Good afternoon, everyone. Thank you for being here with us today. We are excited to share the remarkable progress Cebu Pacific made in 2023. We will highlight how we finished the past year strongly, focusing on how we have expanded our network, fleet, and capacity. We will also share significant improvements in our operations, particularly in our financial performance, customer management and recovery, and efforts towards sustainability and governance. Finally, we will provide an insight into Cebu Pacific's outlook and strategic plans for the upcoming year and beyond. Please sit back, relax, and make yourselves comfortable as we go through the exciting journey of Cebu Pacific. Let us dive straight into the highlights of our performance last year. 2023 was a year of remarkable growth for Cebu Pacific, driven by robust demand for air travel. Looking into our fourth quarter performance, we have seen our operations accelerate further.
We saw a 15% increase in flights year-on-year, and our seat load factor improved by 5 points compared to the same quarter of the previous year. in December alone, we made a strong return, operating an average of 435 flights while carrying 69,000 passengers each day. Our peak performance was recorded on December 20th and 28th, when we reached 446 flights and carried more than 73,000 passengers daily, the highest number of flights and customers in our history. Reflecting on the entire year, it is clear that Cebu Pacific finished 2023 on a high note. Domestically, we carried a total of 16 million passengers, marking a 19% increase from the previous year. This growth allowed us to capture a market share of 53%, solidifying our position as the leading domestic carrier.
This is a result of several initiatives, such as the resumption of routes connecting Manila to Laoag, Iloilo to Puerto Princesa, and Iloilo to Cagayan de Oro. Further, our strategic relaunch of operations in Clark International Airport has expanded our network, establishing us as the largest airline servicing Northern and Central Luzon. Our international operations also experienced a significant surge with 4.8 million passengers flown, representing a 260% increase year-on-year. This growth was driven by increased frequencies to popular destinations such as Hong Kong, Singapore, and Tokyo, as well as the resumption of routes from Manila to Melbourne, Macau, and Shenzhen, and from Cebu to Tokyo, Hong Kong, and Taipei. Additionally, the launch of direct flights between Manila and Da Nang in December 2023 further strengthened our international network, providing our passengers with even more convenient travel options.
By year-end, Cebu Pacific boasted the largest network in the Philippines, operating in 60 destinations across 108 routes with over 2,700 weekly flights. We are also proud to announce that our system-wide capacity successfully reached 100% of pre-pandemic levels. Looking into 2024, our load factors in the first quarter are seen to be improving year-on-year despite higher capacity. CEB has benefited from returning passengers during the Christmas holidays and Philippine festivals, and we are also expecting a high volume of travelers as we approach the Holy Week. Moving forward, our commitment to providing affordable, safe, and reliable air travel remains unwavering. With the largest network in the Philippines, we are focused on network expansion and strategic growth to deliver unparalleled value to our passengers. I will now turn you over to Trina, who will provide an update on CEB's fourth quarter financial performance.
Thank you, Xander, and good day to everyone. I am pleased to present Cebu Pacific's financial results for fourth quarter of 2023. It's worth highlighting that fourth quarter marked Cebu Pacific's strongest quarter of the year in terms of revenue, as we generated PHP 23.7 billion in total revenue. That's 23% up year-on-year and already 12% higher than 2019. Passenger business generated PHP 16.3 billion in revenue, 29% higher year-on-year. This was on the back of 5.3 million passengers flown during the quarter, which was 21% higher year-on-year. Seat load factor went up 5 percentage points year-on-year to 82.8%, while average fares increased over 6% year-on-year to over 3,000 pesos. Total passenger revenue for the quarter was already 8% higher than 2019. Ancillary business generated PHP 6.3 billion, 25% higher year-on-year.
In addition to passenger growth, various initiatives such as product bundling, price optimization, and baggage policy enhancements improved ancillary yield to over PHP 1,010 per passenger. That's 3% higher year-on-year. Total ancillary revenue for the quarter was already 35% higher than 2019. Meanwhile, cargo business generated PHP 1.1 billion in revenue, 28% lower year-on-year. We flew 41.5 million kilos of cargo during the quarter, 36% up year-on-year, but this was more than offset by a 47% decline in cargo yield due to stiff competition.
Coupled with lower wide body capacity, cargo revenue for the quarter was 24% below 2019. With PHP 23.7 billion in revenue, Cebu Pacific generated operating income of PHP 2.4 billion for the fourth quarter, for an operating margin of 10%. This is a reversal from previous year's operating loss of 232 million, but still 13% lower than 2019. Operating expenses totaled PHP 21.3 billion, 9% up year-on-year.
