Good day, everyone. We are delighted to have you join us for Cebu Pacific's investor call. Today, we will be sharing with you our business and financial highlights for the third quarter and nine months of 2023, and some key commercial and operational updates, including the recent news that will impact our fleet and network. We are eager to discuss the concrete actions we have taken to effectively address ongoing issues to ensure the continued growth and success of Cebu Pacific. Let us now dive into the presentation, starting off with the business and financial highlights. For the third quarter of 2023, Cebu Pacific flew over 35,000 flights, up 18% year-on-year, and 1% higher than the same period in 2019. That enabled us to fly 7.2 billion ASKs and 6.3 million seats, up 41% and 12% year-on-year respectively.
Compared to the same period in 2019, that is almost 100% capacity restoration in terms of ASKs and 98% in terms of seats flown. We flew 30.2 million kilos of cargo, 44% lower than 2019, with an average yield of PHP 29.3 per kilo, 7% higher than 2019. We had less wide-body aircraft operating compared to 2019, which impacted cargo capacity most of all. This was aggravated by the stiff pricing competition across the industry.
We flew 5.3 million passengers in the third quarter, 27% higher year-on-year, yet still 4% below 2019 levels. This translated to seat load factor of 83.7%, 9.7 points more than last year, but still 1.4 percentage points below 2019. We have yet to fully recover passenger volumes in our short-haul international flights, particularly in our China market. However, average fares improved to over PHP 3,000, 17% up year-on-year and 25% higher than 2019 levels.
This was largely driven by a shift in travel demand from previously second quarter summer peak to third quarter, particularly July and August, in line with the change in school break calendars. Ancillary yields likewise improved to PHP 1,110 per passenger, 29% higher year-on-year, and notably 50% higher than 2019 levels. We undertook various pricing optimization initiatives to improve ancillary take-up, including, but not limited to, sale of add-on bundles.
Similarly, we saw a shift in travel demand as well from several OFW markets, and we deem this attributable as well to Filipinos coming home for graduation or school breaks. Given these, we are happy to report that CEB generated PHP 23.3 billion system-wide revenue for the third quarter, a 39% increase from last year and a 23% increase from 2019. Passenger business generated over PHP 16 billion, up 48% year-on-year and 21% higher than 2019.
This was followed by ancillary business, which generated PHP 6.4 billion, 59% higher year-on-year and 52% higher than 2019. Cargo revenue of PHP 972 million, on the other hand, remained 34% lower than same period in 2019. With total revenues of PHP 23.3 billion, CEB generated operating income of PHP 2.4 billion, a turnaround from last year's operating loss of over PHP 3 billion and 170% higher than 2019.
This yielded a 10% operating margin for the quarter, an improvement from 5% margin back in 2019. Higher passenger yields, improved fuel efficiency, and prudent expense management improved overall profitability. This is on the back of 47% higher jet fuel prices, which increased to $113 per barrel for the quarter, which was partially offset with improved fuel consumption, increasing our total fuel expense by only 23% versus 2019. Excluding fuel, operating expenses increased only 13%.
Flight and ground operations increased only 6% versus 2019 despite inflation. Given these, our CASK ex fuel now stands at PHP 1.9, just 12% higher versus 2019. Repairs and maintenance expense increased 87%, or PHP 1.9 billion, partly offset by 15% reduction in depreciation. We had 12 more aircraft versus 2019, comprised of 25 more right-of-use aircraft deliveries, less 13 exits of previously owned aircraft. As we shifted towards more power-by-the-hour structure maintenance agreements and maintenance provisioning method for more right-of-use aircraft, maintenance expense increased, but depreciation of previously capitalized heavy maintenance costs decreased. After interest expenses, non-core losses and taxes, we posted net income of PHP 1.3 billion, a turnaround from the net loss incurred both last year and 2019. Moving on to our year-to-date highlights.
We've flown over 104,000 flights, 18.4 million seats, and 20.4 billion ASKs, all higher year-on-year, but still 3%-6% short of pre-pandemic levels. This is largely due to our short-haul international operations, which remains below pre-pandemic levels, partly due to delayed recovery of our China market. Pre-pandemic, we flew about 60 flights per week into China through Beijing, Shanghai, Guangzhou, Xiamen, Shenzhen, and Macau, whereas today, we fly only 32 per week to and from these China destinations. Cargo volume remained 45% below 2019, but was partially offset by 21% higher yields. Since the start of the year, we have experienced a weaker overall demand for air freight, coupled with reduced capacity and competitive pricing overall. CEB flew 15.5 million passengers year-to-date, 7% lower than 2019, but with average fare 6% higher than 2019.
