Good day, everyone. The second quarter was the most challenging operating environment Cebu Pacific has faced post-pandemic. The outbreak of conflict between the United States, Israel, and Iran in late February triggered an unprecedented and rapid spike in global fuel prices, our single largest cost component, with prices more than doubling within a matter of weeks and outpacing our ability to recover these costs through fares, creating substantial pressure on margins and temporarily disrupting the positive trajectory we had seen earlier in the year. Despite these headwinds, demand for affordable air travel remained resilient, and the business continued to grow, albeit at a slower pace. Revenue increased 7% year-on-year to PHP 35 billion in the second quarter, bringing first-half revenue to PHP 69 billion, up 8% from the same period last year. To partially offset higher fuel costs, we implemented calibrated fare increases during the quarter.
Passenger volumes grew 4% in the first half to over 14 million, against a 10% increase in capacity. This underscores the resilience of demand for affordable air travel, even in an environment of elevated costs. Periods like these reinforce the advantages of scale. One thing we've learned over the years is that challenging times often reshape the competitive landscape. The strong become stronger. With our scale, cost leadership, and disciplined execution, we believe Cebu Pacific is well-positioned not just to navigate this period, but to emerge from it even stronger. This is reflected in our strength and market leadership, with domestic market share expanding to 65% this month of June, up from 56% a year ago. Beyond managing near-term challenges, we continue to strengthen the long-term foundations of the business.
Fleet modernization remains a key priority, with neo aircraft now comprising 73% of our jet fleet, supporting greater fuel efficiency and lower operating costs. We continue to invest in new revenue opportunities, including onboard connectivity through Starlink and strategic wet lease arrangements that create additional growth opportunities, both seasonally and over the longer term. Looking ahead, we believe recovery is already underway. Last April and May, passenger volumes were broadly flat as higher price increases started to weigh on demand. This June, with recalibrated fare increases, traffic returned to year-on-year growth led by the domestic market despite the seasonally softer travel period. At the same time, the external environment became more supportive. With greater capacity reductions among less resilient competitors, industry capacity growth became more rational, creating opportunities for CEB with our scale and cost leadership to capture demand and further strengthen our market position.
Taken together, these developments reinforce our confidence that the second quarter represents a temporary external disruption rather than a change in Cebu Pacific's long-term growth trajectory. Backed by our structural cost advantage, network leadership, and scalable business model, we remain well positioned to deliver sustainable and profitable long-term growth. Let me now turn it over to Trina to discuss the financial results.
Thanks, Mike, and good day everyone. For the second quarter, Cebu Pacific generated total revenue of PHP 35.2 billion, a 7% growth year-over-year. We flew 7 million passengers, broadly flat from last year, resulting in a seat load factor of 78.6%, while passenger yields improved, with average fares and ancillary yields increasing by 7% and 5% respectively. Notably, the 7% increase in system-wide average fares was achieved despite reduced capacity in our international network, particularly on long-haul routes, which typically command higher fares. This reflects deliberate pricing actions across both international and domestic markets to partially offset higher fuel costs. With this, passenger revenue rose 7% year-over-year to PHP 24.7 billion, while ancillary revenue increased 4% to PHP 8.4 billion. Cargo business performed strongly, with revenues growing 18% to PHP 2.1 billion.
Cargo volume declined by 6% to 46 million kilos, reflecting network capacity adjustments, but this was more than compensated by a 26% increase in yield. With PHP 35.2 billion in revenue, CEB delivered EBITDA of PHP 2.1 billion, reflecting total coverage of direct operating costs despite fuel expense more than doubling year-over-year. However, as higher fuel prices are coupled with increased fleet costs, CEB incurred an operating loss of PHP 2.7 billion and a pre-tax core loss of PHP 4.6 billion. We had eight aircraft deliveries since last year, three of which are wide-body aircraft, which are replacements for older aircraft, including two turboprops. Meanwhile, reduction in our international capacity also reduced available seat kilometers and the Philippine peso depreciated 8% year-over-year. Despite this, our cost per ASK or CASK, ex-fuel increased only 4% year-over-year, reflecting prudent cost management within the company.