Meanwhile, with more international flights, available seat kilometer, or ASK, increased by 26%. This reduced our cost per ASK to PHP 2.9 or 13% lower year-on-year. Fuel expenses amounted to PHP 8.3 billion, 12% higher year-on-year as higher volume requirements were tempered by lower prices. Jet fuel prices averaged $107 /bbl during the quarter, 9% lower year-on-year. Versus 2019, however, jet fuel prices have increased by 41%, increasing our fuel expense by 36%. We invested heavily in additional fleet and other related equipment this 2023 to support both growth and operational resiliency. With this, you'll see notable expense increases for depreciation and amortization, crew cost, as well as financing charges. Finally, we also invested in the improvement of overall customer experience both online and on the ground.
General expenses for IT and other digitalization initiatives would include those for our website, payment and distribution platforms, as well as those for airport passenger experience. With all these, the fourth quarter pre-tax core income amounted to PHP 754 million. This was supplemented by another PHP 669 million in non-core income, primarily from aircraft sale and leaseback transactions. This, plus a net tax benefit of PHP 1.5 billion, brings Cebu Pacific's fourth quarter 2023 net income to PHP 2.9 billion, a significant turnaround from the PHP 1.9 billion net loss incurred last year, and notably 22% higher than net income earned in the same period in 2019. I'll turn you over to Mark now to discuss Cebu Pacific's full-year financial performance, as well as our outlook.
Thank you, Trina. Cebu Pacific generated total revenue of PHP 90.6 billion in 2023, a 60% growth year-on-year and already 7% higher than 2019. The passenger business led this steep recovery with PHP 62.5 billion in revenue, 78% higher year-on-year. This is on the back of over 20 million passengers flown in 2023, 41% higher year-on-year. Seat load factor increased almost 9 points to 84%, while fares improved 26% to almost PHP 3,000. Passenger revenues in 2023 were already 1% higher than in 2019.
Ancillary business generated over PHP 24 billion in revenue, 66% higher year-on-year. In addition to more passengers, ancillary yields have improved 21% year-on-year to over PHP 1,040. Ancillary revenues in 2023 were already 39% higher than in 2019. As mentioned earlier, cargo business displayed a downward trend. It generated over PHP 4 billion in revenue, 43% and 29% lower than the previous year and 2019 respectively.
With PHP 90.6 billion in revenue, Cebu Pacific generated operating income of PHP 8.6 billion and a pre-tax core income of almost PHP 4.2 billion for 2023. These remain shy of 2019 profitability levels due to higher fuel and fleet expenses, but show a significant recovery from the losses incurred in 2022. Notable expenses include fuel, which was 21% higher year-on-year. Volume requirements increased on the back of 30% more flights, but partially offset by lower fuel prices. Depreciation expenses increased year-on-year as we added a net 13 aircraft, plus shifted towards more leased aircraft. Crew and airport costs increased to support growing operations. As Trina noted earlier, embedded in our OpEx are digitalization and other efforts to support our customer first initiatives. Total operating expenses grew 20% year-on-year to PHP 82 billion, while ASKs grew to over 27 billion, 59% higher year-on-year.
This reduced our cost per ASK to PHP 3, 25% lower, while CASK ex-fuel reduced to PHP 1.9, 25% lower year-on-year. Financing costs increased to support our growing fleet, but were offset by non-core gains from sale and leaseback transactions, as well as tax benefits accumulated since the pandemic. All these combined, Cebu Pacific recorded a net income of PHP 7.9 billion in 2023, 13% shy of the PHP 9 billion net income in 2019, but a significant recovery from the PHP 14 billion net loss incurred in 2022. We ended 2023 with total assets of PHP 187 billion, PHP 39 billion higher than in 2022. Our total fleet count by year end was at 85 as we took delivery of 18 aircraft plus four spare engines and exited five aircraft leases. Aircraft and aircraft-related assets constituted PHP 146 billion or 78% of total assets.
Total liabilities ended at PHP 182 billion, of which over PHP 130 billion are debt-related, inclusive of lease liabilities and convertible bonds. The current portion of debt and leases was PHP 14 billion, while unearned transportation revenue from passenger bookings increased to PHP 14 billion. With these, we ended 2023 with equity of almost PHP 5 billion. The current ratio ended at 0.5x , while average net debt to EBITDA improved to less than 4.7 x.
