Good day, everyone. Cebu Pacific began 2026 on a strong note, delivering solid growth in the first quarter. Total revenue reached PHP 33.3 billion, up 10% year-on-year, supported by the tail end of holiday peak period and early summer travel. We carried over 7.5 million passengers, up 8%, supported by a 10% increase in seat capacity. Seat load factor remained robust at 83.7%, with improved passenger yields reflecting a resilient travel demand environment and effective commercial execution. Cebu Pacific also continued to outperform the broader Philippine aviation industry. The airline grew its domestic market share to almost 58% and its international market share to 23%, reinforcing its position as the country's leading carrier across both segments. Such scale and leadership advantages enable us to drive lower unit costs, optimize network and capacity deployment, and strengthen bargaining power with suppliers, supporting competitive pricing and operational resilience.
Looking ahead, the operating environment in the second quarter has become more complex. Escalating tensions in the Middle East have sharply increased volatility in fuel prices, our largest cost component, and created headwinds for our long-haul operations, while also introducing uncertainty around the overall demand outlook. Amid this volatile environment, we have started taking a more cautious and measured approach with a clear focus on protecting margins and capitalizing on resilient demand. We have adjusted our fares and optimized flight frequencies where appropriate alongside selective flight cancellations, focusing on routes with high demand. Our network structure provides a natural advantage. Approximately 70% of our seats are deployed to domestic routes, which require significantly less volume than longer sectors, and about 70% of these serve trunk routes where demand is more stable and not purely leisure-driven.
As of March 2026, 73% of Cebu Pacific's jet fleet consisted of NEO aircraft, providing a structural advantage. The Airbus NEO aircraft deliver up to 20% lower fuel burn and CO2 emissions per flight versus the previous generation aircraft. They average 14% more seats per flight year-on-year across our A330, A320 and A321 family, providing a natural hedge. More seats per flight also optimize our revenue while reducing fuel cost per seat. Importantly, Cebu Pacific remains committed to our core mission of connecting people by providing an affordable, convenient and reliable service. We continue to optimize revenue by balancing fare levels and seat load factors, adjusting pricing to reflect higher costs while staying responsive to demand.
Management likewise remains prudent. We have implemented measures focused on cost containment and cash preservation, curtailing non-critical spend and actively negotiating supplier contracts. While near-term conditions warrant caution, Cebu Pacific enters this period from a position of strength. The combination of market leadership, a resilient demand base and disciplined execution provide confidence in the airline's ability to navigate volatility. Management remains focused and agile, committed to reinforcing Cebu Pacific's resilience and an evolving operating landscape. Let me now turn it over to Trina to discuss the financial results.
Thanks, Mike. I am pleased to report that Cebu Pacific delivered a solid set of financial results for the first quarter. We generated total revenue of PHP 33.3 billion, a 10% growth year-over-year, supported by a 10% growth in seat capacity. We flew 7.5 million passengers, an 8% increase, resulting in a healthy seat load factor of 83.7%, underscoring resilient demand with effective capacity deployment. Overall, passenger yields improved as a 2% decline in average fares, which were impacted by the cancellation of our flights to the Middle East this March, were more than offset by an 11% improvement in ancillary yields. With these, passenger revenue rose 6% year-on-year to PHP 22.5 billion, while ancillary revenue increased 19% to PHP 9 billion. Cargo business continued to grow, enabled by more wide-body aircraft that expanded both weight and size capability.
Cebu Pacific carried 58.3 million kilos of cargo, 6.7 million kilos more than last year, partly offset by a 5% decline in yields, likewise affected by canceled shipments to the Middle East. With this, cargo revenue grew 8% year-over-year to PHP 1.8 billion. With revenue up 10%, Cebu Pacific's EBITDA grew 26% year-over-year to PHP 8.4 billion, which expanded EBITDA margin to 25%. Fuel expense, which were reflective of purchases made before the sudden fuel price increase, were lower year-over-year despite the increase in flights. In addition, reduced general expenses cushioned increases in airport, crew, and maintenance costs stemming from the larger fleet. We have taken delivery of seven aircraft since last year, three of which are wide body, which replaced five smaller aircraft, including two turboprops now held for sale.
With these, cost per ASK ex-fuel increased 2% year -over -year to PHP 2.23, but total cost per ASK remains flat despite the fleet and capacity expansion. As a result, operating income or EBIT rose 54% to PHP 3 billion, driving an EBIT margin of 9% and a pre-tax core income of PHP 1.3 billion, an almost 300% improvement year -on -year. As geopolitical tensions intensified, global risk aversion accelerated the depreciation of the Philippine peso at the close of the quarter, resulting in non-core Forex losses of PHP 1.8 billion for CEB, mainly from the translation of our foreign currency debt. As a result, Cebu Pacific closed the quarter with a net loss of PHP 400 million compared to a PHP 466 million net income in the prior year.
