25.4% to nearly P30 billion, due to a
29.8% increase in jet fuel costs. According to the budget airline, the effects were worsened by
the local currency’s depreciation.
Cebu Pacific Airlines strengths are its skills and capital, which it can use to gain a
long-term competitive advantage in the marketplace and it is stated in the SWOT analysis, the
strengths portion that the organizational element that may promote growth and productivity is the
strong captured marketing of Cebu Pacific Airlines because Cebu Pacific Airline is already a
well-known airline and successfully delivered their clear message advertising, they have
effectively recorded the thoughts of their customers and lastly, Cebu Pacific Airline has a strong
online presence on various social networking platforms, as well as effective social media
management, that helped them build a strong customer relationship.
VI. STRATEGY FORMULATION

SWOT ANALYSIS

The SWOT analysis identifies the company’s strengths, weaknesses, opportunities for growth,
and threats.

STRENGTHS WEAKNESSES

S1 Highly Skilled Employees W1 Customers complain about frequent

flight delays might damage the image

S2 Pricing Range W2 Heavy reliance on outsourcing

S3 Customer Services W3 Brand Loyalty is elusive

S4 Strong Captured Marketing W4 Unfavorable Branding

S5 Investment in Technology & Innovation W5 Net Income

OPPORTUNITIES THREATS

O1 Increased spending on infrastructure on T1 Pandemic Surge

the Philippine Development Plan

O2 Education Level Society T2 Strict Implementation of Social Rules

due to Pandemic

O3 Consumer attitudes towards leisure T3 Inflation Rate

O4 Technological Convenience T4 The transition of Government and

Changes in Policy

O5 Accessible to a wide range of customers T5 International trade and other treaties

Table 12. SWOT Analysis

 SO STRATEGIES
● Open new international routes to reach a
wider market
(S5, O1)
● Advertising destinations by reinforcing
and improving promotion.
(S4, O4, O5)
● Make current and committed campaign
and offerings for international tourists
(S2,S4,O3,O5)
● Permit volume discounts and prompt
announcements about upcoming seat sales
(S4,S5,O3,O4,O5)
ST STRATEGIES
● Provide sanitizer stations in the baggage
check-in counter and observe safety
precautions
(S3, T1, T2, T4)
● Develop technology advantages by
investing more in innovation.
(S5, T3, T5)
Table 13. TOWS Analysis
WO STRATEGIES
● Improved quality of service by
providing specific compensation
(W1, O3)
● Collaborate with strategic alliances
with suppliers
(W2, W5, O4)
● Expand the business and open new
routes to increase liquidity
(W5, O1)
● Reduce cost by laying off employees
and cost-cutting due to pandemic
restrictions
(W5, O1)
WT STRATEGIES
● Focusing on expanding the business
by acquiring more airplanes to
prevent any delays that will also
make the establishment more
profitable
(W1, W2, W4, T3)
● Extend services by providing new
flights to reach wider markets and for
the establishment to stay profitable.
(W5, T3, T5)
 SPACE

SPACE Matrix Ratings

Internal Strategic Position External Strategic Position

Competitive (CA) Industry (IS)

A
X -6 worst, -1 best +1 worst, +6 best
I
-3 Product Quality +2 Profit potential
S
-2 Market share +3 Growth potential
X -3 Brand & Image +2 Financial Stability

-3 Customer loyalty +1 Labor productivity

Average -2.75 Average 2

Total axis X score: -0.75

Financial (FS) Environmental (ES)

+6 worst, +1 best -1 worst, -6 best

A
X +3 Returns -5 Inflation
I
+5 Debt Level -2 Technology
S
+3 Liquidity -1 Price Elasticity
Y +3 Cash flow -2 Competition

Average +3.5 Average -2.5

Total axis Y score: 1.5

Table 14. SPACE Matrix Ratings

 SPACE Matrix Position Profile

Figure 13. SPACE Matrix Position Profile

Based on this strategy formulation tool, Cebu Pacific Air should pursue an aggressive
strategic position. This profile shows that Cebu Pacific Air has a stable organization, with low
growth. The company should focus on existing successful products. This will help maintain the
 company’s performance level. Also, to invest in research and development for new products.
Lastly, potential product penetration through expansion.

Internal-External Matrix (IE)

EFE = 2.42 STRONG AVERAGE WEAK

IFE = 2.44 (3.00-4.00) (2.00-2.99) (1.00-1.99)

HIGH I II III

MEDIUM IV V VI

LOW VII VIII IX

Table 15. Internal External Matrix

Figure 14. Internal External Matrix

 The Internal-External Matrix is another strategic matrix tool used to analyze the working
conditions and strategic positions of Cebu Pacific Air. Based on the results of the IE matrix Cebu
Pacific falls into V which means to hold and maintain.