Cash inflow from operations amounted to PHP 17 billion as cash income of PHP 23 billion was reduced by requirements for working capital, interest, and taxes. Cash outflow for investment totaled over PHP 9 billion as CapEx of about PHP 19 billion was offset by over PHP 10 billion proceeds from the sale and leaseback transactions. Meanwhile, outflow for financing amounted to PHP 11 billion, as debt and lease payments were offset with PHP 10 billion in new borrowings.
Lease payments comprised PHP 9.8 billion, while debt payments included a debt pretermination for PHP 5.1 billion. These combined provided CEB with ending net cash and cash equivalents of almost PHP 17 billion. Moving forward, we hope that Cebu Pacific's solid 2023 financial results will set the foundation for a more exceptional performance in 2024. Now, allow me to provide some updates on key economic indicators which affect our financial outlook.
On fuel, fundamentals remain unchanged with jet prices still supported at the $100 /bbl mark. With geopolitical tension in the Middle East, supply concerns also weigh after OPEC+ members announced the extension of their voluntary output cuts into the second quarter. On Forex and interest rates, U.S. dollar versus Philippine peso remain above the 55.5 mark as the U.S. Federal Reserve remains largely hawkish, waiting to become more confident that inflation is trending down to 2%.
With this, rate cuts may likely happen later this year. Throughout 2023, we have actively pursued opportunities to expand our fleet to ensure operational resilience while maintaining our growth trajectory. This 2024, we are preparing to welcome an additional 18 aircraft deliveries to replace 10 exiting aircraft, ending the year with a fleet of 93. Our 2024 CapEx estimate is at PHP 48.7 billion, including predelivery payments for future deliveries. Financing will be a combination of long-term debt and sale and leaseback transactions.
This will allow us to increase capacity year-on-year by 11%-15% in terms of seats. For the first quarter of 2024, CEB is already offering 14% more seats compared to the same period last year. For the second quarter, we expect to continue double-digit capacity growth as we upgrade several international routes, including Manila to Bangkok, Hong Kong, and Incheon. Turning over to Alexander to discuss our customer experience updates and sustainability wins.
Thank you, Mark. Last quarter, we shared with you how industry challenges have led to capacity constraints and operational difficulties for Cebu Pacific. This quarter, I am pleased to say that the contingency plans we implemented have enhanced our operational resiliency and reliability. Today, we have ongoing investments in additional aircraft and spare engines. Aside from that, our enhanced customer first efforts help sustain our commitment to offer passengers safe, affordable, and reliable flights. Notably, our on-time performance remained resilient even in December, the busiest month of the quarter. Since October, our OTP has remained stable, moving between 70% and 80%. We close the year with an average OTP of 71.4%, which is higher than our OTP in 2022 and also higher than in the pre-pandemic year of 2019.
We are likewise happy to report an improvement in our customer sentiment as we ended the year with an average Net Promoter Score of +30 for the fourth quarter. This came after we implemented new customer-first initiatives and established the new customer journey management team. For our customer-first initiatives at the airport, we've empowered our frontline teams by providing them with training that enhance their skills in communications, customer service, and conflict resolution. This aids our initiative of standardizing our disruption handling at the airport, which ensures seamless passenger experience across all of our stations. In addition, we've also elevated our customers' airport experience by allowing them to perform various services on their own. This includes generating their own boarding pass and an ability to independently check in their bags.
Passengers may now use their boarding passes to avail meals from CEB-accredited vendors on the rare occasions that their flights might get disrupted. We've placed gate locators at the airport to help our passengers find their way to their assigned gates. We've also supplemented this by notifying our passengers via text messages regarding any last-minute changes in their boarding gates. On top of empowering our frontline teams and elevating our passenger experience, we've also enhanced our online customer support as we introduced an updated and better version of Charlie. Charlie is our virtual assistant. The new and improved Charlie offers customers the fastest way to get answers to their concerns as she links them to the CEB Help Center. Charlie also offers the fastest way to connect to our live agents, with customers waiting less than a second for a response to their queries.
As we remain committed to further enhancing Cebu Pacific's customer experience amidst the dynamic air travel landscape, we will also strive to continue offering the best value to our passengers. Now, it's worth noting that our success also extends beyond our expanding network, sterling financial recovery, and improving customer experience. We also take pride in our efforts to operate sustainably. Cebu Pacific's commitment to sustainable aviation has earned us a gold rating from the Centre for Asia-Pacific Aviation. This makes Cebu Pacific the top-rated sustainable airline in the Philippines and one of only two recognized low-cost carriers in Southeast Asia. I'm also proud to announce that our sustainability efforts have been fruitful as shown by our improved environmental, social, and governance scores, or ESG scores. Last year, our ESG score moved up from 38 in 2022 to 41 for 2023.
