Good day, everyone. We are delighted to have you join us for Cebu Pacific's investor call. Our team will be sharing with you today our business and financial highlights for second quarter and first half of 2023. We also wish to provide you with some key commercial and operational updates, including some of the recent operational challenges we've encountered. We are eager to discuss concrete actions we have taken to effectively address these issues and ensure the continued growth and success of Cebu Pacific. Let's now dive into the presentation, starting off with the business and financial highlights. Cebu Pacific flew 36,000 flights this second quarter, just 1% less than same period 2019. That's 6.3 million seats flown, a 96% capacity restoration versus 2019. While available seat kilometers were 7.1 billion, only 3% lower than 2019.
With our seat load factor averaging 86.4%, we flew 5.5 million passengers for the quarter, 8% lower than 2019. Fares averaged about PHP 2,900, 3% lower than 2019, driven by lower domestic fares. Ancillary yields, on the other hand, at over PHP 1,000 per passenger, were notably higher than 2019. On cargo, both volume and yields trending lower. Competitive pricing coupled with an overall weaker demand for air freight were aggravated by several flight cancellations during the quarter, reducing overall cargo operations altogether. We carried 26 million kilos of cargo at the second quarter. That's 48% lower than 2019, while cargo yields, which averaged PHP 33 per kilo, remained 21% higher than 2019. With the stats mentioned, CEB generated PHP 22.7 billion in total revenues, now at 96% of pre-pandemic level. Passenger business generated 70% of total revenues or PHP 15.8 billion, 10% lower than 2019.
This was followed by ancillary business, which generated close to PHP 6 billion, 34% higher than 2019. Cargo generated PHP 867 million, 38% lower than 2019. Let us look at our financial results now, starting with second quarter income statement. With revenues of PHP 22.7 billion, we generated EBITDA of PHP 5.46 billion and operating income of over PHP 2.5 billion. That's a reversal from last year's operating loss of over PHP 2.8 billion at about 50% of 2019 levels. Let's dive into some key operational expense drivers. Operating expenses for the quarter totaled PHP 20.2 billion, 20% year-on-year increase on the back of 22% more flights and 69% more ASK. Compared to 2019, however, total operating expenses were higher by 9%, despite 1% less flights and 3% less ASK. Notable expense increases would include fuel, which comprised PHP 7.2 billion and approximately 56% of our total expenses.
Fuel for the quarter averaged $91.7 a barrel, over $10 higher than 2019. Repairs and maintenance costs likewise increased to over PHP 3.4 billion. We now have a total of 80 aircraft in our fleet, an increase of eight since 2019. Moreover, 46 of our aircraft are operating leases or called right-of-use assets, compared to only 22 back in 2019. With right-of-use assets, future maintenance costs are provisioned as the assets are used. This is in contrast to owned assets or property and equipment where heavy maintenance costs may be capitalized at time of repair and then depreciated thereafter. As such, our depreciation and amortization cost decreased despite the increase in our total fleet, partially offsetting increase in maintenance costs. Finally, the Philippine peso likewise depreciated since 2019 by about 7% to PHP 55.7 per U.S. dollar compared to PHP 52 back in 2019.
Over 60% of our operating expenses are U.S. dollar based. With this, cost per ASK excluding fuel now stands at PHP 1.8, 26% lower year-on-year, but 13% above 2019. After interest, our core income before tax posted at PHP 1.64 billion. We had another PHP 1.2 billion arising from non-core gains. These are mainly mark-to-market gains from the convertible bond option and gain on sale and leaseback of two aircraft. Bottom line, we posted PHP 2.7 billion in net income, a reversal from last year's PHP 1.9 billion net loss and 29% lower than 2019. Moving on to our first half business highlights. We flew over 68,000 flights year-to-date, 5% lower than 2019. In terms of seats, that is 12.1 million, putting our capacity restoration versus pre-pandemic at 94%. ASK of 13.2 billion remained 9% below 2019 level as we still have less regional flights.