Seat load factor averaged 84.4%, about 10 percentage points higher versus last year, but still two points lower than 2019. On the other hand, ancillary yields per passenger averaged PHP 1,053, 61% higher than 2019. This is partly driven by increase in our long-haul seats by 31% versus 2019 as we increased weekly flights to Da Nang from 14 to 24 times weekly. As mentioned earlier, the successful take-up of our new ancillary products, particularly the add-on bundles, also improved ancillary yields.
Year-to-date, we've achieved revenues of PHP 66.9 billion, 78% above last year and 5% higher than the same period in 2019. Our revenue growth was primarily fueled by our passenger ancillary businesses, contributing PHP 46.1 billion and PHP 17.8 billion in revenue, respectively. Ancillary revenues outperformed as it grew 40% higher than 2019 level, while cargo revenues were softer at 33% lower than 2019 levels.
With PHP 66.9 billion in revenue, 5% higher versus 2019, operating expenses totaled PHP 60.7 billion, 13% higher versus 2019, respectively. Fuel costs, which made up most of our expenses, amounted to PHP 21.4 billion, 16% higher than 2019, driven by 34% hike in fuel prices from $77 per barrel to over $103 per barrel. Excluding fuel, CEB incurred PHP 39.3 billion in operating expenses, 16% higher than 2019.
This was attributable to repairs and maintenance expenses due to more aircraft in the fleet. As mentioned earlier, this is also due to a shift towards more power by our maintenance agreements and similar maintenance provisioning structures for more right-of-use aircraft, partially offset by reduced depreciation of maintenance CapEx. Peso depreciation of about 6% to PHP 55.5 per U.S. dollar also increased our overall expenses as about two-thirds of our operating expenses remain pegged to the U.S. dollar.
With this, CEB generated operating income of PHP 6.2 billion, 37% below 2019 for an operating margin of 9%. After interest payments of PHP 2.7 billion, plus net non-core gains and tax benefit totaling PHP 1.6 billion, CEB now records year-to-date net income of over PHP 5 billion. For our balance sheet, CEB ended September 2023 with total assets of PHP 173 billion, 76% or PHP 131 billion of which were aircraft related. This was 17% higher versus start of the year after 12 deliveries, three returns, one ATR sale, and two sale and leaseback transactions. Cash balance remains stable at PHP 19.5 billion. Total liabilities amounted to PHP 171 billion, PHP 124 billion of which are debt related. Current portion of debt remained below PHP 12.4 billion, driving a stable current ratio of 0.6 times.
Finally, with PHP 5 billion net income earned for the period, CEB's equity closed at PHP 2.1 billion. Net debt-to-equity ratio still steep at over 50 x, while net debt to EBITDA for the last 12 months improved to 5.2 x. Now for our cash flows. Net cash from operations amounted PHP 12 billion, driven mainly by our cash income of PHP 18 billion, offset by PHP 5 billion outflow for working capital. Net outflow for working capital was comprised of PHP 7.3 billion in settlements for return obligations and heavy maintenance checks, partially offset by PHP 2.7 billion inflow from unearned transportation revenue or forward bookings. On the other hand, we had PHP 5.7 billion in cash outflow for debt service, plus another PHP 7.8 billion CapEx for one engine and two narrow-body aircraft under finance lease.
With these, for the nine months ended, CEB generated PHP 535 million net cash outflow, bringing the total cash and cash equivalent balance to PHP 19.5 billion. Before I turn you over to Mike for some of our latest business updates and outlook, allow me to share some of the key economic indicators that would impact our business outlook. On fuel, forward prices for jet fuel tempers about $109 per barrel, about 4% lower versus the average prices in the third quarter. This suggests persistent headwinds as Chinese economic data underwhelms and high U.S. rates continue to erode demand. Uncertainty surrounding the Middle East conflict as ceasefire efforts grow while the war rages on, cost increased volatility with prices.
On Forex and interest rates, USD, PHP rates similarly sees just a slight dip quarter on quarter as the Fed signals less hawkish stance, causing market speculation that the Fed is done hiking for the year despite U.S. inflation remaining above target. We are now looking at PHP 55.8 per U.S. dollar for the fourth quarter versus PHP 55.9 average in the third quarter, while SOFR forwards now looking at 5.38%, relatively steady versus the last quarter. I now hand you over to Mike to discuss about the latest business updates and outlook.
Hello, everyone. Thank you for joining us today. Allow me to provide you a broader view of our latest commercial and operational performance and outlook. First, on the commercial front. CEB's system-wide recovery by the third quarter was already at 98% of pre-pandemic seat capacity, with domestic leading the way. Going into the fourth quarter, we remain optimistic as we saw our domestic market share in October at 55%, despite challenges on fleet availability.
