{"id":323766,"date":"2023-06-21T23:15:52","date_gmt":"2023-06-21T15:15:52","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323766"},"modified":"2023-06-21T23:15:54","modified_gmt":"2023-06-21T15:15:54","slug":"stock-in-focus-cebu-pacific-cebu-air-inc-ceb-21-june-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-cebu-pacific-cebu-air-inc-ceb-21-june-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Cebu Pacific \/ Cebu Air Inc. (CEB) – 21 June 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>CEB<\/td><\/tr>
Company Name<\/strong><\/td>Cebu Air Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>21 June 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 55.70<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Despite headwinds as explained below, we remain bullish on tourism with CEB as one of our top picks for the sector.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Cebu Air, Inc. (CEB) is facing a Senate hearing after Senator Nancy Binay filed Senate Resolution No. 575 to investigate (in aid of legislation) the numerous passenger complaints of overbooking, offloading, booking glitches, and delayed flights. The public hearing was conducted on Wednesday, June 21.<\/p>\n\n\n\n

The lawmaker has zeroed in on CEB following the flood of social media complaints against the airline for offloading passengers due to overbooked flights and outright flight cancellations, both without providing suitable alternatives or compensation. While Senate hearings are generally dismissed by the market as \u201cpolitical noise\u201d, this hearing could have serious implications on budget airlines as lawmakers are expected to focus on the practice of \u201coverbooking\u201d, which allows airlines to book more than the available number of seats on the aircraft. This is what allows budget airlines to exist, as they are able to offset their cheaper fares by overbooking.<\/p>\n\n\n\n

According to Sen. Binay, the industry has been overbooking flights by as much as 10%, while the Civil Aeronautics Board (CAB) rules only allows up to 5%. As a result, passengers are offloaded once the aircraft reaches full capacity. Tighter regulations on overbooking could result in narrower margins for budget airlines like CEB.<\/p>\n\n\n\n

With perfect timing, a news article was released today detailing how Pratt & Whitney, the U.S. maker of engines that power the Airbus A320neo \u2013 CEB\u2019s airplane of choice, is now having trouble servicing aircraft for preventive maintenance. CEB maintains a fleet of 24 A320neos, preferring it to other models due to its fuel efficiency.<\/p>\n\n\n\n

However, it was revealed that this particular model requires maintenance after only 6,000 flights as compared to 20,000 flights for older models. According to the news report, 120 Airbus planes are grounded worldwide due to slow servicing and shortage of replacement parts. CEB currently has 3 out of its 24 A320neos grounded, while PAL has grounded 4 out of 8 aircraft.<\/p>\n\n\n\n

Both carriers said that they have reduced their flight frequencies and limited booking slots due to less available planes. An unfortunate setback just as tourism is just starting to take off (pun intended) in the region. It remains to be seen if CEB will be able to pass off its culpability to Pratt & Whitney when it faces the Senate.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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