With a total fleet of 101 aircraft, total assets increased to PHP 265.5 billion, an PHP 800 million increase since start of the year, following the delivery of one Airbus A320neo, the first of seven aircraft deliveries expected this year. Meanwhile, total liabilities rose to PHP 246.8 billion, a PHP 1.1 billion increase driven by higher unearned transport revenue reflecting strong advanced bookings for the second quarter. Net debt ended at PHP 170.6 billion, a 1% increase from start of the year, resulting to improved net debt to EBIT the multiple of 5.1 x. While core profits grew strongly, total equity declined modestly to PHP 18.7 billion, a PHP 313 million decrease because of the Forex losses. Net debt to equity ratio ended at 9.1 x. Cebu Pacific ended the first quarter with a strong liquidity position. We generated PHP 11 billion in cash income for the quarter.
After outflows for working capital of PHP 3.1 billion, including net interest and tax payments, cash inflow from operations amounted to PHP 7.8 billion. Cash outflows for investing activities amounted to PHP 5.9 billion, primarily for the one aircraft delivery during the quarter and pre-delivery payments or PDPs. Financing activities reported a net outflow of PHP 770 million with additional borrowing for the aircraft delivery and PDPs. Taken together, these movements resulted in a net cash inflow of PHP 1.4 billion, ending the first quarter of 2026 with a cash balance of over PHP 23 billion. This liquidity position provides headroom to fund operations, meet obligations, and support strategic initiatives while preserving flexibility to absorb short-term cost pressures. 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. Our first quarter performance reflected strong demand ahead of the summer school breaks, with Cebu Pacific carrying a record 7.5 million passengers for the quarter. System-wide load factors remained healthy at 83.7%. Domestic traffic grew by 8% to 5.6 million passengers, driven by the growth in seats and improved connectivity, which sustained domestic mobility. International traffic rose 10% to 1.9 million passengers, supported by recovering inbound tourism, along with the growth of outbound Filipino traffic into places like Japan and China. Cebu Pacific remains the country's largest airline, operating a network of 62 destinations, 36 domestic and 26 international, across 124 routes, five hubs, and close to 3,500 weekly flights. As the quarter progressed, however, the operating environment became more complex, driven by the escalation of the Middle East conflict, which pushed fuel prices to record highs.
Amid this volatile environment, we have started taking a more cautious and measured approach. We started implementing fare increases starting in the latter part of March, when jet fuel prices exceeded the $200 per barrel mark. Fare increases were implemented in tranches and varied by route. Further adjustments have been made subsequently, including the implementation of higher fuel surcharges. However, given competitive dynamics along with the fact that we operate in a highly price-sensitive market, we will continue to reevaluate our approach on how we can maximize revenues. We also continue to actively manage our network. Ongoing profitability reviews coupled with various sensitivity analysis have resulted in network adjustments, including some temporary route suspensions and very selective flight cancellations while focusing on routes with high demand.
The priorities remain clear: to optimize revenue and ensure that all flights at a minimum cover its direct operating cost to generate positive contribution margins. This process is continuous and management stands ready to take further network or revenue management actions should this inflated fuel price environment persist. I'm happy to report that CEB once again outperformed its competitors in the first quarter of 2026, maintaining clear leadership in the domestic segment while keeping shares steady in the international market. These gains reflect our disciplined capacity deployment, strong network connectivity, and sustained recovery in passenger demand. For the first quarter of 2026, CEB strengthened its domestic market share to 57.5%, up from 56.9% last year and 57% the previous quarter. International market share likewise improved to 23%.
Looking ahead, management is taking a more measured stance, prioritizing prudent network deployment and margin protection amid a persistently volatile fuel and cost environment. Rather than actively pursuing market share expansion, focus remains on disciplined capacity decisions, root-level profitability, and operational resilience. While near-term growth will be calibrated, management remains cautiously optimistic that Cebu Pacific's structurally lower cost base, scale advantages, and improving fleet efficiency will enable the airline to remain resilient through 2026. First quarter on-time performance improved to 79% from 74% last year, and 69% in the previous quarter as aircraft movements normalized following the December peak holiday travel. Even modest reductions in airport traffic can improve network reliability by easing runway constraints, improving aircraft rotations, and reducing downstream delays.
Our quarterly Net Promoter Score also rose to + 45, up from + 31 a year earlier, and marking a new post-pandemic high, while net sentiment remains steady at +6 . In addition to improved OTP, these reflect the cumulative impact of our investments across the customer's end-to-end travel journey, from digital booking and payment platforms to operational reliability and more consistent service delivery. Taken together, these efforts position Cebu Pacific to sustain improvements in customer experience while supporting long-term demand and brand strength. I now turn you over to our Chief Financial Officer, Mark, to share some insights on our outlook.
Thank you, Xander. Looking ahead to the rest of 2026, the operating environment is increasingly complex and less predictable. Geopolitical tensions in the Middle East are driving fuel price volatility, while the peso, now trading near all-time highs, reflects both fuel-related shocks and broader macroeconomic fundamentals and risk sentiment. Against this backdrop, the BSP's revised inflation outlook, 6.3% in 2026, easing only gradually back to target by 2028, supports a hawkish policy stance with recent rate hikes aimed more at anchoring credibility and containing second-round effects than solely responding to oil-driven pressures.