This achievement places us among the top-performing airlines assessed by S&P Global. Also in 2023, MSCI upgraded our ESG rating from BBB all the way to A, one of the highest among Philippine corporations. Such achievements were made possible through strategic initiatives like our integration of 15 New Engine Option or NEO aircraft into our network, transitioning to electric ground vehicles and support equipment, as well as using SAF or Sustainable Aviation Fuel for our aircraft deliveries. Our dedication to corporate governance and industry standards likewise remains unwavering. Cebu Pacific's adherence to the Code of Corporate Governance and to the Securities and Exchange Commission regulations has earned us the accolade at the Golden Arrow Awards. These achievements reflect our commitment to transparency and ethical business practices.
Before 2023 ended, Cebu Pacific also received an award of appreciation from the Department of Social Welfare and Development for its significant contribution to providing logistical support during calamities and disasters. None of these milestones would have been achievable without the support and confidence of our investors, stakeholders, and of course, our passengers. Your belief in our mission empowers us to push boundaries and elevate our operations in such a way that benefits not only our stakeholders, but also our community and the environment. I am now turning you over to Mike to provide an outlook into Cebu Pacific's strategic plans for 2024 and beyond.
Good afternoon, everyone. Let's take a moment to celebrate the incredible journey we have had over the past year. We have achieved remarkable milestones and received recognition that speaks volumes about our dedication to excellence, safety, and customer satisfaction. We are proud to be recognized as one of the Philippines' strongest and most valuable brands, reflecting the trust and confidence our passengers have in us. Our commitment to excellence has also earned us titles such as the best low-cost airline brand and the most sustainable low-cost carrier in the country. Further, our dedication to safety has placed us among the top 20 safest low-cost airlines worldwide. These accolades reflect our unwavering focus on delivering exceptional service and ensuring the safety of our passengers. Building on this strong foundation, we look to the future with great optimism for Cebu Pacific.
With a young and growing population and the economy back on the growth treadmill, there are boundless opportunities for the aviation sector. Significant advancements are underway in aviation infrastructure, marked by improvements in the Ninoy Aquino International Airport and the ongoing construction of the new Bulacan Airport. Moreover, the recent privatization of NAIA is a welcome development that adds another dimension to our progress. These are crucial in amplifying our ability to serve more passengers and connect to a wider range of destinations.
Cebu Pacific is also making a historic investment in what will be the largest aircraft order in Philippine aviation history. This is a strategic move to meet the increasing demand for air travel. In doing so, we are engaged in a rigorous selection process with the different manufacturers to ensure we ultimately make the best choice for our passengers, our company, and the environment.
This expansion is not just about adding more planes, it is about creating more opportunities and more connections. None of this would have been possible without the unwavering support and confidence of our investors and stakeholders. I extend my heartfelt gratitude to everyone for joining us in this journey. As we move forward, let us continue to focus on our mission of providing safe, reliable, affordable, and sustainable flights to our passengers. Thank you for your continued trust and support. Together, let's soar to greater heights and create lasting value for all. Let's fly everyone.
G ood afternoon, everyone. Thank you for joining us today. For our Q&A session, we will be joined by Mike Szücs, our Chief Executive Officer, Mark Cezar, our Chief Finance Officer, and Trina Asuncion, our Director of Investor Relations. Some reminders for our Q&A. If you wish to ask a question, please press raise hand and kindly wait for us to announce your name before you unmute your line. Once unmuted, kindly state your company and ask your questions. After asking, kindly mute your line and unraise your hand. Alternatively, you can ask your questions through the Q&A chat box. Thank you.
First question that we have is from Paulo Garcia. "Can you provide color on the Pratt & Whitney issue as of late? How many planes are grounded because of the issue, the general overall effect on operations thus far, and when do you expect this issue to be fully resolved?"
Okay. This is Mike, let me give an update on that. Currently we're at 10 aircraft that are what we call long-term AOG to the Pratt & Whitney issue. We project that number to grow through this year. Where it finally ends up, it will probably be in the range of maybe between 12 - 17 aircraft, something like that, within that range in terms of overall AOGs as we go through the year. There is a range there because there are a number of uncertainties in terms of the worst case would obviously be 17. The best case would be around the 12 scenario. We've obviously got some spare engines that we've got coming in. We've managed to get hold of some additional spare engines, which is going to give us some additional lift.
