Cebu Pacific Air Inc. SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. High growth rate for air cargo market: While the Covid pandemic spelled doom for commercial passenger airlines, the cargo airlines and their operators saw an increase in their business. Cargo airlines’ profits increased by 9% in the first year of pandemic, i.e, 2020. Globally, there were only 5 airlines which posted profits for the year of 2020 and they were all cargo carriers. In June 2021, the growth in air cargo volume reached 9.9% which was the highest in 4 years. June 2021 was also the 14th consecutive month where there was an increase in the demand of air cargo. For the year 2021, the overall air cargo volumes increased by 18.7% year on year which was the second-best yearly performance since 1990. This upward trend is continuing this year also. In February 2022, the demand of air cargo increased by 2.9% compared to February 2021.

Cebu Pacific Air group is the largest Philippian domestic cargo carrier with a market share of 46%. It is also the only passenger airline in the Philippines with dedicated cargo aircrafts. Cargo flights brought in a revenue of ₱6.5 billion which surpassed even the pre pandemic levels. For the fourth quarter of 2021, the reported cargo sales were ₱2.2 billion which was 54% higher than the pre-pandemic level. As the air cargo market increases even further, the company can use its current dominant position to strengthen its hold and bring in even more revenue.

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Threat

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Political

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Economic

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Social

Reduction in disposable income of people resulting in less air travel: Covid-19 pandemic paralysed the whole global economy and this resulted in loss of jobs in many industries. Companies were either trying to become more streamline and lean to be able to survive the onslaught of recession or companies just could no longer afford to pay all their employees. This also coincided with what is now known as “the great resignation”. People started resigning from their jobs en masse out of frustration and disappointment at their old job or to take a break and look for better career opportunities. One way or other, this resulted in people losing or letting go of their source of income. What followed was the reduction in spending on things not considered essential. While the diaspora of people who still had a job and were working from home saw an increase in disposable income, the unemployed saw a sharp reduction in their household disposable income. Even when the travel restrictions were lifted, the income of the unemployed were still low. This meant they were unable or less likely to travel by air for leisure purposes.

Cebu Pacific is a low-cost carrier and its target consumers have been the worst hit as the result of the pandemic. Cebu Pacific might see a reduction in the overall volume of passengers even when things return to normal. To maintain or increase the volume, the airline might look at option of offering additional discount or lowering its price of its costs but it will also result in a narrower margin for the airline.

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Technological

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Legal

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Environmental

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