We expect that by the end of the year, our system-wide network recovery will be at 103%. Domestic will continue to exceed pre-pandemic levels, while international will be at about 93% of 2019. We will continue to boost our international network. For example, we recently launched our Manila to Da Nang route and resumed Manila, Shenzhen. We also added international frequencies from our non-Manila hubs, such as Cebu and Clark.
By year-end, we expect to fly to 60 destinations through over 100 routes and at least 2,700 weekly flights. Now, Mark has mentioned earlier how we've seen third quarter fares improve compared to pre-pandemic. This is in part due to a notable shift in travel demand, as seen through our forward booking curve. Traditionally, our peak months were April to May, coinciding with Easter and summer breaks. However, the change in school calendars, shifting school breaks towards the period June to August, resulted in higher yields for these months, particularly for domestic. In the international market, routes with a high concentration of OFWs, such as Hong Kong, Singapore, and Dubai, saw similar trends, with OFWs adjusting their travel plans to align with Philippine graduations and school breaks.
North Asian markets, on the other hand, showed no significant changes compared to 2019, with demand still driven by external events like the Cherry Blossom Mid-Autumn Festival and Lunar New Year. Regardless of the year, September remains to be our weakest month. Now, last quarter, we discussed the challenges posed to CEB's operations, which included various issues, problems with Pratt & Whitney engines, aircraft delivery delays, and supply chain disruptions.
As of the end of September 2023, CEB had four aircraft on long-term AOG due to these issues. Later on, I will mention the outlook for next year. Most importantly is that amidst these challenges, we have demonstrated resilience by effectively addressing these issues in the best possible way. We bolstered our spare aircraft capacity by acquiring new aircraft and increasing our spare capacity ratio, even if this meant tempering our growth targets in the near term.
We introduced improved customer recovery options and policies and enhanced our customer support teams, both on the ground and online, to enhance customer communications and engagements. We further collaborated with MIAA and other partner agencies to improve handling processes throughout. We've taken all these initiatives to uphold our commitment delivering affordable, safe, and dependable flights. With these enhancements, we are pleased to report that we've seen a significant improvement in customer sentiment. Our Net Promoter Score has recovered to +35 by the end of September. Moreover, our on-time performance has also seen excellent progress, climbing to 81% by the end of September. Our fleet plan continues to be busy for both good and bad reasons. The good, we have ramped up ahead of the holiday peak as we expect seven more deliveries until the end of this year.
As a result, we look to close this year with 79 aircraft in our fleet. However, despite all this activity, growth outlook for 2024 remains softer than we would like, as we are unexpectedly confronted with yet another engine issue that will impact us in the next couple of years. Pratt & Whitney have disclosed a defect in the manufacturing process that affects engines powering the A320neo and A321neo fleet worldwide. Whilst this is not a safety issue, it has accelerated engine removal and inspection that will ensure the continued and long-term safe operation of the Pratt & Whitney fleet.
As a result of the unanticipated engine removals, we expect to have between 10 and 20 aircraft on the ground through 2024. We continue to explore various opportunities to supplement the fleet and ensure operational resilience, including securing both brand-new and used aircraft, as well as exploring ACMI leases for certain times through the year. We expect to increase our fleet to 92 come end of 2024. But despite the higher fleet, active aircraft will be lower than initially guided. With this, we expect our year-on-year seat growth to be within 5% and 8% in 2024. Whilst we acknowledge the challenges we will face in 2024 and 2025, we remain very optimistic on the long-term economic prospects in the Philippines for our aviation industry.
There will be substantial infrastructure improvements with the privatization of NAIA, the development of the Bulacan Airport, and further enhancements of regional airports to relieve congestion and increase connectivity. These are the game changers in the overall capacity landscape of Philippine aviation, which will enable us to grow our future network and operations without the previous infrastructure constraints.
Let's look more broadly at the Philippines as a whole within the Asian region. Southeast Asia is forecast to be the fastest-growing region in the world, with GDP growth forecast of 4.2% for the next 20 years, and RPK is growing at close to 10%. The Philippines is very much at the forefront of that, with average GDP growth forecast even higher than that. As well as serving the growing domestic market, the Philippines is situated right in the heart of the Southeast Asia region.
Within four hours of flying time from Manila, there are 2 billion people. And just for the Philippines itself, the low air travel penetration we see today will grow substantially as the Philippines benefits from its demographic dividend. A very young, fast-growing, and increasingly wealthy population that wishes to travel more. To service the Filipino market over the next 20 years, Philippine carriers, including ourselves at the forefront, will need to roughly quadruple in size to cater to the growing demand. Recognizing this opportunity, Cebu Pacific has recently issued a request for proposals to both Boeing and Airbus for 100 to 150 narrow-body jets.