VII. OBJECTIVES, STRATEGY RECOMMENDATIONS, AND ACTION PLANS

Strategic and Financial Objectives

Cebu Pacific Air aim’s to increase its revenue to 50% by 2023. Cebu Pacific is a
budget-friendly airline business model. This strategy offers unbundled fares, meaning the fares
that they offer come with no frills and are easy on the budget. For example, the in-flight food
service is lessened to meet up with their budget-friendly fare. This low-cost carrier strategy
enables them to have regular passengers who want to travel but also keep in mind their budget.
Cebu Pacific air aims to offer more international flights for the upcoming years. Currently, they
have 26 international destinations that they offer to the market. XD -Labajo

Financial Objective

● To bounce back at least 50% from the great loss from 2020.
Reason for the objective: For the years 2019-2020, The financial analysis showed that
Cebu Air Inc., decreased its revenues due to the cruel pandemic. Therefore, Cebu Air Inc.
should reduce costs to achieve the goal of at least a 50% increase.

● To reduce liability cost

Reason for the objective: For the year 2020, Cebu Air Inc., experienced a huge loss from
its revenue. To be able to achieve this, Cebu Air Inc. should reduce costs mainly in the
consumption of jet oil, operating cost, tax payable, accounts payable, etc.

● To reduce operating cost to 10%

Reason for the objective: To be able to achieve the reduction of operation cost, laying off
several employees, eliminating non-essential funding such as team building, corporate
gatherings, and suspend benefit payments (vacation pay, holiday pay, car loans, food
 allowance, travel allowance, transportation allowance and etc) can help decrease the
operating cost of the company.

Strategic Objectives
Cebu Pacific aspires to be the best airline in Southeast Asia by offering genuine and
high-quality transportation services, with the aim of not only being a great business, but also
being the best airline in the region, but also to have a deep sense of duty towards the world's
citizens through their vision and mission and especially improving their life and strongly
committing itself to the well-being of the people it fosters through their rights, job standards,
safety and security, and protection for future purposes.

External Analysis Strategies. Cebu Pacific’s external analysis needs to assess the
following:
● Build up and maintain the composition of the political strategy, and use outside
experts that can usually be found to support any point of view, regardless of the
issue.
● Economical strategies should lower the interest rates, increase real wages.
● Social strategies should increase brand awareness that should risk boosting the
revenue for the company.
● Technological strategies such as analytics And reporting discovering meaningful
information in data and visualizing it to support decision making.
● Environment strategies such as Talk and engage, the first and most critical step
when planning a sustainability strategy is building a winning business case for
sustainability and also never forget to educate and communicate at the same time.
● Legal strategies, knowing or investing in such knowledge for legal aspects to gain
experience, and knowing the potential risk and positive opportunities for the best
of the company.

Due to the past performance of Cebu Pacific’s customer service needs to improve good
communication skills especially empathy and patience of the employee as you know some
people or specifically passengers these days have short temper. Heavy reliance on outsourcing
should invest in training and development for many of various operations to be dynamic and
must apply effort and consistently improve their functionality and performance. Brand loyalty
must also be improved by investing in an eye-catching logo design that would be pleasing for the
public or passengers to have an impact and especially focusing on the brand that knows best and
make the loyal customers come back. And unfavorable branding must focus on targeting the
meaning of the brand, maintaining high standards for design because investing in high-quality
design could make a big impact on visual communication.

Cebu Pacific must also demonstrate that low-cost does not imply low-quality service.
Weak inflight staffing, cancellation, delays, and refunding should both be minimized or avoided
if at all possible. Customer cancellation notice should be given, proper time booking should be
made to avoid delays, and refunds should be made following the Customer Service Plan, which
states that refunds should be made within 30 days. Since CEB has lower fares, losing customers
is a big deal. Even though the organization is in a strong strategic position to react to the external
environment an average rating (EFE rating: 2.42) and has also an average internal rating (IFE
rating: 2.44), It may also be necessary to make changes to expand services to a spectacular level
and continue its mission of providing secure, accessible, efficient, and fun-filled air travel
services.

Cebu Pacific Airlines’ strategic goal is to be able to expand and maintain profitability
even though it provides low-cost fares, as the vision states that by 2023, it should be the most
profitable airline in the world. Low-cost carrier with the most performance.It is now known as
the Philippines' low-cost airline, but to be profitable, it must find ways to raise return on
investment, even though it has negative working capital and has incurred losses. Other sources of
revenue may be provided by the company, as well as similar or unrelated diversifications. Since
it has to adhere to its status as a low-cost carrier, the company couldn't easily change its product
prices. Similarly, cutting costs will be a safer option.
Recommended Business Strategies

SO STRATEGIES

● Open new international routes to have a wider market. By expanding, you’ll not just
gain market share but also have greater profitability. The bigger the company, the more
bargaining power it can have. More supplies needed more discounts to suppliers.
(S5,O1,S4,O5,O3).
● Cebu Pacific’s web page is easy to use, even an ordinary person who doesn’t have
enough knowledge about computers can easily access the webpage.
(O4,O5,S2,S3,S4,O2).