On cargo, we carried almost 56 million kilos. That is down 45% versus 2019, but offset by 28% higher yields. For the first half of 2023, CEB flew 10.3 million passengers, 8% below 2019, as our seat load factor averaged 84.8%. Average fare of PHP 2,934 is now just 1% lower than 2019. Ancillary yields, on the other hand, are higher than both last year and 2019 by over 30%. Summarizing now our first half financial performance. Year-to-date, revenues generated were PHP 43.6 billion, 3% lower than 2019 on the back of 8% less passengers. Operating expenses, on the other hand, totaled PHP 39.8 billion, 11% higher than 2019. Fuel, our biggest cost contributor, amounted to over PHP 14 billion, up 13% versus 2019. Fuel prices averaged over $99 a barrel, 13% higher at $78 back in 2019. Excluding fuel, operating expenses totaled PHP 25.7 billion, 10% higher than 2019.
As mentioned earlier, these were driven mainly by a bigger fleet, higher repairs and maintenance provisions, and the weakening of the peso from about PHP 52 to the dollar in 2019 to about PHP 55 per dollar this 2023. With still 9% less ASK than 2019, cost per ASK excluding fuel averaged PHP 3, about 16% higher than 2019. With that, we generated EBITDA of PHP 9.6 billion, operating income of PHP 3.8 billion, and pre-tax core income of PHP 2.2 billion for first half, all a positive reversal from last year's heavy losses. With additional PHP 1.1 billion in non-core gains, CEB's net income for year-to-date first half posted PHP 3.7 billion, a swing from a net loss of PHP 9.5 billion last year, but just half of 2019's net income of PHP 7.5 billion. Now, let us look at our balance sheet.
We end first half 2023 with total assets of PHP 165 billion, 12% higher than end of 2022, mainly driven by eight aircraft deliveries this first half. 73% of our total assets comprise of aircraft and aircraft-related assets, including pre-delivery payments. Our cash balance remains stable at PHP 22.5 billion. Total liabilities amounted to PHP 164.3 billion, PHP 114 billion of which are debt-related. That includes PHP 101 billion in finance and lease liabilities and PHP 13.3 billion in convertible bonds payable. Finally, with sustained profitability, CEB registered positive equity of PHP 726 million. Current ratio remains steady at 0.7x, while net debt-to-EBITDA for the last 12 months averaged 7.2 x. Now, for our cash flows. After non-cash adjustments, CEB generated PHP 12.1 billion in cash income. This was reduced by PHP 8.1 billion outflows for debt service, which include principal and interest payments on our debt and payments for our lease liabilities.
We also had a net cash outflow of PHP 1.9 billion for working capital as inflows of PHP 3.5 billion from increase in bookings were offset by PHP 4.6 billion for settlement of payables, including PHP 4.7 billion for asset retirement obligations and heavy maintenance visits. With net cash inflow of PHP 686 million from the sale and leaseback of aircraft, we generated almost PHP 2.5 billion net cash inflow for our first six months, bringing total cash balance to PHP 22.5 billion. Before I turn you over to Xander for our commercial and operational update, allow me to give you some latest macroeconomic indicators. While jet fuel prices for July remained below second quarter of 2023, forward prices have recently climbed up, reaching the $100 per barrel mark come fourth quarter as news of supply cuts have turned the market bullish on oil prices.
Meanwhile, the peso is sustaining its strength and now at a three-month low amidst hopes of a pause in Fed rate hikes and improvement in the Philippines' trade data. On the other hand, interest rates continue to push higher as latest U.S. inflation print of 4.6% remained higher than the Fed's 2% target, reinforcing their argument for higher interest rates. With all that in mind, let me turn you over now to Xander for our commercial and operational update.
Thank you, Trina, and good afternoon, everyone. It must be said that coming into 2023, Cebu Pacific was optimistic about its ability to fully restore services to its customers in support of our country's post-pandemic recovery. In January 2023, after finalizing the investments in new planes as well as operational upgrades, we embarked on a recovery program, starting with the arrival of our new Airbus neo. In fact, the first quarter showed a credible performance as on-time performance, or OTP, improved month-on-month. However, as early as March, we began to feel the industry challenges and its effects from April onwards. This is when the engine and supply chain issues in the global aviation industry have changed the dynamics altogether. Cebu Pacific has faced challenges arising from Pratt & Whitney engine issues, which power all Airbus A321 and A320neo aircraft.