This size of order, a value of circa $12 billion based on manufacturer catalog prices, will represent the largest-ever commitment of any airline into the Philippine aviation industry. Discussions with representatives of Boeing and Airbus are already well underway, and we expect to make an award prior to the end of Q1 2024. Such a commitment aligns our vision with the shared commitment of the government and private airport operators collectively, striving to provide a world-class air transport service to all passengers. Once again, thank you for joining us today. Together, let's soar to greater heights and create lasting value for us all. Let's fly, everyone.
Good afternoon, everyone. Once again, thank you for joining us today. For our Q&A session, we will be joined by Mr. Mike Szucs, our CEO; Mr. Xander Lao, our President and Chief Commercial Officer; Mr. Mark Cezar, Chief Finance Officer; Mr. Alex Reyes, Chief Strategy Officer; and Ms. Trina Asuncion , Director for Investor Relations. We have some reminders for our Q&A session. If you wish to ask a question, please press raise hand. Kindly wait for your name to be announced before we unmute your line. Once unmuted, kindly state your company for asking the question. After the question, please mute your line once again. Alternatively, you may also type in your questions through the Q&A chat box. Thank you. We can now. Anyone who wants to ask a question, please press raise hand. Hi Klyne?
Lauren, good afternoon.
Hi.
Klyne?
Good afternoon.
Yes. Klyne here from Regis. Thank you for taking my questions. Just going back on the issue, pattern recognition issues for 2024. I heard that your guidance for seat growth next year is 5%-8%. Is that correct? How would that translate to ASK growth?
Hi, Klyne. Can you hear me? Klyne, this is Mike. On the 5%-8%, yeah, that's about right in terms of seat growth. I don't have it on ASK streams, have we got a rough guide on ASKs?
In terms of ASK growth, Klyne, it is still in the double digits. Still in double digits.
Would that be like low double digits or.
Yeah, probably on the low double digits.
Low double digits, yeah.
Okay. Thank you. I guess in terms of your, you mentioned earlier that your market share, at least for the domestic market, has risen to 55% in October. How does that compare with 3Q?
3Q overall was slightly lower than that, Klyne. I think one of the things that we did, as you know, we have had some fleet availability issues. During Q3, we were very cautious in terms of ensuring that we had the standby capability available, and we were bringing some other aircraft. We had some aircraft that had been grounded not just due to Pratt & Whitney issues, so those were being recovered. So we had less flying in Q3 than we had anticipated.
When we got into October, we managed to bring some further aircraft in, so we are back to the sort of market share that we are looking to maintain. But also it is worth saying, we were hoping to be higher than this. If we did not have the aircraft on the ground as we have, then we would obviously be looking to have a higher market share than this. But 55%, given the circumstances that we are facing, is a very good place to be, having been through the challenges of fleet availability in Q2 especially.
Thank you, Mike. Last question from me, at least for this round, I think. How are your, I guess, your forward bookings looking for the fourth quarter and even the first quarter of next year? If you can provide some details. How are fares trending as well? Have they started to deteriorate relative to where you are in 3Q? That is it. Thank you.
Thanks, Klyne. It is Xander here. Maybe a couple of points. In terms of our forward bookings, we are still looking at a relatively healthy December. Q4 overall bookings are still relatively healthy. We are seeing quite a bit of fare competition. Having said that, from what we are seeing thus far, the planes are actually getting fuller than they were in, say, third quarter or even second quarter.
Thank you, Klyne. We have a question from the chat box. Could we have some color on the guidance for growth in freight demand for Q4 or 2024? Is the decrease in freight demand due to competition or weaker domestic demand?
I think based on some of the explanations, one is freight demand is less for us in particular because of the lack of wide-body aircraft that we have in our fleet. In 2024, we should see some of that freight demand come back as we bring in more A330s into our network. Having said that, it has been a more, I guess, competitive environment on the cargo market, given that there is a lot more capacity that has come back, a lot more options for people to ship their cargo on. It has been really a driver of two things. One is capacity. From our perspective, as we bring back more 330s and also a lot more competitive pressure.
This is Mike. I think the cargo market has been softer. There is undoubtedly the market has softened overall. I think PAL's results came out the last couple of days. Their cargo performance versus last year has dropped off similarly to the manner that we have. They obviously have a much higher international component than we do, particularly benefiting from the North Pacific carriage. I think overall, the market is softer. We are also seeing in the domestic market some of the customers that we had historically back in, say, 2018 and 2019.