With additional translation losses from foreign currency debt, Cebu Pacific's net loss for second quarter amounted to PHP 5.5 billion. This brings Cebu Pacific's first half revenue to PHP 68.6 billion, an 8% increase from same period last year. Passenger revenue, which comprised approximately 69% of total, rose 7% to PHP 47.2 billion as passengers grew 4%, supported by a seat load factor of 81.2% and a 2% increase in average fare. Ancillary revenue grew 11% to PHP 17.4 billion, with yields also improving by 8%, while cargo revenue grew 13% to PHP 4 billion as we carried close to 105 million kilos, with yields also improving 9% year-over-year. Total revenue reached PHP 68.6 billion for the first half of the year, up 8% versus same period last year. EBITDA declined to PHP 10.5 billion, reflecting the significant increase as fuel expense during the period.
Despite this, Cebu Pacific remained profitable on an operating level with EBIT of PHP 0.3 billion. Notably, cost per ASK ex-fuel increased by only 3% to PHP 2.20, despite a moderate 3% increase in ASK and the depreciation of the peso. This demonstrates continued cost discipline within the company amid an elevated inflationary environment. With financing costs, pre-tax core loss was PHP 3.4 billion, and with PHP 2.5 billion in foreign exchange translation losses, net loss reached PHP 5.9 billion for the first half of 2026. CEB ended the period with PHP 255 billion in total assets. Aircraft related assets comprised PHP 210 billion, following the delivery of two Airbus A320neo aircraft since start of the year and bringing CEB's total fleet to 102 aircraft. Meanwhile, liabilities stood at PHP 242 billion, of which total debt comprised PHP 195 billion.
The significant loss recorded during the period, driven by the increase in fuel prices and foreign exchange, weighed on profitability and consequently leveraged metrics. Retained earnings declined, resulting in total equity base of PHP 13 billion, while average net debt to EBITDA ended at 6.9x . While these metrics reflect the impact of an exceptionally challenging quarter, we believe the pressures are largely cyclical rather than structural. As fuel prices normalize and operating conditions continue to improve, we remain confident in Cebu Pacific's long-term earnings potential. We remain focused on disciplined execution, strengthening our financial position, and delivering sustainable long-term value for our shareholders.
Cebu Pacific generated PHP 14.6 billion in cash income during the first half of 2026. With increased working capital requirements and net interest payments, net cash inflows from operating activities amounted to PHP 4 billion. CEB invested PHP 9.7 billion for two aircraft deliveries and pre-delivery payments or PDPs. With proceeds from sale and sale and leaseback transactions, net cash outflow for investments amounted to PHP 8.1 billion. Meanwhile, financing activities resulted in net cash outflows of PHP 3.1 billion, ending the first half of 2026 with a cash balance of nearly PHP 15 billion. While cash balance declined during the period, our liquidity remains more than sufficient to support operations and ongoing capital commitments. We remain focused on prudent capital allocation and disciplined cash management as operating conditions continue to improve.
I now turn you over to our President and Chief Commercial Officer, Xander, to share Cebu Pacific's commercial and operational highlights.
Thanks, Trina, and good day, everyone. As Mike and Trina shared, the second quarter was affected by a sharp increase in fuel prices, which put significant pressure on our financial performance. We responded decisively throughout the quarter and actively managed pricing, demand, and network deployment to maximize contribution margins while protecting our long-term position. We adjusted fares to recover direct costs and recalibrated pricing based on booking trends to stimulate demand. We also selectively reduced flights across our network, focusing on markets where demand and pricing supported positive contribution margins amid the high fuel cost environment. These actions are reflected in our commercial and operational results. Revenue continued to grow, albeit at a slower pace, and we saw improving booking trends toward the end of the quarter, indicating that recovery is underway.