The Pratt & Whitney engines experience premature removal from service, and each engine restoration requires 220 days instead of the industry norm of 90 days. This impacted the network, causing delays and unscheduled cancellations. Currently, there are 120 Pratt & Whitney-powered Airbus grounded globally. While CEB provisioned double the level of recommended spare engines as early as last year, we were advised last March 2023 that we would no longer receive the spare engine support that Pratt & Whitney had previously indicated. Apart from the Pratt & Whitney engine issues, we have also encountered delays from Airbus, our aircraft manufacturer. We recognize that global supply chain issues are further worsening the situation and causing additional delays in aircraft deliveries. As a result, we've experienced delays ranging from two to five months for our scheduled deliveries in 2023.
Finally, supply chain issues have become increasingly prominent, leading to extended recovery periods for aircraft on ground, or AOG. AOG refers to aircraft that are grounded requiring additional time for restoration. These aircraft must remain grounded until they are deemed airworthy and compliant with safety standards. All these impact the number of aircraft available to fly on our planned network schedule for the rest of the year. Apart from these fleet-related matters, we have also entered the rainy season and have seen much higher occurrence of red lightning alerts raised almost daily. This requires the suspension of all flight and ground activities at the airport for passenger and ground personnel safety. In the second quarter, there were a total of 72 red lightning alerts raised, some lasting for more than two to three hours, causing consequential flight delays, possible cancellations, and negatively affecting on-time performance.
CEB also experienced several incidents which have created additional long-term grounded aircraft. Examples of these include aircraft damage from runway debris or even damage from displaced ground equipment due to sudden and exceptionally strong winds. A tow bar puncturing the aircraft and bird strike incidents, which damaged both engines and the main landing gear, among others. These events were sudden and unprecedented, which made delivering the originally planned schedule more difficult and causing disruptions to our guests. Despite the challenges, we remained resilient, ensuring we effectively address these external issues while maintaining our promise of providing affordable, safe, and reliable flights. With the difficulties our passengers have experienced due to cancellations and changes in flight schedules, we rolled out enhanced customer recovery options, more than what's included in the Air Passenger Bill of Rights.
We have also formed additional customer support teams, both on ground and online, to better serve our passengers. Aside from strengthening our customer support, we implemented reductions to our flight schedules up to the end of September and are accounting for the long-term AOGs to our winter 2023 schedules. Since April, we reduced the network by 6% to 8%, and while the rationalization of flight schedules affected our planned network growth for the year, this still resulted in 2,200 weekly domestic flights, which is higher than pre-COVID levels. On the other hand, CEB's international weekly flights ended at 519 by the end of the second quarter and are still gaining traction going into the third and fourth quarter. Notwithstanding network adjustments, we still resumed domestic operations of Manila to Laoag, Iloilo to Puerto Princesa, Iloilo to Cagayan de Oro, coupled with the launch of several non-Manila flights.
On the international front, we have also resumed Cebu to Tokyo and Cebu to Taipei, plus the launch of Clark flights. This reflects our commitment to enhancing operational efficiency, boosting inter-island connectivity with new routes launched, and effectively managing resources while maintaining a trajectory of growth. Another solution that we have done to address these challenges is to increase the number of standby aircraft. Our standby aircraft count has risen from three to four, with plans to further expand to six by the end of the year. These aircraft are readily available in case uncontrollable events arise on the day of flight. Moreover, we are securing additional leased aircraft to reinforce our operational flexibility. Looking ahead, we are closing the year with 78 aircraft after 17 deliveries and 15 exits.
Our future direction remains aligned with our commitment to achieve an all-neo fleet by 2028, with 43 deliveries and 33 exits. On the commercial front, we saw weaker loads in April and May versus pre-pandemic due to the grounding of some aircraft. However, for the second half of the year, we feel encouraged as we expect a more stable network with additional spare aircraft and higher travel demand, pushing forward bookings up. Historically, the third quarter is a seasonally lean quarter, but curves are currently showing higher demand, possibly due to a shift in the school calendar. Similarly, the fourth quarter demand outlook is looking strong with All Saints' Day weekend and the Christmas peak. As we navigate the ever-evolving landscape of the aviation industry, your trust and confidence inspire us to overcome challenges and seize opportunities.