As inflation risks become more domestically driven, interest rate decisions will increasingly balance price stability against sustaining growth momentum. With this, our approach remains disciplined and measured. We are not assuming a quick normalization of external conditions. Instead, we are focused on protecting the business through active cost management, careful capacity deployment, and prudent liquidity planning. Consistent with our risk management approach, we have selectively layered tactical fuel hedges where pricing has been attractive.
We have likewise secured coverage for over 12% of our third quarter fuel requirements and hedged roughly 11% of our USD disbursements exposure over the next three months. These actions are deliberately calibrated to provide near-term protection while preserving flexibility should fuel and currency markets stabilize. At the same time, supply chain conditions continue to improve gradually, but constraints remain across aircraft, engine, and component availability. Notably, Pratt & Whitney shop visit turnaround times for GTF engine inspections are showing improvement, which would help ease aircraft on ground exposure, with conditions expected to improve progressively through 2027. As both Mike and Xander have mentioned, our priorities and approach are clear. First, we will continue to optimize revenue by balancing fare levels and seat load factors, adjusting pricing to reflect higher costs while staying responsive to demand.
With this comes a conservative capacity deployment plan, ensuring all flights cover their direct operating costs and generate positive contribution margins. Second, we will maintain active and strict cost discipline across the organization, including deferring non-essential spend. Third, we will protect the balance sheet through disciplined working capital and liquidity management. We will continue to unlock internal efficiencies and operational levers to lower unit costs before considering any additional external debt. While the near-term outlook requires caution, Cebu Pacific has demonstrated its ability to respond quickly to disruption. We have a predominantly domestic network, a cost-focused operating model, and a management team that has navigated multiple industry cycles. These strengths give us confidence that we can manage through current volatility while positioning the airline to recover margins and capture upside when conditions normalize. I will now turn you over back to Mike.
Thanks, Mark. Last March marked Cebu Pacific's 30th anniversary, a significant milestone that reflects not only longevity, but transformation. Over the past three decades, we have helped reshape the Philippine aviation landscape, democratizing air travel, connecting communities, and making flying accessible to millions of Filipinos. We have grown through multiple cycles, economic shocks, fuel volatility, global disruptions, and most recently, a pandemic. Each time emerging as a more resilient, more efficient, and more relevant airline. That track record gives us confidence, not just in our ability to manage uncertainty, but to evolve through it. As we look ahead, we remain firmly anchored on our long-term strategy. Our continued investments in fleet modernization, network strength, and operational excellence reflect a deliberate commitment to building capability at scale.
Most recently, we launched the Cebu Pacific Training Academy, a purpose-built facility designed to scale talent development and reinforce safety, service, and operational excellence across our network. Alongside the revival of our Cadet Pilot Program, the Design Engineering Program partnership with De La Salle University, and the expansion of our pilot training facility in Clark for Airbus A330 flight simulation training, this not only strengthens our talent pipeline to support growth but reflects Cebu Pacific's broader commitment to investing in the training and development of future aviation professionals.
These are not short-term responses. They are foundational initiatives aligned with our long-term vision. We are building a more efficient, more resilient, and more accessible airline, one that expands the market, deepens connectivity, and unlocks the full potential of Philippine aviation. While the environment continues to evolve, our direction remains clear. We stay focused, disciplined, and confident in the long-term opportunity ahead. Thank you for your continued support. Let's fly everyone.
Q&A session. With us here and leading our Q&A today are Xander Lao, our President and Chief Commercial Officer, and Trina Asuncion, Vice President for Investor Relations. Also joining us online are our Chief Executive Officer, Mike Szucs, and our Chief Financial Officer, Mark Cezar. As a reminder, this Q&A session is being recorded. If you have a question or comment, you may use the Q&A feature or the raise hand function at the bottom of your screen. Please state your name and company so we may address you properly.
To ensure a smooth and efficient discussion, we kindly request that you limit your questions to a maximum of two per turn to provide others the opportunity to participate. First, we will be addressing the questions that were submitted in advance via email. Our first question: To what extent has CEB implemented fuel surcharges or fare adjustments to domestic and international routes to offset input costs? Has CEB imposed fuel surcharge rate? Xander, can you take this question?
Sure. Thanks, CJ. Great question, and we really implemented the fare increases in phases across our network starting in March when the war had started. In terms of fuel surcharges, we have implemented higher fuel surcharges when they were allowed. We are actually thankful that the Philippine regulators shortened the cycles, and we did see fuel surcharges, for example, surge up to level 19, which is a level below the maximum level approved during the second half of April. While the next period, we did see a decrease for the May 1 to 15 period declined slightly to level 18. Now, what does this mean in terms of what the actual increases are? The surcharges are around PHP 600 -PHP 1,700 for domestic flights and roughly PHP 2,000 -PHP 7,000 for international flights. And really these charges depend on the distance of flights.