A number of these customers are shifting now into road and ferry transportation as well. They have explored those options and sort of moved away perhaps from air freight. It is not that they have gone to another airline, but they have literally chosen a different mode of transport altogether. But I think underlying all of this, I think the market is soft. It is certainly softer than it was last year.
Thank you, Mike. We have a question from Bo Guntalim. Hi, Bo.
Hi. Can you hear me?
Yes.
Okay. Thanks for the presentation. Just a few questions from me. First of all, for the 2024 outlook, any other guidance you can provide besides the seat growth for next year? Like perhaps, I do not know, do you provide revenue guidance, margin guidance, and so forth? My second question, just to confirm my understanding, in the third quarter, there was an availability issue, and you mentioned it is from the Pratt & Whitney. Sorry, what was the engine issue in relation to again? Has there been recall? You mentioned October it is back to normal already, but then next year there is another recall based on the slide you showed earlier. Thank you.
All right. I'll do it in reverse order. The Pratt & Whitney issue. First of all, there's been two Pratt & Whitney issues or two phases. The first phase, which was encountered earlier this year, which came and hit us around about late March, April time. This was really due to what they call hot section issues and vibration issues, and it caused some unscheduled engine removals. It wasn't just us, it was other airlines that are powered by Pratt & Whitney that faced the same issue. There became a complete shortage of spare engines because all of the airlines were affected. Also the MRO, the shop capacity to repair the engines or to overhaul the engines became constrained.
Now, that was the first issue, and that was the one that resulted in us having four at times, occasionally five AOGs due to Pratt & Whitney. We did some mitigating issues to bring in some additional spare engines that we managed to locate ourselves. But that was the initial phase of Pratt & Whitney that the industry was dealing with, and it was very well-publicized. Now, more recently has come the second issue, which is in relation to powdered metal. This is the metal that they vaporize to then put back together to make the disks, the turbine disks, the compressor disks, which are very precise pieces of engineering that are engineered to withstand extreme pressures and extreme temperatures, and the technology that goes into this is quite a marvel in actual fact.
Now, what Pratt & Whitney discovered through, there was one incident actually on an aircraft in an airline in Mexico that alerted them to this issue, and this happened back in December of last year, so about 11 months ago, where one of these disks failed, and it failed in a manner that they felt was far from ideal. The issue was contained, but they felt that there was a very extreme risk that this could be an uncontained failure.
Therefore, with an abundance of caution, they've now asked all of the airlines operating the GTF-powered Neo, so this particular engine, the Pratt & Whitney PW1100G, that they have to come off wing once they've done so many cycles to have an inspection of these disks and be replaced if required. They need to come off after a certain number of cycles that have been performed.
This is an airworthiness directive that's been talked about for the last couple of months, and we now know the airworthiness directive. It has been issued, and it will come into effect in December, sorry, in January, on January the 1st. There will be a kind of like a grace period for those engines that are immediately affected. You've got like 100, I think it's about 100 cycles additional that you can do if your engine is immediately one of these that's over the cycle limits. We anticipate we will have in January about 10 or an additional, bearing in mind we've got four aircraft at the moment that are grounded due to Pratt & Whitney.
We will have an additional six aircraft that will have to be grounded in January, which will take us to a total of 10 grounded aircraft in January due to this issue. Obviously, the engines will come off, and then they will go to the MRO to then go through the overhaul, the inspection, and then to see if they need overhaul or if they can be inspected and then just released back to us. Through the year, we will have further engines on our aircraft, on the remaining fleet, further engines that will then hit those cycle limits. Those engines will then need to go through the same procedure where the engine needs to come off wing and the engine needs to go be inspected.
We know in January we're going to have 10 aircraft that are going to be on the ground, and we anticipate, based on the flying of the remainder of the fleet and also based on when we will get engines back from shop after they've been inspected and/or overhauled, that we will go from 10 up to a maximum of 20 aircraft that will be grounded through 2024. That's basically the issue. It's a worldwide issue. There are about 41 operators of the GTF-powered Neo in the world. They are all affected to a greater or lesser extent. There are many of the airlines out there that will not be growing at all as a result of the impact.
Thanks to the activities of fleet planning department, legal, engineering, et c, where we've been able to bring in additional aircraft this year, we are still able to maintain growth through next year because we've got a lot of additional hulls, and of course, we've got some further deliveries next year. That's the extent of the issue. It really is a very serious issue. I think what we've demonstrated, however, is that we've been able to work through it and still, despite the challenges, maintain a growth outlook, admittedly one that we would rather be exceeding.