Also there is some uncertainty in terms of the amount, or when the engines currently in shop or waiting to go into shop will then come back. The indications from Pratt & Whitney currently are actually on the encouraging side in terms of overall momentum. More spare engines are becoming available. It looks like more MRO capacity over the next 12 - 18 months is going to become available as well, which should reduce the turn times in the shops. That's where we are today. It's 10 AOGs we have at the moment. That is going to increase through the year. What I would say is that this is a better picture than if you'd asked us maybe four or five months ago.
And that's why I think four or five months ago, we would've said our growth this year versus on a VLY basis would've been in the range 5%-8%. We now think we're going to be maybe 12%-15% in terms of our overall growth this year on a versus last year basis because we've got an improved situation. Of course, this is on the back as well of us having brought in a number of additional aircraft last year. W e were able to bring in 12 additional aircraft last year, when we saw the Pratt & Whitney issues materializing, and a further aircraft as well this year.
Hopefully that's answered the question and also I think sort of puts down a marker as well that we are in a position to be growing this year at a more optimistic growth rate than we anticipated maybe four or five months ago.
Thank you, Mike. If anyone wishes to ask a question, please press raise hand. Hi, Clyne.
Hi. Good afternoon.
Hi. Can you hear me? Yep?
Yeah. A few questions from me, if you do not mind. My first question would be, can you please tell us more about what transpired in the fourth quarter? Because I noticed that on a revenue base, it did not improve that much from the third quarter. I was wondering, are you seeing any competitive pressures or is demand weaker than expected there? That is my first question.
Trina, do you want to go?
On a quarter-on-quarter basis, Clyne, what we did see was, again, the third quarter became a bigger peak for us versus in the past it was a low. Normally in the past it would really spike up from third quarter to fourth quarter, as opposed to now where it looks like, at least this year, July and August were stronger than anticipated, and it flattened out basically second and third quarter as well. It also minimized the decline from second to third quarter. In the same manner, it minimized the uptick from third to fourth quarter. Having said that, yes, October became weaker than anticipated, but it was offset by November and in fact a much stronger December.
What we did see as well was while the demand was a seasonality effect, one of the bigger attributes of the fourth quarter was improvement in fares because there were a lot of demand improvement, particularly with the international sector. The change in mix of flying with significant improvement in the international sector also helped our revenue base, not the volume, but our revenue base, because the average fare also increased. I hope that helps.
Yes. Thanks, Trina. I also wanted to ask, how come it was flat on a revenue basis, but on EBITDA, it was up a lot versus third quarter. I was wondering if this is all entirely due to lower fuel prices, or were there other items that also declined or at least kept in check in the fourth quarter relative to the third quarter?
Yes, there is also improvement in operating expenses ex- fuel. For example, repairs and maintenance costs. We did have a high level of repairs and maintenance costs second and third quarter, compared to the fourth quarter, where it declined. Two pronged. There was less of surprise technical difficulties or, as you say, or challenges with respect to AOGs other than Pratt & Whitney. That is one. A lso, we have concluded several of our exits, our lease return exits, and thus the recalibration of our provisions for return obligations as well as heavy maintenance visits fully reduced. T hose are the two key components that assisted. Was there others? Yes, lease term. Short-term leases also declined. We had less short-term leases already as we exited some of the early short-term leases. I think those helped as well.
Understood. Thanks, Trina. My last question would be, because I heard earlier that your seat growth so far in the first quarter of 2024 has been 14%, around 14%. I was wondering if that also resulted in better load factors, and if not, when do you expect your load factors to revert to pre-pandemic levels?
Yes.
Can I [inaudible] Sorry.
Passenger increase with respect to load factor increase. It's been quite steady, honestly. It's been quite steady because capacity growth is also forthcoming as well as seat growth. Sorry, as well as passenger growth. With the 14% capacity growth, the volume is looking like it's trending just as much.
Thanks for that. Sorry, one last question for me. I was wondering if you could talk more about the competitive dynamics that you're seeing. Is it improving to your favor already? Because I understand that I'm guessing that your competitors are still struggling to find this, to grow their network as much as you are. P lease correct me if I'm wrong on that. Thank you.
Fine. Let me have a stab at that. I think, first of all, let's talk about there's two very distinct competitors, right? They're very, very different in terms of profile, Philippines AirAsia and obviously PAL. PAL is absolutely in a honeymoon period in terms of financial performance at the moment. Obviously, having done their Chapter 11 restructuring. More importantly now, having done that restructuring they're benefiting on their long-haul routes, principally to the U.S. because the Asia to U.S. market is still substantially down in terms of capacity versus pre-COVID. In large part, this is due to China. China obviously was a point of sixth freedom connecting traffic for all of Asia going into the U.S., and that's just not there.