But I think we have always known that there was always a limit to what we think higher prices consumers were willing to absorb. For instance, for the market, I think we initially accepted fare increases of roughly 30%-40%. We did consequently see slower booking behaviors, which then led to reduced load factors. This really weighed on our April passenger numbers, which were slightly less on a year-on-year basis in spite of the increased number of seats. We clearly saw the negative impact of both the higher ticket prices along with an uncertain economic environment. Because of this, we adjusted fare downwards, rolled out some short-term seat sales, and we already saw the impact of these changes as early as the second half of April and with May bookings actually gaining momentum.
Now, I guess one of the things to think about is this process of iteration will continue. We will clearly have to adjust pricing based on the market response. Our priority is to make sure at this point in time is that each flight covers its direct operating costs and generates a positive contribution margin. Lastly, while we did say that our fuel surcharges or what we call YQ were already allowed, I would say two things. First, this would not really cover seats that are already sold prior to the increases.
Ultimately, these surcharges would not really fully offset the higher input costs as fuel more than doubled in such a short span of time. Secondly, we also have to adjust our overall pricing based on the market responses. I think we've learned throughout this period that we needed to make sure that pricing were recalibrated to ensure that bookings remain healthy rather than just a one-way overall price increase.
Thanks, Xander. Our next question: What is the status of your jet fuel inventory? What specific hedging or procurement strategies have been executed to secure supply for July and beyond? Trina, maybe you can answer that question.
I can take that, CJ. Thank you. We've secured fuel supply and inventory through the end of June. Know that we do not see any fuel supply as an issue now and going forward. It's more a matter of locking in the pricing. We hope to retain some flexibility should prices stabilize, basically. On hedging, as mentioned by Mark earlier, 50,000 bbl have been hedged at roughly $120 per barrel. This is for Q3. Forward curves remain to be backward dated, so we'll continue to monitor this. We'll be taking action as appropriate and as they present themselves. Again, the overall objective of our hedging policy is to narrow the price volatility gaps. I think that's it.
Thanks, Trina. Our third question: Given the sensitive demand environment, how is CEB adjusting its network and growth plans? Can you provide updated capacity guidance for the rest of the year?
Let me take that, CJ. We think CEB will still grow, although at a slower pace. In fact, we implemented an initial round of network adjustments, and our second quarter seat growth is going to be slightly below the initial guidance. We think we'll come in roughly between 11%- 13%. As mentioned, we did see passenger growth soften and load factors actually coming in below expectations for the month of April so far. We have seen, though, May recovering, but we do want to remain cautious coming into June.
We think our seat growth for the first half of 2026 is going to come in roughly between 10% - 12%. We do think growth from the start of the lean season, which is possibly the second half of June and really until the end of summer, will be in the high single digits. For now, we think that overall seat growth is going to come in at roughly 9% - 11%, which is lower than our previous guidance. I would say this is also dependent on where fuel prices land. We have been encouraged by the recent decline in prices, but it is too early to tell, and clearly, that's something we would have to manage as we go along. Back to you, CJ.
Thank you, Xander. Our next question: Can you provide us with updated CapEx guidance? Is the group capable of taking on more debt to fund these, and what specific levers are available to reduce or defer this spending?
I can take that, CJ. Thank you.
Thank you.
CapEx guidance, our original guidance was PHP 35 billion, but around PHP 32 billion of this would be aircraft related. Seven is deliveries for this year, and these deliveries will still proceed this year, although we've been able to defer some to the latter part of the year. Note that financing for these aircraft have actually been committed already, so this plus our cash balance of around PHP 23 billion already provides us sufficient liquidity running well into next year. Having said that, the group has the capability to take on more debt if needed. Clearly, this is not our first option. Nonetheless, we have about PHP 15 billion in committed local bank lines. In addition, we have a number of unencumbered aircraft, actually, and including some that are minimally encumbered. These will include aircraft and engines whose outstanding balances remain well below the market values of these assets.
This will give us additional flexibility to monetize such asset equity if necessary. Still, cash preservation is a clear priority to us. We will maintain strict cost discipline across the organization, and this will include deferring non-essential spending. Of course, we want to maintain some flexibility so that we are able to bounce back quickly in time for recovery. We have a lot. We have a lot of working capital, levers, liquidity management initiatives, and even some internal efficiencies which we think we can push and tap further, and these will reduce operating costs and cash outflows, and we can do this well before considering any additional financing.
Yes.
Thanks.
Thanks, Trina. Now as we move on to the questions that were raised in the Q&A box in Zoom. While there are no questions via the Raise Hand function, our first question is from Brian Vesser from GTA Securities. Three questions right here. What routes grew year-over-year, if any? What caused the spike in ancillary revenues? Does CEB have internal guidance on the dollar, and what Forex level threshold are you carefully watching?