We stand firm in our dedication to providing exceptional service and value-for-money travel experiences for our customers. I will now hand you over to Mike to present our sustainability initiatives and second quarter winnings.
Thank you, Xander. Good afternoon, everyone. Thank you for joining us today. The past few months for Cebu Pacific have been challenging, but I'm pleased to share that our company has demonstrated resilience and maintained a positive business performance for the second quarter of 2023. One of the key reasons behind our continued success is our commitment to build and leverage the broadest of domestic networks with our extensive international network to, from, and within the Philippines. This strategic approach has allowed us to consistently provide safe, reliable, and affordable flights for our passengers, along with supporting economic growth across the regions. However, our success is not solely measured by numbers and figures. Our growth has also been propelled by a positive impact on society and our commitment to support the environment. One of our significant initiatives is the usage of sustainable aviation fuel, or SAF, within our fleet.
We take immense pride in being the only local airline in the Philippines to embrace SAF, and we're continuing to integrate it into our operations. We are equally dedicated to promoting eco-friendly practices on the ground. We have already transitioned our Juander Shuttle service to 100% electric zero-emission minibuses, supporting our employees' commuting needs and extending our positive impact beyond the aviation industry. We are also proud of our diverse and inclusive organization. Last month, we celebrated Pride Month by having the first pride flight in the Philippines. It was operated by allies and members of the LGBTQIA+ community. This highlights our unwavering commitment to diversity, inclusivity, and equity. This aligns our operations with our environmental goals and social responsibilities. I am pleased to share that all of these efforts have not gone unnoticed.
We have recently been recognized as the third strongest and one of the most valuable brands in the Philippines by a prestigious London-based research firm. This recognition is not only about the present, it speaks volumes about our long-term business performance and the enduring trust people have placed in us. None of this would have been possible without the unwavering support and confidence of our investors and stakeholders. I extend my heartfelt gratitude to each and every one of you for being an essential part of this journey with us. As we move forward, let us continue to focus on our mission of providing safe, reliable, affordable, and sustainable flights for all of our passengers. Together, let's soar to greater heights and create lasting value for all. Let's fly, everyone.
Everyone, once again, thank you for joining us this afternoon. We will now begin our Q&A session. We will be joined by Mr. Mike Szücs, our Chief Executive Officer; Mr. Xander Lao, our President and Chief Commercial Officer; Mr. Mark Cezar, our Chief Finance Officer; Mr. Alex Reyes, Chief Strategy Officer; and Ms. Trina Asuncion, the Director of Investor Relations. Some reminders for Q&A. If you wish to ask a question, please press raise hand. Kindly wait for the host to announce your name. Once unmuted, kindly state your company before asking your question. A reminder also, after asking a question, please leave the line once again. Alternatively, you can also chat your answers through the Q&A chat box. We are now taking questions. Yes, we have [Rachel Lynn Rodriguez]. You can now unmute.
Hi. Good afternoon. Thank you for the call. I have two questions. First one, you mentioned that there still exists supply issues, but I noticed that I think you're quite ahead in terms of deliveries of new planes. What's your view on that? That's the first one. Second one, what's your overall outlook for how oil prices will be for this full year, and are you hedging these exposures? Thank you.
Well, I'll split that up. This is Mike. What I'll do is, Mark, do you want to just give an update on aircraft deliveries? Maybe just in the general sense, and then I'll talk about some of the supply chain issues, and then we'll come back to you on fuel.
Sure. It is true now that we are increasing aircraft deliveries for the balance of the year. But our ongoing issue has been for some time now, that most new aircraft deliveries from Airbus have been delayed by several months, maybe even years. [We have had to take aircraft from there, including some used aircraft, forward for that.] Also, we are awaiting more aircraft [with our partners.]
[I would say that the net impact is that in terms of the fleet growth will happen into capacity growth on a one-to-one basis. That's just the reaction.]
Yeah. Because I am sure the question will come up in another format, let me just give you an update on where we are in terms of capacity. Probably the single biggest supply chain issue that we face, and there is a multitude that all MROs and airlines are facing. The biggest single one that we are facing is due to the Pratt & Whitney related engine issues. As Mark said, one of the reasons that we've been bringing in additional aircraft is to provide us capacity to cover for aircraft that are essentially going to be on the ground. We are now planning, based on the forecast that we're getting from Pratt & Whitney, that we will have X number of aircraft on the ground at any one time.