You're seeing a lot of the long-haul carriers in this part of the world that are able to benefit, particularly the premium ones, are able to benefit with extremely high yields. Often it's a case of what used to be a business class yield is now a domestic yield. They've got very, very strong financial performance on the long-haul side. You'd see that they've made an order of A350s which will start delivering in 2025. We think this is the right focus for PAL because whilst they've got traffic, their fleet is aging a little bit. They've got the long-haul focus, but they are struggling to get the short-haul lift that they will have been looking for. You're right in that sense. How can or will they be able to grow their short-haul capacity? There's a question mark on that.
When I say short-haul, that will include obviously domestic. If I move on to PAA. PAA is still only 2/3 of the size that it was in terms of 2019. It's got 16 aircraft operating versus what was 24 in 2019. The outlook according to OAG seems to see, is showing them around about the same level, perhaps growing to 17 by year-end. Normally, AirAsia project very, very large growth. Maybe this is a more realistic assessment for them and probably reflects their difficulty in bringing aircraft back into service, which is still an ongoing problem for not only them, but the group as a whole. As a consequence, obviously, Philippines AirAsia will be keen to protect their Manila flying, obviously, and that does leave opportunities elsewhere, for example, in Cebu as a base.
If you correlate that with the fact that we're looking to grow, we're looking to grow now, as I say, could be between 12% and 15% this year, which is ahead of what would normally be our run rate for growth. This is a high growth on a VLY basis, probably double what we might normally do, close to double what we might normally do. S ome of that growth is going to be into spaces that are left by Philippines AirAsia. If I look at the growth overall versus 2019, I've said we're going to grow, say, 12%-15% this year versus last year. Last year was still down overall versus 2019 because of the capacity issues that we faced during the year, and in large part due to [inaudible] .
If I look at this year's growth versus 2019, we will be growing at about maybe 6%-8% this year. 6%-8% versus 2019 over a period of many years, that's not a massive growth rate. We are confident that it's very doable and it's not going to be overly dilutionary. As I say, at the same time, you're seeing other airlines are still going to be smaller than they were in 2019. Of course, during that time between 2019 and 2024, of course, GDP has grown. We think our growth rate this year, as it's come out, is well-placed to deliver a good outcome for us this year.
If I'm looking at market share, just as a final stat, we anticipate as we go into Q2, our domestic capacity share overall, when I look at Manila and the other bases, so total country will get to about the 56%, maybe 57% mark. We would expect our domestic market share to be at least at those sort of levels as well. We anticipate growing our market share position as we go into Q2 from where we are today.
Thank you.
Our next question will be from Julian.
Hey, good afternoon, and congrats all for the great results. A couple of questions for me. The first one is, maybe just to pick up on the market share, can you just tell us what is the difference versus 2019? So you are in the low 50% now, 53%. What was the number before in 2019?
52% on a four-year basis, Julian. As I say, look, it fluctuated through last year because in many ways we were looking to push capacity growth last year very much to take advantage of our competitive strength relative to others in the Philippine market. We got thwarted by, frankly, the AOG issues, the capacity constraints placed on us by principally the engine-related issues. In many ways, what we are doing this year is almost like a deferral from last year. We managed to bring in 12 additional aircraft last year on top of what our original plans are. We managed to get hold of further spare engines. It is on that basis that we have got this VLY growth of maybe 12%-15% this year.
That is why I think our domestic capacity share, based on what we are seeing, will go into sort of like the 56%-57% mark. If I say capacity share translates to market share, often we are slightly ahead. That should translate to a market share, which is consistently above 55%.
Great. Thanks. Shifting to the ancillary revenue, it represents, if I am not mistaken, something like 26% of total. That is kind of on the low side for an LCC. Why? I think per pax, it is around $20, if I am not mistaken. Can you just comment on that? I do not know if you have got a target for 2024 and medium-term.
L ook, I agree with your global reference, Julian, but I think if you look in market specifics or regional specifics, I think there is great variation. If you look in Europe and the U.S ., then I think you see very high numbers in terms of ancillary revenue. Of course, ancillary revenue, despite all the wonderful innovations and there is some great things that everyone is doing, airlines are very innovative in terms of ancillary offerings, but still, it is the core products. The bag is still a huge element in terms of what you get in terms of overall ancillary revenue. Frankly, we cannot charge. Our market will not take, and it is a regulated market as well in terms of pricing, too, in terms of we have to get an approval for what we might charge for a bag.