We certainly would have hoped to have been well into the double-digit percentages in terms of growth rate next year as opposed to the 5%-8% that we're providing. In terms of your first question, which is do we add any other further flavor to the outlook that we give? No, we don't. No, we don't. I think we're giving the outlook as much as we can in terms of seats.
Bear in mind, given what I've just described in terms of fleet, it's actually quite difficult at the moment to give outlooks because there's been such movements around in terms of trying to understand what the Pratt & Whitney impact will be. Thankfully, we've now got a clearer picture, although I think we've still got a little bit more clarity to come in the months ahead. But we are confident of the schedules that we're now putting out and the fact that we will be able to grow, admittedly, more modestly than we would have anticipated earlier.
Thanks so much for the color. Just a few clarifications. You mentioned the 10-20 aircraft being grounded. You mean in accumulation throughout 2024? How long would each aircraft need to be grounded for? For the four aircraft that's already been grounded, is that the phase I of the issue or is this a phase II of the disk needing to be replaced?
Yeah. The ones that we've had so far are all down to the phase I, which was due to what they call hot section and vibration issues, right? That was the one that was understood previously. Yes, when I say 10 to 20, that's the running total. The maximum that we anticipate that they'll be on the ground will be 20. Now, in terms of how long an aircraft will be on the ground, it's very much dependent on what is now the shop times for the engines to be inspected and overhauled. Now, depending on whether the engine will just have an inspection, and it will clear the inspection, or whether it'll have an overhaul will determine exactly how long the engine will be unserviceable for.
If it needs a full overhaul, then given the MRO constraints that there are at the moment, it's going to be maybe Pratt & Whitney are talking up to 400 days for that engine to be off wing. We think that will improve next year as they bring MRO capacity online. That's something that Pratt & Whitney is doing. For engines that only require an inspection, the time will be much, much less.
Based on all of the indications that we're getting from the moment from Pratt & Whitney, given when we anticipate an engine to hit its cycle limits and therefore come off wing, and also when Pratt & Whitney anticipate providing us back the engines that are already off wing now and waiting to go through shop or in the process of going through shop, we anticipate that we will be in this range, 10 to 20 aircraft grounded at any one time. As I say, in January, that's when we start at 10, and then it will move up towards 20 through the year.
Okay. 96 aircraft, how many would be impacted by this?
Sorry, I said 20.
20 out of 96.
Yeah, 20 maximum.
Okay.
Well, no, we're growing next year to 92 next year. If you can see 79 at the end of this year growing to 92. So there's a lot of fleet growth in there, but a lot of that fleet growth, some of it is going to be made effectively redundant because we're bringing an aircraft in, but also we're going to be grounding an aircraft. But when we look at the phasing of it all, the net effect is a seat growth of between 5% and 8%.
Bearing in mind as well that some of the aircraft that are coming in next year, the ones from Airbus, are going to be slightly higher on gauge, so slightly higher seat count. So that is also helping the fact if we're getting more seats, even though we're maybe putting an aircraft on the ground. But the overall seat impact is a 5%-8% growth next year. Although it would have been well into the double digits had we not had the impact of Pratt & Whitney.
Okay. Thank you, Mike.
Thank you both. We have some questions in the Q&A chat box. We have one from Naomi Nyong. Could you share your outlook on the weakness of the short-haul market, particularly into China? If and when you expect that to return to 2019 levels. Are you facing any delays on securing MRO capacity for regular maintenance as well as on engine issues? Number three, how are you seeing lease rates for aircraft spare engines trending in 2024, given the tight supply overall due to delays in the OEMs?
Sure. Let me take the first question. We are actually reintroducing capacity on China slowly. Our network isn't fully back yet. For example, we restarted operations into Shenzhen starting the northern winter season but have deferred Beijing. Actually, we are looking at or we have brought up our frequencies, for example, on the Chinese New Year period, but we do have to wait and see.
From what we're seeing in terms of industry data, international capacity out of China is only above 50%. I guess bookings from China have been quite slow thus far. But recent data is encouraging. We have seen, for example, growth in bookings for Thailand, but I guess we have yet to see that in the Philippine perspective. We are ramping up for the Chinese New Year. But I think at this point it's wait and see for China. I'll pass on to Mike for the second question on MRO.
All right. Just on MRO capacity, I think two different things here. First of all, for regular checks, I think you have to plan well in advance, and I think our team has been well on top of making sure that they can plan for the regular events. So we haven't faced problems in that aspect because I think because of very forward planning from the team. Where I think we face problems is if you have unexpected activity that is required, then you are then running into constraints because you're then trying to go to an MRO last minute, "Can you help me out?" And they are booked up.