WO STRATEGIES

● Collaborating with other sister company airlines and suppliers can lessen the
expenses and make additional revenues. Making promos and having a big discount from
suppliers. To improve company profit, they should cut or lay off their employees, today
the number of flights is lessened and doesn’t need that much of a job.
(W2,W5,O1,O4,O5).

ST STRATEGIES

● Due to the pandemic, the safety of our customers and staff is our priority.
Disseminating sanitation stations around Cebu Pacific luggage counters is a must. We
need to follow the proper protocol to prevent getting sick of Covid. (S3, T1, T2, T4).
● Having a research team to research about innovating technologies, starting ahead of
time makes less money and can avoid inflation. (S5, T3, T5, T4).

WT STRATEGIES

● Cebu Pacific should focus on upgrading and adding more airplanes to avoid delays
to their flights. Common causes of delays are landing gears broken, engine problems, bird
strikes, decompression, etc. (W1, W2,W4, T3,).
 Due to the calamity caused by the pandemic, Cebu Air Inc. has been in agony on how to
market, earn and increase their business. Since almost half of the globe is in lockdown, it is
imperative to take into account what the post-covid world is going to mean for those in the
digital marketing realm. The pandemic has accelerated the speed at which people are “going
digital” and has given new power to many online industries. With that, Cebu Air Inc. should
creatively improve its marketing strategy through social media. It is a great opportunity in
expanding the market. With more than three billion people around the world using social media
every month, the users and engagement on major platforms just keep increasing. They have a big
advantage over other companies because their website is quite easy to use. According to a report
of the Social Media Marketing Industry, social media is an effective tool to get exposure and gain
more customers. Moreover, Cebu Air Inc. can lessen its marketing cost because social media is
inexpensive compared to other advertising mediums.

Laying off some of the employees can increase their profit, this strategy is necessary due
to the pandemic. Good costs focus on the company's growth and are aligned with the company's
customers and how to meet the needs of those customers. It's also important to note that
cost-cutting doesn't necessarily mean completely cutting a cost. It can also refer to optimization
and efficiency. Not only laying off employees but they can also negotiate fees on their suppliers.
Nowadays there are only a few flights. Cost-cutting on their fuel can also be a help for their
profit.

Recommended Organizational Strategies

Long-term Objectives:

● To provide quality service at a reasonable price

● To improve the image of Cebu Pacific Airlines
● To improve job performance, provide more customer service training to
employees
● To accommodate passengers' demands for improved transportation, safety, and
other related services
Strategies

Initiatives to improve customer service

One of the most important takeaways from this unfortunate event is that airlines should
have simple and reassuring capabilities for passengers to cancel, refund, or reschedule their
flights in the future. This will make it easier to reduce costs while still ensuring that the customer
is still in control. Cebu Pacific also needs to educate and train its employees about how to deal
with customers during health-related emergencies including the COVID-19 pandemic. The
company must require a dedicated information and training platform that can be modified easily
and content redistributed to employees.

Improvement of Service Quality Standards

This ensures that by providing customers the best quality experience and addressing the
wants and needs, as well as the needs of the company, the service provided must be outstanding.
Cebu Pacific is continuing to improve its commitment to quality by ensuring that the required
quality is always met by providing total management and staff commitment to quality. The
company's objectives are to include the highest quality of service presented and provided while
adhering to the highest customer satisfaction standards.

VIII. STRATEGY IMPLEMENTATION

The Strategy Map

1. Translate your strategy recommendations into a strategy map for the company.
 Figure 15. Strategy Map

B. Departmental Action Plans and Programs

ACTION PLAN
CEBU PACIFIC AIR, INC.
Cebu Pacific Building
Domestic Road, Barangay 191, Zone 20,
Pasay City 1301 Philippines

Phone: +632 7020 888

Email: groupbooking@cebupacificair.com
 Website: https:cebupacificaircorporate.com

Objectives Tasks Department Time Frame Resources

Involved

Reduce costs To be able to reduce the Financial This task must be The management must
fare and earn through Department conducted every foresee the overall
economies of scale month. operating cost of the
company.

Increase Profits To increase their profits Financial The company must The department must
they should work on Department accomplish this concentrate on the most
innovation. weekly. profitable services.

Increase Revenue To increase their Financial This task must be The Financial
in Target Markets marketing efficiency and Department conducted every Department must start
sales, they should month. with a clear strategy that
understand and analyze is aligned with their
their target market in revenue goals.
every possible detail that
is available.