We simply cannot put a $50 bag in there that maybe you might be able to do in for other markets. It is perhaps not right to compare ourselves to maybe northern European carriers or to U.S. carriers. What I would say, if you looked at the region overall, I would say that we are a very good performer and amongst the best now in terms of other LCCs in this region. I think, in principle, partly due to the changes that we made, we have increased our revenue per pax on the ancillary basis. Versus 2019, it is close to about a 40% increase versus 2019. I think that is a substantial move. That has obviously helped offset what has been a substantial rise in input costs such as fuel.
If we look at 2019, where obviously a very strong year for us, but fuel through that year was probably about 40% lower than where we are today. That has been a key. The growth in our ancillary revenue, which actually I think has been a very creditable performance by the team, has actually helped offset some of the fuel price increases that we have had to deal with. I agree with you on the global sense, but actually, I think if you look at the regional sense, I am happy to come offline and get some of your statistics. I think actually we are doing very well if you look at on a regional comparison, compared to other LCCs.
Okay. Thank you. If I understand correctly, you do not charge at all for bags? Is that correct?
No, we do. We just can't charge. We can't charge excessive. Look, we've done changes in baggage policy. We get better. The things that have helped us have been things like bundling, and we've done some of the clever things that the other airlines have been doing as well. This is something we were back in 2019, we were just starting out on this journey. We've become more sophisticated, we've become smarter. A t the end of the day, the actual charge that we can make for a number of these items simply can't be at the levels that other people can do.
Okay. Got it. Thanks. The second question is on the unit cost on CASK ex-fuel, which is up 17% versus 2019. How do you see that going forward? Is this the new level that we should expect? Or is there scope to get back, to get it down?
Hi, Julian. Mark here. Bit of both. We do have to acknowledge the inflationary environment that we operate in did have an impact on our unit cost. Labor, parts, materials, generally more expensive than pre-pandemic. There's a significant impact brought about by the grounded aircraft. We have assets for which we still carry the depreciation and interest charge in our P&L, yet do not generate any unit of measure for us. There is also an overhang of that, which will probably, safe to say, be with us to some extent for another couple of years, through 2026, maybe. We have a [inaudible] assorted.
The other one I'd add in there, Julian, just as a reminder, we've got about 60%-65% of our costs are dollar-based. If you look at 2019 versus, it's close to a 10% in depreciation of the peso if you look versus 2019 versus last year. Out of your number, you've got a 6% delta, which is just FX-based. I think it's a creditable performance in the headwinds that we've been facing, which includes, of course, that FX impact.
The grounded aircraft, what's that contribution? Because that obviously 2026, 2027, that's going to go away. What's, just out of that, what's that component?
I don't have the specific number, I'm afraid, Julian.
We can follow up on that.
We can follow up with you.
But yes, there should be improvement in the utilization of our aircraft, going back to 2019 levels and maybe even more with more or highly configured seats per plane. Once we fly those aircraft, it would generate more ASK than existing fleet.
Yeah. Great. Thank you very much. I will catch up with you, Mike.
Thank you, Julian. We have Ellis Taylor on the line. Hello?
Good afternoon, everyone. Thank you very much. It is Ellis Taylor from Cirium. I just had a question around your aircraft financing plans over the next year or two. Are you still primarily looking at sale leasebacks, or are you considering JOLCOs or other forms of financing? Do you have any RFPs out at the moment for aircraft finance?
We released an RFP early this year. That is an ongoing evaluation. That is for the financing of all of the narrow body deliveries for 2024. On preferred mode of financing, that is by aircraft type. For wide bodies, there is a clear preference for sale and leaseback financing only. That is just our view on the risk reward proposition of dealing with the residual value of that particular asset type.
Okay. Thank you.
For narrow bodies, we are trying to get back to doing more finance leases. Last year we did three JOLCOs, and we are doing at least a couple more this year. I think it is fair to say for the remaining narrow body deliveries, there is a preference to do finance leases or JOLCOs.
Great. Thank you very much.
Thank you. We have Brendan.
Hi, Brendan.
Hi. Thanks for taking the call and my question. I have a question about Clark. You mentioned the bringing back of the Clark domestic base as driving the domestic growth last year. I noticed in the schedules over the next few months, a lot of Clark capacity goes down. It looks like about 50% goes down, and it looks like you might be moving capacity to Cebu, where that goes beyond pre-COVID levels. Do you have any color on that? What's happening there, if indeed they do?