Sure. Let me take the first two questions and allow Trina to take the last one. So rather than talk about specific routes, I'd like to maybe give a bit more guidance in terms of specific market segments. We did grow our domestic segment, we think, by around 8% in the first quarter. Short-haul international also grew slightly by around maybe 2%, 3%. It is really the long-haul segment that contracted, and that's really because of the war. So I think we were flying maybe seven to 10 times from Manila to Dubai, and then we had started actually our operations into Riyadh on the first day of March when the war started. So we had to suspend some of that.
So long-haul operations contracted slightly in the first quarter. So where we have placed the growth was where we thought it would make a lot of sense. Now, in terms of the ancillary revenues, the growth really has been driven by passenger numbers. Our passenger numbers grew in the first quarter. Some of our bundles and fees also grew. So we've done a better job in terms of offering relevant packages to our consumers. And we think that take-up has been pretty good so far. We are looking forward to continuing to invest in the ancillary packages that we offer, and that's something we will continue to watch throughout the year. Trina, you want to take the next one?
Sure. In terms of our guidance, kind of difficult, but we all know that the peso is trading at its weakest ever since pre-pandemic. Now, having said that, we do require, or at least our sensitivity will require us at least $140 million - $160 million a month. So you can see that for every peso weaker, every dollar, that will entail another $140 million - $150 million for us. And that would exclude the translation or paper gains and losses that we do on our currency translation at the end of every quarter. But having said that, as Mark also mentioned, we do take a look actively and dynamically into opportunities to hedge, including Forex. And we also keep a certain part of our cash in US dollars for a natural hedge. Hope that answers the question.
Thanks, Trina. Again, just to remind everyone, if you have any questions, you may type it in the Q&A feature of Zoom, or press the Raise Hand function if you have a question. Our next question is coming from Alfred from FlightGlobal. Could you talk about the headwinds on the long-haul network and what outlook will it be like for long haul?
Well, first of all, we're thankful that long haul is a relatively smaller part of our operations. 70% of our seats are domestic. I think we also have some built-in advantages with having new aircraft and the like. In terms of what the, I guess, view for long haul would be, we've reduced our exposure on long haul. Clearly in Dubai, we have suspended operations since the start of the war. There are ongoing assessments on whether that operation will restart or not. But in the meantime, we continue to remain suspended on those frequencies. Riyadh, we have continued ops. We suspended temporarily during the first part of March, but we have then again restarted ops into Riyadh. We think the demand into Riyadh continues to remain healthy as there are still overseas Philippine worker deployments and the like.
I think for Australia, we have reduced some of our frequencies. I think previously in Sydney and Melbourne, we were at seven times and five times weekly. This has come off a bit as we see the exposure of fuel on longer sector flights being more punitive than the shorter sectors. I guess, thankfully, the exposure to long haul was never huge to begin with, but that's something we've rolled back. Will we be able to redeploy the aircraft? Really, there are other opportunities. We are one of the few carriers here in the Philippines that can deploy their A330s onto domestic stations and continue to take advantage of this relatively resilient domestic market. Back to you, CJ.
Thanks, Xander. We have a raised hand here from Klyne Resullar from Regis. Klyne, you may go ahead and say your question. Kl yne, are you there?
Hi.
There you go.
Thank you for taking my questions.
Oh, Klyne.
Yeah. I just want to understand the rationale behind your seat growth guidance, particularly in the second half, because I think you are still expecting growth. I was wondering if this assumes that jet fuel prices stay where they are still, or are you thinking about the growth being sustained because jet fuel prices could drop off towards the latter part of the year?
I think it is a couple of things. One is we have moderated that growth. The aircraft are here. Can we make sure that the flights that we are flying continue to provide a contribution margin to the airline? As long as we are able to do that, then we will continue to operate those flights. Of course, what you have mentioned is there is a view that the war could end sooner rather than later, and we would just want to make sure we are pretty much prepared to, I guess, restart operations soon. As I also mentioned, I guess earlier, Klyne, it really will depend on the fuel outlook. I think we have come off from the highs of $230-ish. Now, I think latest mark was probably at $150, $155. Clearly that has helped us a bit. It is something we have to continuously monitor.
I think that is our initial guidance for now, and we will have to keep looking and adjusting the network as we go along. I think one of the things really for the second quarter, for example, that maybe a question that has come to us from other analysts and the like, is it felt like your April and May capacity was still relatively high. Second quarter is also the peak period for the Philippines. It is not like we could consolidate and cancel the flying all at once. Again, looking at the network, did the flight or did the route have a positive contribution margin? Was it able to cover its direct operating cost? If yes, then we will continue to fly it. It is a more moderate growth rate compared to what we had previously guided. I hope that answers it, Klyne.
Yes. Thank you, Xander.
Sure.
I guess, could you also give us an idea how your competitors are responding to this price? Are they scaling back on their capacity growth or no? Yeah.