Improved The company should Marketing This task must be Cebu Pacific’s Marketing
Customized consider feedback and Department / conducted daily. Department must meet
Customer surveys from passengers Customer the customer’s
Experience who experienced poor expectations. In that way,
service. it increases customer’s
loyalty

Increase To effectively engage in Marketing This task must be The department must be
Awareness in situational awareness, Department/ conducted on an aware of situational risks
Current Situation make logical decisions, Customer annual basis. to avoid potential threats
with a strategic focus.

Improve Product To improve their product Internal This should be The Management must
Service Offerings service offerings, they Business conducted on an offer services and meet
must ensure that the Processes annual basis. their goals with the
services that will be minimum of effort,
offered will prove that expense, or waste.
unfavorable branding is
untrue.

Increase Cebu Pacific Air should Human This task must be The management must
Acquisitions be able to gain awareness Resource / conducted every anticipate taking new
of their brand and Internal month. products and services to
interest in their offerings. Business market.
 Such as adding services Processes
and products.

Optimize and The company should Internal This task must be The Management must
Invest in optimize and invest in Business completed every acquire more customers
Research & Research and Processes month. with resources by
Development Development to help to focusing on the right
reduce costs through strategies
more efficient products
and production
processes.

Improve Internal The company should Internal Cebu Pacific Air The management must
Efficiency identify its issues and Business must conduct this consider the issues and
problems and evaluate its Processes task every week. take them as an
performance. opportunity to improve
their performance.

Improve Thought To maintain the Human This task must be The management must
Leadership leadership of their Resource completed every focus on the purpose of
company, they should be Management month. their work to understand
consistent in their the goals of their
mission and must be company.
committed.

Increase By establishing brand Learning & This task must be The management must
Company awareness and credibility Growth completed every help customers
Awareness of with their target month. understand, recall, and
current trends audiences, they should become comfortable with
generate more valuable their branding and
and more sustainable products.
leads, conversions, and
revenue.

Boost The company must Learning & Should be The management must
Technology establish long-term Growth conducted every presume and assess their
Advancement partnerships with month. current technology
suppliers to advance its systems against their
technology. requirements.

Increase To increase employee Human This task must be The Department must set
Employee expertise, Cebu Pacific Resource conducted daily. their employees for
Expertise Air should provide Development success by giving them
training and skills the resources they need to
development for do their job well.
employees.
 Table 16. Action Plan

Financial Projections and Overall Evaluation of the Strategies

Projected Income Statement

2021 2022 2023

Revenue 33,926.94M 50,890.41M 76,335.62M

Gross Margin % 33.74% 49.74% 60.08%

Cost of Sales 22,478.00M 25,578.00M 30,472.00M

Gross Profit 11,446.95M 25,312.88M 45,862.44M

Total Expenses 13,934.82M 25,190.27M 48,291.56M

Net income 19,992.20M 25,700.14M 28,044.06M

Table 17. Projected Income Statement

Long-term financial Projections

2021 2022 2023

Sales/Revenue 33,926.94M 50,890.41M 76,335.62M

Sales Growth -36.25% 4.89% 9.46%

Gross Income 11,446.95M 25,312.88M 45,862.44M

Gross Income Growth 33.74% 49.74% 60.08%

Operating Income -17,265.27M -13,379.29M -10,384.62M

Income before tax -8,219.45M -6,892.19M -5,863.89M

 Net income 19,992.20M 25,700.14M 28,044.06M

Total Current Asset 15,509.00M 16,533.00M 18,267.00M

Total Assets 135,679.32M 139,568.29M 141,279.48M

Total Current Liabilities 36,279.00M 37,195.00M 39,578.00M

Total Liabilities 108,648.95M 113,568.56M 117,793.59M

Total Equity 25,759.37M 28,572.94M 32,492.82M

Inventory 119 128 140

Operating Expense 43,934.82M 45,190.27M 48,291.56M

Cost of Goods 22,478.00M 25,578.00M 30,472.00M

Operating cash flow -9,109.21M -7,092.53M -6,060.09M

Table 18. Long-term financial Projections

Financial forecasting and strategy are combined in long-term financial planning.

Long-term financial planning is most effective when it is part of a larger strategic
strategy. Due to the pandemic, Cebu Air Inc. lost a significant amount of revenue in
2020, as shown in the table above, so the group proposed some strategies that could assist
Cebu Pacific Airlines in regaining its foundation or revenue, to increase revenue by 50%
by the end of 2023.