For example, as of today, we have four long-term AOGs that are Pratt & Whitney, and that number will fluctuate during the next 18 months. At times it will get slightly larger than that, and at times it will be slightly smaller than that. That's something that we have to forecast for. We have been bringing in additional aircraft to cover for that and also to provide for us additional growth. Of course, one of the other reasons we're bringing in aircraft is that Airbus themselves, on the new aircraft that we're receiving, they're running late too. On a previous call, and the last quarter, we gave an indication of the additional aircraft that were coming in.
We anticipated that we'd maybe have, as a run rate by the end of the year in December 2023, that our December 2023 seat capacity would be maybe about 12% up on where it was versus 2019. Given all of the issues with Pratt & Whitney, and given the outlook, whilst the Pratt & Whitney issues seem to be more severe, we have brought in additional aircraft. We now anticipate our seat capacity at the end of the year to be in the mid to high single-digit area. So about half or slightly above the half of the 12% that we were indicating before in terms of our overall capacity that we'll have in the market at the end of this year versus where we were in December 2019.
Now, in terms of the supply chain issues, let me talk specifically about the biggest one, which is the Pratt & Whitney engine issue. First of all, there is no issue with regard to safety. All of the actions and all the recommendations that are coming from Pratt & Whitney, and they're working with all of the airlines that are flying around on the GTF platform. It's all done out of an abundance of safety. Now, the first issues that we've been dealing with, and these were the ones that came and hit us, as Xander talked about earlier. These are the ones that came up on us very quickly in March because we'd been given every indication that there was a supply of spare engines to cover for us. But unscheduled engine removals started to increase, not just for us, but for everyone.
Pratt & Whitney all of a sudden found themselves short of any engines whatsoever. Hence, we now have four engines on the ground. These issues are primarily nothing to do with the geared turbofan itself, not the gearbox, nor indeed the life limited parts which have been escalated. These are things around the combustion chamber and the nozzle guide vanes that aren't quite making it to the LLP limits. So engines are coming off wing slightly in anticipation of where Pratt & Whitney is being indicated. So that's caught the industry short. That's the issue that we've been dealing with as of now and why we've been bringing in additional aircraft. There is a new issue now with Pratt & Whitney, and this is the one that they announced, or RTX, or Raytheon announced about three or four weeks ago on their earnings call.
This relates, again, it's about an abundance of caution and safety that they're doing this. It's something that is an extremely remote possibility of failure, and if in failure, there's an extremely remote possibility it could be a problem. Now, this is related to a quality issue on the powdered metal, which they use to create things like the discs in the high -pressure turbine. So they have announced that there are a batch of about 200 aircraft that they'll be looking to recall. I'm sorry, 200 engines, I should say. Look to recall in mid-September this year. We've been advised that we don't have any engines in that batch of 200, so it doesn't affect our immediate outlook.
However, there is the possibility, or we have been told that there is a second batch of engines that is also under review. That is something that we will find out more about in the next month or two, and we will then have to react accordingly. We do not think it will impact us at all for this year, but it could impact us next year. We are building up contingency for that, in terms of bringing in additional aircraft, which is one of our fundamental strategies this year. Extra aircraft, to summarize it, for three things. One was fundamentally, we wanted to grow, and at the end of this year, we will be bigger than we were in 2019, not as much as we hoped because of the AOG aircraft. We wanted to grow. Number two, Airbus are late with their deliveries.
Number three, we do have aircraft on the ground due to Pratt & Whitney issues. That is where we are at. I do not know, Mark, if you want to talk about it. I think there was a separate question about fuel prices.
Fuel prices, obviously, quite a bit of volatility in the market out there given the cuts by, not the cuts from Russia, [because they did not. We are talking about million barrels per day and on top of that whole separate process, which is a million barrels per day.]
We are hedged for 15% for the next [3 months] at significantly lower prices than spot. We are expecting this to potentially be lower in about a month. We are currently taking on a more opportunistic stance on this hedging. Also, we are seeing strength in [demand], which allows us to [pass on fuel price increases in the form of fuel surcharges.] Also seeing that our competitors in the Philippine market are not hedged. That is how we see it.