So yeah, if you're doing something last minute, you're going to face difficulties with MRO capacity. The third question, I think, was with regard to lease rates, whether it be engines or indeed aircraft. The reality is, the Pratt & Whitney issue in particular, and bear in mind, there's also an issue as well on the LEAP engine too. It's less publicized, and it's not as material, but it is an issue on the LEAP engine as well. But all of this is putting constraints on capacity. So there is a rush, particularly now for people trying to pick up additional capability, additional capacity.
If you can find a spare engine, then that's going to be very bid up. That's if you can find a spare engine on the Pratt & Whitney. And certainly, aircraft pricing has gone up. Particularly, for example, on, say, what would be the CEO, the classic engine option on the A320, where you're seeing secondhand rates for mid-life aircraft really being bid up and lessors being able to secure very good terms and on- relatively long leases.
I have to say, I am pleased that we were able to move early this year in terms of securing some additional lift. We brought in some additional CEOs earlier this year, and I think before the big surge in pricing came. As I say, the pricing now is at some pretty hefty levels for some mid-life aircraft, and very competitive if you want to secure some. So, pricing has gone up because of the capacity constraints.
Hey, Mike, we have another question. Do you intend to seek compensation from Pratt & Whitney, or is this covered by insurance for the engine issue?
No, this will be a discussion with Pratt & Whitney in terms of compensation.
Then we have another question from Rainier. Are there any updates to the planned quasi- reorganization? Hi, Rainier. None so far, but we continue to look into this avenue. For, as earlier guided, this will likely come sometime next year, but not in the near term. No updates yet for now. Our next question will come from Jose Luis Lim. Hi, Jose.
Hi. Luigi from Sun Life. Just a question on your growth plans. I noticed there that you plan to add about 100 to 150 planes, medium to long-term, I guess. Would you be able to finance any of this in peso? I guess, are you planning to time this and wait for lower rates before doing this? And how much of your fuel requirement for next year is already hedged? Thank you.
You want to do the.
The hedging?
Yeah, do the hedging first, Trina.
Yeah. Trina here. On the hedging side, I think our last hedge was back in October, so it is already done, but it was less than 10%, below $100 a pop. It was in the money. For now, no outstanding, like in October onwards, we do not have any outstanding hedges. We continue to look at this on a more opportunistic basis. I see that none of our competitors are hedging. We do not want to go completely out of the herd on that.
Mark has lost his voice because he has been unwell. Let me just put a bit of context on the aircraft order. The aircraft order is for the first deliveries we will be looking for will be in 2027. It will be very much the late 20s and then in the first half of the 2030 decade. That is when it is. What rates will be at that point in time, I do not know. One of the great advantages we have as Cebu Pacific, and I think two aspects to this, I think a very strong financial track record pre-pandemic consistently over many years. I think going through the pandemic where frankly, we did not let anyone down.
Yes, we had some negotiations with people, but we did not go through any bankruptcy restructurings or whatever. We did not cancel any orders. We didn't let any lessor down, didn't let any bank down. We are a very credible counterparty to the finance community, as witnessed by our ability to access the JOLCO market on a regular basis and an ongoing basis. Whatever the rates might be at the time that we come to take delivery of these aircraft, we will anticipate that we will be getting the best access to financial products to assist us with that when the time comes. I don't know if, Mark, you've got a bit of voice and you wanted to add anything to that? Or do you want to, Trina?
Sure. Just on the aircraft deliveries, obviously we're not really funding this one time. It will come with a delivery schedule. As and when the aircraft are to be delivered, that is when we will fund a big chunk of that aircraft price. There will be some pre-delivery payments also scheduled similar to our previous orders with Airbus and our previous orders with Airbus.
There will be a pre-delivery payment schedule up to date. In the past, we've never had any external financing for our pre-delivery payment schedule. Not to say that we'll never look into this. It remains an opportunity. But for now, there's no significant plan on any one-time capital funding for these. All options remain out there. Commercial financing, whether peso or U.S . dollar, JOLCOs, as Mike mentioned, finance lease, operating lease, and sale and leasebacks are all available. We always look into this as and when we do a separate RFP for the financing of each aircraft. Hope that clears.
Yeah. Thank you.
We have a question from Julian. How do you expect your market share to be affected by the slower growth in 2024? How do you see the return to full capacity in 2025 not having an important impact on yields given the very significant amount of capacity that will return in the group?