Liquidity ratio
Current Ratio

RATIO FORMULA 2021 2022 2023

Current Ratio Current Assets 135,679.32M 139,568.29M 141,279.48M

/Current
Liabilities 108,648.95M 113,568.56M 117,793.59M
 = 1.25% = 1.23% = 1.20%

Implication: The current ratio, which is a liquidity ratio that calculates a company's ability to
pay short-term obligations or those due within one year, is 1.20 percent in 2023.

Quick Ratio

RATIO FORMULA 2021 2022 2023

Quick Ratio Quick Assets/ 135,679.32M 139,568.29M 141,279.48M

Current
Liabilities 36,279.00M 37,195.00M 39,578.00M

=3,74% =3.75% = 3.57%

Implication: The outcome of the quick ratio for the year 2023 is 3.57 percent, which indicates
that the 3.57 percent is an indication of a company's short-term liquidity status.

Profitability Ratio
Gross Profit Margin

RATIO FORMULA 2021 2022 2023

Gross Profit Gross Profit / 11,446.95M 25,312.88M 45,862.44M

Margin Sales Revenue
33,926.94M 50,890.41M 76,335.62M

= 0.34% = 0.50% = 0.60%

 Implication: The outcome of the Gross profit margin for the year 2023 is 0.60 percent, which
means that the 0.60 percent is a measure analysts determine a company's financial health.

Operating profit margin

RATIO FORMULA 2021 2022 2023

Operating Gross Profit - 11,446.95M - 25,312.88M- 45,862.44M-

Profit Margin OPEX / Sales 43,934.82M 45,190.27M 48,291.56M
Revenue
33,926.94M 50,890.41M 76,335.62M

= 0.96% = -0.391% = -0.03%

Implication: Based on the Operating Profit Margin for the year 2023, the result is -0.03
percent, which means that Cebu Pacific operations contribute to its profitability by -0.03
percent, and if you compare it to the past 3 years, it indicates that Cebu Pacific is getting back
on track.

Net profit margin

RATIO FORMULA 2021 2022 2023

Net Profit Net Profit / Sales 19,992.20M 25,700.14M 28,044.06M

Margin Revenue
33,926.94M 50,890.41M 76,335.62M

= 0.56% = 0.51% = 0.38%

 Implication: Based on the Net Profit Margin for the year 2023, the result is 0.38 percent,
which means that the Cebu Pacific net profit margin achieved as a percentage of sales is 0.38
percent, and if you compare it for the past 3 years, it shows that Cebu Pacific is getting back
on track.

ROA

RATIO FORMULA 2021 2022 2023

Net Return on Net Profit After 19,992.20M 25,700.14M 28,044.06M

Total Assets Tax/ Total
(ROA) Assets 135,679.32M 139,568.29M 141,279.48M

= 0.15% = 0.18% = 0.20%

Implication: For the year 2023, the Net Return on Total Assets was 0.20 percent, which means
that this ratio is used to calculate the quality and efficacy of a company's assets.

ROE

RATIO FORMULA 2021 2022 2023

Net Return on Net Profit After 19,992.20M 25,700.14M 28,044.06M

Total Equity Tax/ Total
(ROE) Equity 25,759.37M 28,572.94M 32,492.82M

= 0.78% = 0.90% = 0.86%

Implication: The Net Return on Total Equity for the year 2023 was 0.86 percent, which means
that this ratio of 0.86 percent reflects the efficiency of the management in using the business's
capital.

Leverage Equity Ratio

Debt to equity ratio

RATIO FORMULA 2021 2022 2023

Debt - to - Total Debt/ Total 108,648.95M 113,568.56M 117,793.59M

Equity Ratio Equity
25,759.37M 32,492.82M
28,572.94M
= 4.22% = 3.63%
= 3.97%

Implication: Based on the debt to equity ratio results, it shows that the 3.63 percent is the
percentage that the company’s ability to repay its obligation

Debt to Assets Ratio

RATIO FORMULA 2021 2022 2023

Total Total Debt/ Total 108,648.95M 113,568.56M 117,793.59M

Debt-to-Assets Assets
Ratio 135,679.32M 139,568.29M 141,279.48M

=0.80% =0.81% =0.83%

Implication: The firm's long-term repayment potential is marginally less than 0.83 percent.
This also demonstrates that debt provides 0.83 percent of a company's assets. Cebu Pacific, on
the other hand, has an acceptable total-debt-to-assets ratio since it has been below 1 for three
years in a row.

Activity Ratio
Inventory turnover

RATIO FORMULA 2021 2022 20203

Inventory Cost of goods 22,478.00M 25,578.00M 30,472.00M

Turnover sold / Inventory
119 128 140
 = 188,890,756 = 199,828,125 = 217,657,143

Implication: Based on the Inventory Turnover for the year 2023, the result is 217,657,143,
which means that Cebu Pacific has sold and replaced inventory during that period, and if you
compare it to the year 2020, it indicates that the Cebu Pacific is getting back on track.