No, I think you've captured it there, Brendan. Manila comes first, as you yourself completely understand, everyone will understand. Then of course, we've got two other principal bases at this point in time, which is Cebu and Clark. I think we've seen more opportunities in Cebu than we have in Clark. As we're able to, I believe, release more aircraft this year for flying than we anticipated previously, as I say, our outlook on growth is more rosy than it was if you'd asked us four or five months ago. Our order of preference will be to take advantage of the Cebu opportunity more so than the Clark opportunity, is probably the best way of capturing it.
Okay. Is it also a competition thing? Although competitors are still way down in both bases, do you see less competition in Cebu?
Yeah. L ook, I think in both, to be honest. I think the competition is struggling to. First and foremost, they do Manila, and they will cover that, but they are struggling to get back to the levels that they had in both of the bases. Look, we just see a better performance overall out of Cebu on a vis-a-vis basis versus Clark. I think AirAsia recently has had to pull back some of its Cebu flying in order to support its Manila flying. Again, we see this as an opportunity for going in and strengthening our position in Cebu.
Okay. Just one other question. I liked your A versus B slide Airbus. That slide makes it seem like you have two choices. Do you actually have three choices because you can go with either engine on the-
Yeah, absolutely. You are absolutely right. On the A version, there are two engine choices. You are absolutely right. For everyone's benefit, if they are not aware, on the Airbus, you can have either the CFM engine or the Pratt & Whitney engine. On the Boeing, it really is only sole source. It is with CFM only. T here are actually three potential combinations.
Yeah, I just wanted to clarify and make sure that you were doing the competition in that way. I thought you were. Okay, thank you.
Yeah, yeah.
Thank you, Brendan. Following on the Airbus and Boeing, there's a question from Paolo Borsi. "Any update on the deals?"
No. We've been making progress. We're getting into what I would consider maybe the closing stages now, where we're pleased with the engagements we made. I think we spent a lot of time, and the OEMs have spent a lot of time with us, so there's a clear understanding of what we expect. We think the aircraft types, either from Boeing or indeed from Airbus, are fit for purpose in terms of what we'll be looking to do with the engine options as has been described. We now absolutely want to make sure that we get the best economic outcome for us, for our stakeholders, and ultimately for the customers. It's important for us to ensure we get very competitive pricing.
We expect the best pricing that's out there in order to make sure we can pass that benefit on to our consumers, our customers over the years to come. It's getting into the closing stages, so maybe a month or two away from an announcement. That's what we're looking to. That's what we're targeting.
Thank you. Another question from Paolo. "How are forward bookings as of late? What routes are currently seeing more demand? Are we seeing a shift from domestic to international travel?"
Paolo, Trina here. Yes. Actually, as Xander mentioned already during his video, our load factors for the first quarter, it seems as if it's improving year-on-year, and this is on the back of higher seat capacity. The forward booking percentage is actually increasing, even if our seats are increasing. I guess some of the key drivers really would be the festivals. Of course, the returning traffic from Christmas and New Year. Several Philippine festivals upcoming up, as well as the Chinese New Year, this first quarter. Then, of course, the Holy Week. They are still very much a peak for us this March. I t's a combination of domestic and international for first quarter. For Q2, I think very much the summer traffic is still mostly evident on domestic leisure routes, very much on the beaches as is customary.
It would be a lean season, on the other hand, for some short-haul markets. Then June is a very interesting month for us right now because with the anticipated shift in the school calendar again. What used to be lean for us and it was showing some sort of steadiness already last year. We think it's going to be another expectation of possible peak this year again compared to last year. D omestic, again, would likely be the driver for that. Then for international, the overseas Filipino worker market, we see it customarily during graduation season. I guess, easy to say a lot of it is seasonal, a lot of it is events-driven or celebratory-driven as is very much for the Filipino market.
We will be getting or asking our last question given that there is no more time. This is from Rainier. "Are there any updates to the planned quasi-reorg? Can you give more color on the non-core gains both for the fourth quarter 2023 and full-year 2023?"
Quasi-reorganization is still on the works. We expect to get it done in Q2 if there's no extension. Trina, you could take the second part of it.
The non-core gains, three particular drivers there. There's the sale and leaseback gains. We did enter into several sale and leaseback transactions as well as a buyback transaction for the assets that we've disposed. Those have resulted in gains for us. There's also the mark-to-market gain on the convertible bonds, which fluctuates with the share price, basically. The option on the convertible bond has actually resulted in a gain for us for the year.
Thank you, Trina. For any other questions, given that we are conscious of our time, we can just set up a meeting after, and we'll take your questions offline. For now, we want to thank you, and we will now end the call. Thank you for joining us today.
Thank you, everyone.
Thank you.
Thank you, everybody.