CEB carried close to 7 million passengers during the quarter, which was broadly in line with the prior year. Domestic traffic, which accounted for 76% of total passengers, increased by 2% to 5.3 million. International traffic totaled over 1.7 million, reflecting deliberate capacity reductions, particularly on our long-haul network, where seats were reduced by 35% year-on-year. Despite the reduction in international operations, system-wide average fares increased 7% reflecting deliberate pricing actions to recover part of the sharp increase in fuel costs. Fare increases were more pronounced on international routes, particularly long haul, where capacity was reduced significantly. Domestic operations continued to anchor the network but were not immune to the impact of the Iran war, with higher fares and softer booking demand weighing on passenger volumes and seat load factor.
Even so, domestic traffic remained above the prior year, while system-wide seat load factor was maintained at close to 79%. For the first half of 2026, CEB carried nearly 14.5 million passengers, an increase of 4% year-on-year. Domestic traffic grew by 5% to 10.9 million passengers, maintaining a healthy 82% seat load factor, while international traffic increased by 2% to 3.6 million passengers with a seat load factor of close to 80%. Overall, these results reflect the continued demand for affordable air travel and the effectiveness of our network management strategy. Cebu Pacific further strengthened its leadership position. Domestic market share expanded to 60% during the second quarter, up from 55% same quarter last year and reaching 65% this month of June, a significant increase from 56% for June last year as other players retreated.
Internationally, we undertook deliberate capacity reductions and as a result, our capacity share averaged 23% the second quarter, compared with 25% in the same quarter last year. These results demonstrate the strength of our value proposition and network strategy, even amid a challenging operating environment. They also reinforce Mike's earlier point. Periods of disruption can widen the competitive gap in favor of the most efficient operators. As industry capacity growth becomes more measured, Cebu Pacific's cost leadership, network strength, and disciplined execution continue to strengthen our competitive position and enable us to capture additional demand. Our operational performance continued to improve during the second quarter with on-time performance, or OTP, improving to 84.2%, making CEB one of the most punctual carriers in Asia Pacific, according to the London-based aviation analytics firm, Cirium.
This recognition reflects the unwavering commitment, discipline, and collaboration of our people across the network, whose collective efforts drive operational efficiency every day. We remain focused on delivering operational excellence, ensuring a seamless, reliable, and consistently positive travel experience for our passengers. These operational gains translated into better customer experience. Quarterly net promoter score, or NPS, increased significantly to + 45 from + 25 a year ago, while net sentiment remained stable at + 12. The improvement reflects the cumulative impact of our investments across the end-to-end customer journey, from enhancing digital booking and payment platforms to strengthening operational reliability and delivering a more consistent service. Taken together, these initiatives are reinforcing customer trust and loyalty, supporting sustained demand growth over the long term. Everything we do traces back to one purpose: connecting every Filipino safely, affordably, and sustainably.
Even amid a challenging operating environment, we remain committed to investments that strengthen the long-term competitiveness of the business. Fleet modernization remains a key priority, with neo aircraft now comprising over 73% of our jet fleet. Together with our fuel efficiency programs, these initiatives delivered nearly 38,000 tons of fuel savings in the first half. Building organizational capability remained another priority. We opened our new training academy for pilots and cabin crew while expanding opportunities through partnerships. These investments strengthen our talent pipeline, reinforce operational excellence, and support the long-term resilience of the business. We also continue to strengthen governance and disclosure. In April, we published our 2025 integrated report, including our inaugural impact disclosure aligned with ICMA guidance and the UN Sustainable Development Goals, providing investors with more transparent and standardized reporting.
While these investments may not be reflected in today's results, they reinforce our confidence that actions we are taking today will strengthen the capabilities and competitive advantages that will drive long-term value creation. I now turn you over to our Chief Financial Officer, Mark, to share some insights on our outlook.