DSO

RATIO FORMULA 2021 2022 2023

Day Sales Account

Outstanding Receivable / 19,992.20M 25,700.14M 28,044.06M
Total Sales x
360 33,926.94M x 50,890.41M x 76,335.62M x
360 360 360

= 212.14% =181.80% = 132.26%

Implication: Cebu Pacific has regained its track, with a 132.26 percent DSO in 2023,
compared to a 132.26 percent DSO in 2020.

IX. STRATEGY EVALUATION, MONITORING, AND CONTROL

Balance Scorecard

Objectives Performance Targets Initiatives

 Measures

Financial - To increase net - Percentage - At Least 10% - Improve

Performance income and increase of net revenue company
reduce costs income growth from facility
- Market share last year performance
- Increase by purchasing
profitability - 50% revenue more advanced
growth within aircraft
- Increase three years
Revenue in - Reduce cost by
Target Markets laying off
employees due
to pandemic

Customer - Improve - Customer - At Least 20% - Improve the

Knowledge Customized Review and increase quality of
Customer Feedback number of service
Experience passenger
- Customer from last year - Focus on
- Improve loyalty providing
cost-effectivity - Increase quality
number of products
- Increase repeat
Awareness on passengers - Connect with
Current Situation the customers
through the
usage of social
media

Internal - Improve Product - Increased - Increased at - Innovation and

Business Service number of least 15% of creation of
Process Offerings quality revenue from new product
company last year offerings
- Increase equipment
Acquisitions - Gain new - Promote and
- Improved and more market
- Optimization increased customers company
and Investment positive from last year products
in Research and customer through social
Development feedback media

- Improve Internal - Engage and

Efficiency interact with
 the customers
and employees

Learning and - Increase - Employee - Increased - Conduct skills

Growth Employee engagement Employee Job training for
Expertise Satisfaction employee
- Improved development
- Boost employee - 10% Increase
Technology performance in customer - Provide
Advancement employee incentives for
- Employee feedback outstanding
- Increase performance employee
Company evaluation - Excellent
Awareness of performance - Devote in
current trends in Evaluation employee
development
- Improve
employee
leadership skills

Table 19. Balance Scorecard

Appendices:
A. 3 - year Financial Statement
 Revenue and sales in the past three years

2021 2022 2023

Revenue 33,926.94M 50,890.41M 76,335.62M

Gross Margin % 33.74% 49.74% 60.08%

Cost of Sales 22,478.00M 25,578.00M 30,472.00M

Gross Profit 11,446.95M 25,312.88M 45,862.44M

Total Expenses 13,934.82M 25,190.27M 48,291.56M

Net income 19,992.20M 25,700.14M 28,044.06M

2020 2021 2022 2023

Sales/Revenue 22,617.96M 33,926.94M 50,890.41M 76,335.62M

Sales Growth -73.33% -36.25% 4.89% 9.46%

Gross Income -17,549.37.00M 11,446.95M 25,312.88M 45,862.44M

Gross Income Growth -77.59% 33.74% 49.74% 60.08%

Operating Income -20,769.25M -17,265.27M -13,379.29M -10,384.62M

Income before tax -10,217.44M -8,219.45M -6,892.19M -5,863.89M

Net income 19,992.20M 19,992.20M 25,700.14M 28,044.06M

Total Current Asset 12,139.00M 15,509.00M 16,533.00M 18,267.00M

Total Assets 128,458.58M 135,679.32M 139,568.29M 141,279.48M

Total Current Liabilities 33,791.00M 36,279.00M 37,195.00M 39,578.00M

 Total Liabilities 105,767.70M 108,648.95M 113,568.56M 117,793.59M

Total Equity 22,690.87M 25,759.37M 28,572.94M 32,492.82M

Inventory 102 119 128 140

Operating Expense 42,579.82M 43,934.82M 45,190.27M 48,291.56M

Cost of Goods 20,961.00M 22,478.00M 25,578.00M 30,472.00M

Operating cash flow -12,120.18M -9,109.21M -7,092.53M -6,060.09M

Liquidity ratio
Current Ratio

RATIO FORMULA 2021 2022 2023

Current Ratio Current Assets 135,679.32M 139,568.29M 141,279.48M

/Current
Liabilities 108,648.95M 113,568.56M 117,793.59M

= 1.25% = 1.23% = 1.20%

Implication: The current ratio, which is a liquidity ratio that calculates a company's ability to
pay short-term obligations or those due within one year, is 1.20 percent in 2023.