I think for 2024, to be honest, we do not expect any of our major domestic competitors here, either Philippine Airlines or Philippines AirAsia, to grow substantially. We think that PAL, for example, is awaiting wide-body growth, and that's really been their focus. AirAsia has been struggling to reinstate aircraft back to pre-COVID levels. Having said that, Mike mentioned earlier, we will continue to grow overall capacity by around 5%-8%. We think we will be growing by redeploying some of our larger aircraft assets into Manila. So we do expect our market share to stay steady, if not grow for 2024.
With regard to 2025, I think very good question. I think what we anticipate in 2025 is the Pratt & Whitney issue here is going to be with us for a couple of years. So this is a 2024 issue, and it's a 2025 issue. What we anticipate is that the issue will be less in 2025 than 2024, and the principal reason for that is that we should see the benefits of MRO capacity coming on stream through 2024. Also a large number of the engines, because this is worldwide, those engines that go in in 2024, when they come out, they'll be good to run.
So there'll be a lot that will be serviced in the first wave, and then they will run for a good period of time. We will undoubtedly be affected in 2025, but we would anticipate that the impact will be less in terms of the number of hulls that will be on the ground than we are getting in 2024. The number on that, we do not know what the number will be. We do not. But we anticipate that it will be less than we are impacted in 2024.
Thank you. If you have other questions, please press raise hand. Then we have Brendan. Hi, Brendan.
Yes. Hi. Just a quick question. I was wondering if you can expand a bit on the forward outlook from a demand perspective. You touched on China, but are you seeing any weakness in some of the regional markets and markets like Macau, where you are actually still significantly down on pre-COVID capacity? If you have any color on some of the. If you are seeing some weakness in some of these other markets.
Hey, Brendan. It does vary by market. For example, on markets like Japan, Thailand, doing very well in terms of our current performance as well as forward bookings. There are some markets that are slower. China, we pointed out earlier. Macau is probably one of them. I think we need to wait and see in terms of the overseas Filipino worker deployment there. We understand that there are some continuing labor restrictions in Macau, for example. But it does vary by market. Again, some markets much better than others. So there is not really one answer to what we see on international short-haul.
Okay. How about long-haul? Does that still remain very strong at the moment? It seems to me that regional is weakening faster than long-haul, generally speaking.
I think long-haul is continuing to show pretty good performance, Middle East in particular. Having said that, we were planning to make inroads into Dubai and Australia, but we've had to redeploy some of the A330 capacity on our short sectors, given the Pratt & Whitney engine issues that Mike's elaborated on earlier.
Okay. Thanks for the question. Have a good day.
We have one question from Paolo Garcia. What is the estimated split for passenger revenues between international and domestic?
Paolo Garcia, I don't know. I don't know. I don't have it off the top of my head. Paolo, we'll follow up with you on that one.
Again, if you have other questions, please press raise hand. We have another question. When does the company target to recommence dividend payments?
I think Trina touched on this. It relates to the question about the quasi-reorganization as well. That's something that we're exploring to do sometime next year, and then we will get into a position where, first of all, we've got to look at the pref shares in terms of the dividends that are due there, and that's an accumulated dividend. So it would be when the payout does come there, it's also got to capture the previous years. Then we can look as well at the same time as the regular dividends to normal stockholders. I think realistically, the earliest that a dividend could possibly be would be in Q3 of next year. But that's probably right at the very front end. So I wouldn't want to raise too much expectations there.
But Q3 is probably the very earliest, and I think that's the guidance we gave previously on the last call. But that's dependent on the quasi-reorganization, which really is just an administrative process we need to go through. But then it depends on the underlying performance of the company as well to be in a position to play catch up really on the preferred shares, because that's the dividend that we would need to pay first before we can then look at normal dividends that would need to come either at the same time or after that.
Thank you, Mike. Given that we have two more minutes left, we will just have this last question. What is the update on the Senate inquiry and the cancellation in delay? Is the company expected to pay any compensation, and has this been provisioned?
It's a good question. But ultimately, we have been working with our regulators. Having said that, we've already provided some customer improvement policies and guidelines that we've already elaborated on the previous call. We've increased our standby coverage. We've changed some of our customer policies, making the travel fund unexpirable. The travel voucher validity has already been extended to 180 days already. So we have, I guess, responded to some of the inquiries coming from the second quarter Senate inquiry. We continue to work with regulators. I think as Mike's also elaborated, our Net Promoter Score has actually come up. We've had record NPS levels given the additional amount of standby aircraft and the changes in customer policies that we have already done.
Once again, given that it's almost 3:00 P.M., we will be ending the call right now. Once again, everyone, thank you for joining us today. For the other questions, you may email us through our email. Once again, thank you. Everyone, you may now all disconnect. Thank you.
Thank you, everyone.