[inaudible ]. We will now have [Glyne]. Hi, [Glyne].
Hi, good afternoon, and thank you for taking my questions. I have a few. The first question is on, I guess, competitive dynamics. Can you talk more about this? Your experience in the second quarter for both domestic and international markets, and how are dynamics evolving so far in the third quarter? I guess, if you can provide your outlook for the rest of the year. Are you already, I guess, seeing pricing power? If so, which routes? That's the first question. The second question is on your non-fuel cost per ASK. It dropped sharply in the second quarter versus the first quarter. I am wondering if this is a sustainable level. How quickly can you bring it down further to, I guess, the 2019 level of, I think, PHP1.6? So that's the second question.
The third question is, are you going to get compensation for Pratt & Whitney? If so, can you share how much, I guess, the compensation will be? If anything, will it come in this year or next year? Thank you. That's all for me.
[I'll take this one, this is Xander]. Let me try to answer the first question in terms of the competitive landscape. I think we ended the first half in terms of domestic market share at 54%. Clearly, we continue to lead in the domestic market. We did see, I think, overall, the supply chain issues that Mike alluded to not just impacted Cebu Pacific, but other airlines that we compete with. So we did see a capacity, I guess, crunch in the second quarter so to speak. But domestically, we continue to lead. We are seeing better, I guess, booking and yield activity for the third quarter so far in domestic. International hasn't come back as quickly, mainly because while China has, in theory, opened up, we don't see a lot of demand for China just yet.
That's actually, you can see that in some of the capacity data out of China. So domestic capacity out of China is over 100% already compared to pre-COVID levels. I think international and regional flights in and out of China is a little over 50%. So we can see certainly that China hasn't come back. I guess the other thing on international is we have less 330 capacity in the first half of 2023 compared to that of 2019. Clearly, as we bring back our 330s next year, we'll be able to bring in a little bit more capacity on the international sectors. I think maybe with the exception of China, we do see some strength on the other international regional sectors. Japan continues to be quite strong for us.
Hong Kong registered a pretty good comeback in the second quarter, and we see this continuing into the third quarter.
All right. I think, [Glyne], you're asking about outlook for rest of the year. I think rest of the year, we see, I mean, I'll talk about it in just EBIT margin sense. I think we're looking at EBIT margin levels consistent with what we saw in the second half of the year in 2019. That would be high single- digit to, I'll range it, high single- digit to low double- digit EBIT margins for the second half of the year. That's where we would guide for our profitability on the second half. Trina, do you want to give an update on CASK ex-fuel and where you see that?
Sure, Mike. On CASK ex-fuel, last guidance, I think we were looking at, maybe we can describe it because of the difference in FX. FX has changed quite significantly since 2019. If we remove the FX effect, we are looking at CASK ex-fuel to continue to range maybe in the middle, high single- digit, higher than 2019 since w e won't make the 2019 numbers. Yes, that's what—
No, by year-end, we had anticipated, and if you'd asked at the beginning of this year, we were planning to get down very much towards the same CASK ex-fuel numbers as we had in 2019. That was a clear objective of ours. Unfortunately, we are carrying costs in relation to the fleet that are substantially different to our outlook. That is due to number of aircraft that are essentially parked due to being AOG. Because of the uncertainty we have, there is an element of uncertainty in the Pratt & Whitney situation, and general supply chain as well. We are increasing our standby levels. So we're effectively doubling our standby level of the fleet from roughly from three to about six aircraft. This additional fleet cost is a headwind to us.
As Trina says, even with those headwinds, if we strip out the FX delta between this year and 2019, we're into that sort of mid to high single-digit increase on CASK ex-fuel. What we are clearly targeting to do, it's part of our DNA and our mantra, is to keep focused on that. We are going to have some structural elements that will come in favor as we go forward into 2024. Every time we get an A321neo or every time we get an A330neo, that level of upgauging is a structural reduction in our CASK ex-fuel. So that's a real benefit to us. As we can start to unwind some of the issues that we're having on engines and just supply chain, which is causing us to have grounded aircraft and additional standbys, that's something that we'll also feed through.