Quick Ratio

RATIO FORMULA 2021 2022 2023

Quick Ratio Quick Assets/ 135,679.32M 139,568.29M 141,279.48M

Current
Liabilities 36,279.00M 37,195.00M 39,578.00M

=3,74% =3.75% = 3.57%

 Implication: The outcome of the quick ratio for the year 2023 is 3.57 percent, which indicates
that the 3.57 percent is an indication of a company's short-term liquidity status.

Profitability Ratio
Gross Profit Margin

RATIO FORMULA 2021 2022 2023

Gross Profit Gross Profit / 11,446.95M 25,312.88M 45,862.44M

Margin Sales Revenue
33,926.94M 50,890.41M 76,335.62M

= 0.34% = 0.50% = 0.60%

Implication: The outcome of the Gross profit margin for the year 2023 is 0.60 percent, which
means that the 0.60 percent is a measure analysts determine a company's financial health.

Operating profit margin

RATIO FORMULA 2021 2022 2023

Operating Gross Profit - 11,446.95M - 25,312.88M- 45,862.44M-

Profit Margin OPEX / Sales 43,934.82M 45,190.27M 48,291.56M
Revenue
33,926.94M 50,890.41M 76,335.62M

= 0.96% = -0.391% = -0.03%

 Implication: Based on the Operating Profit Margin for the year 2023, the result is -0.03
percent, which means that Cebu Pacific operations contribute to its profitability by -0.03
percent, and if you compare it to the past 3 years, it indicates that Cebu Pacific is getting back
on track.

Net profit margin

RATIO FORMULA 2021 2022 2023

Net Profit Net Profit / Sales 19,992.20M 25,700.14M 28,044.06M

Margin Revenue
33,926.94M 50,890.41M 76,335.62M

= 0.56% = 0.51% = 0.38%

Implication: Based on the Net Profit Margin for the year 2023, the result is 0.38 percent,
which means that the Cebu Pacific net profit margin achieved as a percentage of sales is 0.38
percent, and if you compare it for the past 3 years, it shows that Cebu Pacific is getting back
on track.

ROA

RATIO FORMULA 2021 2022 2023

Net Return on Net Profit After 19,992.20M 25,700.14M 28,044.06M

Total Assets Tax/ Total
(ROA) Assets 135,679.32M 139,568.29M 141,279.48M

= 0.15% = 0.18% = 0.20%

 Implication: For the year 2023, the Net Return on Total Assets was 0.20 percent, which means
that this ratio is used to calculate the quality and efficacy of a company's assets.

ROE

RATIO FORMULA 2021 2022 2023

Net Return on Net Profit After 19,992.20M 25,700.14M 28,044.06M

Total Equity Tax/ Total
(ROE) Equity 25,759.37M 28,572.94M 32,492.82M

= 0.78% = 0.90% = 0.86%

Implication: The Net Return on Total Equity for the year 2023 was 0.86 percent, which means
that this ratio of 0.86 percent reflects the efficiency of the management in using the business's
capital.

Leverage Equity Ratio

Debt to equity ratio

RATIO FORMULA 2021 2022 2023

Debt - to - Total Debt/ Total 108,648.95M 113,568.56M 117,793.59M

Equity Ratio Equity
25,759.37M 32,492.82M
28,572.94M
= 4.22% = 3.63%
= 3.97%

Implication: Based on the debt to equity ratio results, it shows that the 3.63 percent is the
percentage that the company’s ability to repay its obligation

Debt to Assets Ratio

 RATIO FORMULA 2021 2022 2023

Total Total Debt/ Total 108,648.95M 113,568.56M 117,793.59M

Debt-to-Assets Assets
Ratio 135,679.32M 139,568.29M 141,279.48M

=0.80% =0.81% =0.83%

Implication: The firm's long-term repayment potential is marginally less than 0.83 percent.
This also demonstrates that debt provides 0.83 percent of a company's assets. Cebu Pacific, on
the other hand, has an acceptable total-debt-to-assets ratio since it has been below 1 for three
years in a row.

Activity Ratio
Inventory turnover

RATIO FORMULA 2021 2022 20203

Inventory Cost of goods 22,478.00M 25,578.00M 30,472.00M

Turnover sold / Inventory
119 128 140

= 188,890,756 = 199,828,125 = 217,657,143

Implication: Based on the Inventory Turnover for the year 2023, the result is 217,657,143,
which means that Cebu Pacific has sold and replaced inventory during that period, and if you
compare it to the year 2020, it indicates that the Cebu Pacific is getting back on track.

DSO

RATIO FORMULA 2021 2022 2023

Day Sales Account

Outstanding Receivable / 19,992.20M 25,700.14M 28,044.06M
Total Sales x
 360 33,926.94M x 50,890.41M x 76,335.62M x
360 360 360

= 212.14% =181.80% = 132.26%

Implication: Cebu Pacific has regained its track, with a 132.26 percent DSO in 2023,
compared to a 132.26 percent DSO in 2020.