I think some more than others. We have seen, for example, Philippine Airlines and ourselves have roughly the same amount of capacity reduction. Philippines AirAsia has had much higher seat reduction. So far we are seeing 30-ish%, I think, for June. But again, that is based on the scheduling outlook that we have noticed so far. So ourselves and maybe PAL, more rational players, better financial position, I guess, are taking similar cuts, whereas, I guess weaker players will need to take deeper cuts.
Thank you.
Klyne, this is Mike. By the way, sorry, Mark and I, we are sat here together in my hotel room in Bangkok. Sorry we cannot be in Manila on the call. Just to add on the competitive thing, I think there is genuine relative value, and we are seeing that in terms of two key things, how our network is structured. So a massive bias towards domestic. That really does hold up. By the way, nobody makes money at fuel prices when it is up at $240. This is all about minimizing losses.
As Xander has said, it is about does it make sense to fly the aircraft and have a contribution as opposed to parking it. The math in April and May, even though the fuel price are very high, because it's a peak and because we've got a very domestic bias, it made sense to fly those routes. The other bit that we have an advantage on, particularly over someone like AirAsia, is the age of our fleet. Our jet fleet, the majority, about 75% of our jet fleet is NEO. With Philippines AirAsia, it's all old stuff. They've got a 20% fuel burn penalty relative to us.
They have more of a, their bias is less towards domestic than ours is. It's these advantages that we have. I just wanted to stress to everyone, look, nobody makes money in this part of the world. Nobody is making money here. This is about minimizing the losses. For us, it makes sense to fly because we will lose less than if we park the aircraft. Going forward, in terms of the capacity guidance, when we go into Q3, of course, Q3, we're going to see naturally you get less demand in that period of time. Our anticipation is that fuel prices are going to get much lower. You can see that in the backwardation of the curve that Trina touched on. We have actually picked up some swaps in Q3, around about the $120 level, which is half the price of where it was in April.
So whilst you've got less demand, our cost story is going to be much, much lower, basically because the price of fuel looks like it's going to be a great deal lower than that $240. Hence, we're analyzing the capacity situation all the time. I wanted to explain two things. Nobody makes money here. This is about minimizing losses. We are structurally advantaged relative to our competition that we will be pulling down less capacity than you would see those pulling down. We will, of course, be pulling down capacity, and it will be more targeted on the international and on the long haul especially, rather than on the domestic, which is going to have a lot more resilience. Just to give a bit more flavor to the thinking and how we will play this out.
Thank you.
Thanks, Mike. Thanks, Klyne. Our next question will be coming from Paolo Manansala of COL Financial. Paolo, you may go ahead and ask your question. Thank you. Hi, Paolo. Are you there? Okay. Paolo.
Hello. Sorry, am I in?
Yes.
Yes.
Hi there.
You're in.
Hello. I just wanted to ask with regards to what you mentioned a while ago, at the $200 per barrel mark, no airline is profitable right now. I just wanted to ask, I guess what threshold or what average fuel price do you guys see flights becoming profitable again? So different routes in general, I guess an average as to what the fuel price or what dollar specifically of per barrel of fuel is in the profitable range, or what you see as ideal, I guess?
Mark, do you want to take that one? Just before I almost cut myself. Sorry about that.
Sure. Historically, Paolo Manansala, we've been breakeven from a network-wide perspective, somewhere between $120 - $130 jet fuel. That's not P&L breakeven. Our cash flow breakeven somewhere between $145 and $130.
Okay. That's it from my end. Thank you.
Thanks, Paolo Manansala. Our next question will be coming from Rainier Yu from Abacus Securities. He has two questions actually. Is the company still looking to do wet lease agreements in the third quarter? And if yes, how many aircraft? Second question is, can you share the current competitive landscape for domestic? Are other local carriers still scaling down or rerouting other routes into domestic? And for international, have you seen foreign carriers decrease their frequencies?
Sure. Let me take the second question first. We did explain early the competitive landscape on domestic. On international, we have also seen some of the foreign carriers decrease their frequencies, in particular, the Vietnamese carriers have reduced frequencies. But we have seen whether they are reductions in frequencies or downgrades. That has been pretty prevalent on international. Domestically, explained earlier. I think in terms of the wet lease agreements in the third quarter, I guess given the current environment, that's probably not going to happen in this environment.
What's it on the-
Go ahead, CJ.
On the wet lease agreements in the third quarter.
Sorry, just one second.
Sorry.
Yes.
Our next question, given the current trending of jet fuel prices vis-a-vis demand trends, can you give us some profitability or loss guidance?
Yeah. I'll take an initial stab. Look, Mike alluded to a lot of this earlier. Let's go through it quarter -by -quarter. For Q2, given April and May, we saw fuel prices close or above $ 200. We can already safely expect the second quarter to be a loss-making quarter, notwithstanding this is already our high season. The fuel price increase was both steep and sudden. While our ability to recover the higher cost in the form of higher fares is naturally delayed, given that a significant portion of our seats are sold in advance. So that's on Q2. Q3, seasonally, it's our leanest quarter. Historically, even in normal conditions, in much lower fuel prices, it is a loss-making quarter. So that'll be quite steep to expect any difference there this year. We've seen fuel prices decline in the recent week or so.