Thank you, Xander. Macroeconomic conditions remain volatile, with renewed geopolitical tensions reversing some of the improvements seen toward the end of the second quarter. Following the provisional U.S.-Iran memorandum of understanding in June, fuel prices declined as markets anticipated a normalization of oil flows through the Strait of Hormuz. However, renewed hostilities have pushed jet fuel prices back higher after briefly approaching pre-war price levels. Looking beyond the near-term volatility, crude oil fundamentals remain supported by relatively ample global supply. However, any prolonged disruption to the Strait of Hormuz could still create pressure in the oil market. Domestically, inflation has continued to moderate, with headline CPI easing to 6.4% in June from 6.8% in May.
However, core inflation accelerated to 4.4%, reflecting the emergence of second-round inflationary pressures. At the same time, the Philippine peso has remained under pressure, trading above PHP 61 to the US dollar by mid-July amid the heightened geopolitical uncertainty. For a net importer of fuel and other commodities, these external factors remain highly relevant to the domestic inflation and interest rate outlook. On risk management, we have increased our jet fuel hedges to approximately 30% of our third quarter requirements at below $120 per barrel. Given our low-cost structure and market-leading position, alongside the strength of our home market, we are confident that we can operate sustainably at jet fuel prices of around $120. Hence, the decision was made to secure some near-term protection with these hedges while preserving flexibility to benefit from a potentially more stable fuel environment.
On fleet, we continue to execute our long-term fleet modernization strategy. During the first half of 2026, Cebu Pacific took delivery of two Airbus A320neo aircraft, bringing our total fleet to 102 aircraft, of which 60 are powered by more fuel-efficient new-generation engines. We expect to take delivery of five additional aircraft in the second half of the year, offset by the planned retirement of five older aircraft, resulting in a projected year-end fleet of 102 aircraft. By the end of 2026, we expect nearly 80% of our jet fleet to consist of new-generation aircraft, further strengthening our operational efficiency and sustainability objectives. With the deliberate slowdown in capacity deployment in the past quarter, we expect full-year capacity growth to be between 8% and 10%.
On the supply chain front, we have seen some improvements in Pratt & Whitney shop turnaround times for GTF engine inspections and overhauls. While this development is encouraging, the situation still requires active ongoing management. While we see possible normalization in 2027 as a best-case scenario, we remain conscious of ongoing industrial risks, which could delay the full restoration of our fleet until 2028. While we remain mindful of both the risks and opportunities in the near term, our focus remains on disciplined execution.
Looking ahead to 2027, we expect capacity growth to moderate to the mid-single-digit range, reflecting the completion of the majority of our fleet deliveries and upgauging program this year, while continuing the transition to a more fuel-efficient neo fleet. Aircraft-related capital expenditure expected to decline to approximately PHP 25 billion and will be funded through a balanced mix of bank debt, JOLCOs, and sale and leaseback transactions. As our growth profile moderates, our priorities will increasingly shift toward expanding margins, strengthening the balance sheet, and enhancing shareholder returns. I will now turn you over back to Mike.
Thanks, Mark. The second quarter was undoubtedly one of the most challenging periods our industry has faced in recent years. Yet it also reaffirmed an important lesson. Businesses built on strong fundamentals, disciplined execution, and the agility to respond to changing customer demand are best positioned to navigate periods of disruption and emerge stronger over time. Throughout this period, we remained focused on the things we could control, making disciplined commercial decisions, managing our network prudently, protecting our long-term competitive position, and continuing to invest in the future of the business.
Today, we're already seeing early signs that those actions are working. Demand is recovering, external headwinds are easing, and our market leadership continues to strengthen. Nothing we have seen over the past quarter changes our confidence in the long-term growth opportunity for Cebu Pacific. Our structural cost advantage, leading network, and disciplined execution continue to position us well to deliver sustainable growth and create long-term value for our shareholders. Again, thank you for your continued support and for joining us today. We look forward to updating you again next quarter.