B. Pictures of Group (profile of group, meetings, interviewee(s), etc…)

Meeting 5/6/2021

5/8/2021
05/09/2021
5/10/2021
5/11/2021
5/12/2021

5/13/2021
C. Learning per member of the group

Arañas, Arvy

One of the learning I got from this activity is how the pandemic has been and still affecting
people, education, businesses, and business owners. Just like our chosen industry, I learned that no
matter how successful a business can become when there are unexpected tragedies, the business will
surely be affected. This activity helped me to analyze how the aviation industry can become after all
these woes. With the team that I have, one thing I learned is teamwork and trusting my co-learners.
This activity is not possible to be completed without the help, patience, and understanding of each
other. Due to the different perspectives the team shared, I was able to learn to communicate for us to
understand one another.

Castilla, Luigi

The things I learned about this course is that I've realized how important the strategy is
that could affect the company’s performance and economic status, throughout strategic
management I also learned that there are sudden things that would happen naturally and
especially there are Air Companies also that are competitive that would also serve a low budget
company. As a student, I understand that thinking about strategy needs a lot of brainstorming and
patience and a lot of trial and error which is a lot of risks that are being pressured. I took this
opportunity that making a strama paper takes a lot of effort, a lot of teamwork, deep analyzing
and researching things deeply and I also gained experience and knowledge about what's behind
the walls of each company's strategy. And I would like to thank my group mates for not giving
up on me because they told me about my errors and I would correct my errors ASAP.

Chang, Hui-ya

Cebu Pacific Airlines is one of the popular airlines in the Philippines that most Filipino
travelers have experienced flying with. I’ve learned that Pandemic has a huge impact on the
overall performance of the company. This not only affected Cebu Pacific Airline but also the
aviation company. It has affected all the industry. Aside from the information we all discovered
after using the tools in formulation for the strategies, I also learned that teamwork is an essential
element to complete a heavy task. Each individual’s presence and performance can accomplish
the task. I’ve also learned that people have their strengths and weaknesses, and if your
weaknesses have stopped you from accomplishing your task, you should be able to cope with it,
improve yourself, and achieve it. Last;y, the most important thing that I’ve learned from this
activity is to use your time wisely, invest your time in things that will make you grow. Like the
strategies that we recommended, Cebu Pacific should also invest in boosting technological
advancement to improve and enhance the company’s overall operation.

...

Francisco, Francis Dale

I learned a lot of new things just by helping the team in making this strategic
management paper, it taught me why revenue is so critical and it made me understand that even
big businesses or company have their ups and downs but the most important thing is how you
can re-build or strategize things to get back on track. Lastly, the most important thing I learned is
how time management is important and critical as a student because we have a lot of things or
tasks due to the upcoming finals and because we prepared ahead of time or set a time and date
for when we should complete the paper, it prevented us from being pressured.

Loayon, Austin Matthew

This course taught me many things, like how business works and how I can manage my
business soon on my next adventure. Dealing with business especially during this crisis is not
easy. Business is a big game to gamble, not all times you win and earn big prizes, you’ll need to
set your mind that before achieving something you’ll lose many times before getting it. This
pandemic changed our economy, many people lost their jobs and many businesses closed. It also
taught me more about how to cooperate and brainstorm with my group, without the help of one
another we won’t achieve this paper. This activity helps my groupmates analyze what Cebu
Pacific can do during this crisis, not only Cebu Pacific but also soon into our future businesses.
And if I will be given a chance to pick my leader soon in my future work, I’ll choose Sofia
sarong because she’s the best leader I ever had. Without Ms. Sarong I would not discover my
hidden talents and skills, she helped me through this.

Sabalones, Lovely Earth

This subject gave me knowledge on how to make this strategic management paper. I have
learned a lot from this course particularly on how the big business industry works. This helped
me develop my analyzing and writing skills which can be useful for future purposes. This taught
me various techniques dealing with the business world and to be organized in our work despite
this pandemic that we are facing right now and how to manage time dealing with all the struggles
that I and my group mates had. This is a good opportunity to make this paper for us because
sooner or later this will apply to our next journey.

Sarong, Sofia

Throughout the course, I learned that this strategic management paper helps us learn
valuable lessons to identify different kinds of strategic issues from external and internal factors
to develop strategic financial objectives. This subject allows us to think outside the box in the
business world. The main objectives of this subject, to truly promote responsibility consisting of
strategic decision making in business. As a group, I learned that we must exchange and share
ideas to help us communicate efficiently. One of the most important things to consider is time
management. Working as a team is a big factor, teaching us to be more flexible and help towards
our future career.

D. Location Map (if applicable)

 Domestic Road, Pasay City Philippines (Headquarters)

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