While this is encouraging, if it sustains, we could get some relief in the second half of the year. Q4 is always a strong quarter for us. It should provide an opportunity for some recovery, given the Christmas travel and just the seasonal demand in there. Although it is early to give any particular guidance on this. I would have to say that it'll have to be a very steep recovery, in order to recover the two quarters that would be of core losses. That'll be really difficult. Mike, anything you want to add there?
No, just to say, this is going to be a tough year in terms of financial results. That is clear. But we remain confident for the longer term, in ourselves, essentially the Philippine story as well, which is why we're doing all the right things, all the prudent things in terms of cash preservation, making the right network decisions to minimize losses. But we have got a very long-term view. Still we are investing in things that are for our long term. We'll be doing an operational systems changeover later this year. We'll be doing a complete refresh as well on our digital platforms.
So there's a number of long-term things. We just opened a new training center. We just refreshed our operations control center. So these are things that are for the long term, because we have long-term confidence. Despite that this year will be a loss-making year, we are confident that next year we will be back to an excellent story, based on the Philippines ourselves. Who knows as well, the competitive environment may change. There is a relativity to everything here.
We are so much stronger than the other guys out there, and there is at least one of those carriers out there at the moment is in extreme trouble. We are not banking on anything, but of course, we will respond if something happens there. I just want to reassure everyone, we are very confident about where we are for the longer term. This is a real pain that we do not like losing money as we will do, unfortunately, through this year. But we are absolutely committed and we are going to be there for an excellent year next year. That is very much how we see it.
Thanks, Mike. Our next question from Verden Sobi. How has the Middle East conflict impacted the planned wet lease operation in Saudi Arabia?
Thanks, CJ, but I think we answered that earlier. We believe that there will be no wet lease operations in the Middle East for now. Something we will have to revisit.
Our next question will be coming from Leon Gundo of F. Yap Securities, Inc. Assuming that the fuel price today, approximately $ 159 per barrel for Asia and Oceania as per IATA persists throughout the year, where do you guide your annualized CASK will be? The second question is, how are your new booking numbers looking like in April, and how is it compared month-on-month and year-on-year?
Maybe I can take that initially.
Yeah.
First and foremost, just to give a refresh on our sensitivity. Given our latest network, we think we are anticipating to consume about 500,000 bbl a month. Given that on $ 160, just comparing it to pre-war rates of about $90 a barrel, that would give us around a $70 increase. So that's roughly $ 35 million impact on our bottom line a month, just in terms of fuel cost. Having said that, yes, we have looked into that scenario, and that is well within already our current network plan right now. I would say that the ASK numbers, at least, and the seat growth numbers that Xander has alluded to earlier, already encompasses the scenario where it's going to be roughly $160 a barrel. The growth guidance already encompasses that.
But in terms of annualized CASK, a bit too difficult to guide right now, because it's all really a matter of how the rest of the world plays, I guess. And in terms of overall impact on the aircraft utilization and on all the other cost efficiencies that we are able to boil down. But it will continue to be, I think, the lowest cost for ASK out there. Not only that, we will be the highest in terms of relative growth that you'll see, but also that on both fuel and non-fuel costs, we have those favors again, given our current cost structure. Do you want to add something to that, Xander?
Well, no, I was going to take the second question, which is in terms of how did we see April so far? We did talk about price increases that we tried to roll out, but clearly, the market didn't absorb it as well. We do think, for example, passenger numbers for the month of April are going to be slightly less on a year-on-year basis. But that's natural given, I guess, the higher inflationary environment, the higher ticket prices that were being pushed through. We have seen some recovery so far when we did make adjustments to our pricing, and we rolled out seat sales. We have seen some demand continue to push in. So it is a difficult environment to be operating in. But again, as Mike mentioned, we do have specific structural advantages to the airline. So 70% of our seats are on domestic, for example.
70% of the routes that we actually fly are all trunk sectors. These are, we think, really traffic that's going to remain essential. Plus, more than 70% of our jet fleet are NEO, so we are burning 15%-20% less fuel compared to our competitors who are mostly on older aircraft. We do think these structural advantages, while there is some short-term pain in terms of demand for April, we have seen a rebounded need, and we're structurally prepared to take on those challenges.
Yeah. Maybe if I just add to what Xander. Just to explain how. This is difficult territory to be in when your whole business model is built on stimulating demand by having a low cost and putting out low fares and still being able to make a profit, right? That's what we've been doing successfully for the best part of 30 years. Here, we're in an environment where we've been having to try and get fares up to try and recover as much of that fuel price increase as possible. Frankly, it's difficult, and it's a bit of trial and error. I think as Xander has alluded to, in April, we were pushing it up, and we probably nudged it up a little bit higher than we should, but that's part of the iteration. We've since come down.
What is encouraging is that whilst April had a negative impact on the volumes, we are seeing that recovery now coming through in May in terms of volume. So we're finding where we think the sweet spot is. What's definitely panning out is the resilience of the domestic market. That is something that we anticipated would be the case, and it is something that we are witnessing now in May's performance and in the forward bookings going beyond that.
Thanks, Mike. Our next question will be coming from Klyne again, Resullar from Regis. Klyne, you may go ahead and ask your question.
Thanks. Sorry, I just wanted to understand further how, because you're sticking with your CapEx guidance this year, how would that translate to, I guess, net debt being relatively unchanged? I guess that's how I understood what you said, but please correct me if I was wrong.
The net debt will not necessarily be unchanged, Klyne. Obviously, with some losses, our equity will decline. Yes. But as we said, while we have been able to push some of the CapEx, so what will retain the aircraft related will be about 32 at most out of the 35. So there will be some reduction, but since it's mostly aircraft related, those are committed already. But it will be at the tail end of this year. But by the end of the year, yes, definitely, with the reduction in cash and with the reduction in equity, the net debt to equity ratio, we don't anticipate to be the same.
The net debt will likely not be the same either, because unless, we take on additional debt and then we take on just for the cash, which won't happen. It's not our priority. But I doubt that keeping the CapEx will mean keeping the net debt flat. We won't keep the net debt flat this year.
Okay. That's very clear. Lastly, I just wanted to understand as well, if this crisis lasts, yes, until for the rest of the year. I understand that the convertible debt is maturing next year. How do you plan to fund it? Or yeah. Is there a risk of, I guess, needing to raise equity?
I'll let Mark give you a just general comment on that. Go ahead, Ma'am.
Certainly. That's something at the back of our minds. I wouldn't say it's front and center at the moment, but the fact that the conversion price of the bondholders is currently underwater. So that's certainly something we keep in mind. Yes, now we would have to refinance it. We think that'll probably be a capital market transaction. We would probably be eyeing some equity accounted instrument, like a perpetuity, a perpetual. We would just probably do a capital market transaction somewhere around first part or second part of next year. That is probably where we would take that.
Okay. Thank you.
Thank you.
Thanks, line. Our next question will be coming from Lincoln Chan of Cobas Asset Management. Can you provide some color on the demand flexibility in the Philippines, and to what extent the high oil price, low Philippine peso is hurting the demand of ordinary consumers? Are you worried about that?
Thanks again. Let me take that question. I think we've talked about the demand picture earlier, and that's something we have to continue to iterate from, I guess, from a network and revenue perspective. Are we deploying the right amount of flights? Are we pushing the pricing to a level where we think there will be sufficient enough demand so that we are able to cover our variable or direct operating costs? I think that's something we'll have to continue to do. There is an upside with the depreciating peso. 10% of our Philippine population is really overseas Filipino workers that remit money, so in theory, they will have more funds to purchase with.
Clearly, we are concerned with a higher inflationary, weaker peso and a higher inflationary environment. Again, it's really for us to also try and adapt our network and our pricing. In the meantime, internally, we will take steps to make sure we're pretty strict on cost discipline. We want to make sure that we are investing only in essential projects and the like. I think it's really a combination of those factors that will allow us to continue to, I guess, serve the Philippine market quite well.
Thanks, Xander. Seeing that there are no more raised hands for additional questions in the Q&A box. Xander, would you like to say a few words before we close this briefing?
Sure. Thanks so much, CJ, and thanks to everyone for joining us on this call. I am really happy to report a strong first quarter performance, which again, puts us really in a position of strength as we approach this more challenging operating environment, really marked by quite volatile fuel prices, a weaker peso, and what has been so far more challenging demand outlook. I guess, as I mentioned earlier, given the environment, we have to take a very cautious and measured approach, one of which is we will continue to optimize our network. We will continue to optimize the pricing that we will put out. We will continue to be conservative and really looking at how we deploy our capacity just to make sure routes are able to give a positive contribution margin.
Lastly, try to maintain strict cost discipline and really be prudent about our working capital and liquidity management across the organization. I think a lot of things to consider, so we have to be both agile and pragmatic, but our views remain the same. These are difficult but really short-term challenges. Secondly, CEB is clearly well-positioned to weather this crisis, given our structural advantages in terms of our fleet, our network, and our cost structure. Longer term, we do think the growth prospects for aviation in the Philippines remain positive.
It is still going to be an archipelago, it is still going to have a young population, and it is still growing its middle class. I think we have gone through multiple cycles in the past. So whether it is an economic shock, a pandemic, and the like, each time we have actually emerged as a more resilient and efficient airline. We think that this track record really gives us a lot of confidence to move forward and confidence in our ability to really manage this crisis. We are confident really in the long-term opportunity that the Philippines has to hold and where Cebu Pacific is well-positioned. Again, thank you so much and have a good day ahead.
Thank you, everyone.