We see that we're not quite going to get there this year, but we'll still keep focused on it for the years beyond. I think your final question was about Pratt & Whitney compensation. I'm afraid that's not something that we can talk about.
I think—
I think we covered [crosstalk].
Yes, we have questions in the Q&A chat box. We have [Ren Roque]. As regards to the heightened customer care and other operational adjustments made to address the challenges in 2Q, what is the company's outlook on the impact in margins? Can you share the estimated contribution of this to the operational expenses for full year 2023?
I think we kind of answered the margin question in terms of outlook. I think we've given an outlook in terms of the EBIT margins going forward into the second half.
We also have questions on cargo. Is this going to be better in the second half? Are we looking at these figures at the normalized levels post-pandemic?
I think cargo's really being driven by a couple of things. One is, as I mentioned earlier, the lack of 330 capacity. In 2019, we had eight 330s mainly flying international, which is a big source of our cargo revenue. The A330 fleet is quite varied. Secondly, given the return of international capacity, there's a lot more cargo belly space available, applying the routes. Obviously, freight yields have also come down substantially compared to that of last year. We do think the cargo piece will continue to experience some weakness up to the second half of the year.
Should you have any other questions, please press raise hand. Okay, [Glyne]?
Yes. Sorry. Just a follow-up question on the topic of pricing power. I am just wondering why in the second quarter, your fares fell quarter-on-quarter, both on a fare per kilometer basis and the overall fares. Can you just give some color on that and how is that evolving so far in 3Q? Thank you.
Standby, [Glyne].
Second quarter, it has dipped, but very, very slightly, actually, average fares. Maybe the proper answer to that, to clear it, would be even at a higher seat load factor, we did not have that much pricing power in second quarter, particularly with the flight consolidations that have happened driven by the cancellations. In those kinds of situations, we have very limited excess seats available as we have to consolidate previously priced and rebooked passengers into the remaining seats.
I think, Trina, there is that, and then there is also the shift, clearly, in the school holiday calendar. We are actually seeing, I guess, better forward revenues for the third quarter in terms of overall pricing. There is a combination of two things. One is because of all of the feed-related disruptions and feed-related issues, it was a lot more difficult for us to revenue manage upwards. Then clearly, it is because we have also seen a shift in the school holiday calendar. That people traveling in May, for example, this year compared to that of previous years, in terms of our load capacities.
Yeah. That answers the question, [Glyne]?
Yes. Thank you.
Yes. We have another question from [Rainier]. Are the Senate hearings affecting on the [Pass] now?
Let me take that. Obviously, we continue to cooperate with our regulators and our legislators. We have kept them appraised of the customer policy improvements we've had, as well as the operational improvements we recently announced. I think when we take a look at all of the events that have happened, as Mike referred to earlier, which is the Pratt & Whitney related AOGs, plus some of the three AOG incidents. The level of disruption that Cebu experienced in the second quarter was quite unprecedented and something that we continue to address. Obviously, we will continue to be open to discussions with our regulators and legislators on any further improvements, but we have both improvements in our own customer policies as well as the communications that we've done. We continue to keep our government partners appraised of our own developments.
I think underpinning all of this is the level of resilience that we are now building in, which as I have talked about. Which is we are now projecting a level of AOGs based on regular interaction with Pratt & Whitney, along with we are carrying considerably more spare than we would previously have done. So this is to give us a level of resilience, and therefore confidence in terms of the schedule that we are planning to operate.
We have another question from [Brendan]. [Brendan]?
Yes. Hi, good afternoon. Thanks for taking my question. My first question is about international. It seems like you still will not be back at full international capacity at the end of this year. Is that right? Do you have any update on when you might restore international fully, and what the international-domestic breakdown would be for December when you were saying overall capacity is going to be up like 7%, 8% or something?
Stand by, [Brendan]. You got a follow-up question, [Brendan], as well. [Brendan]?
Yeah. My second question is about Caticlan. Do you want both questions now or answer the first question?
No, give us the Caticlan. Yeah.
Okay. The follow-up question is, I just noticed that capacity is way up to Caticlan. Generally, the airport is at the moment over 50% compared to this time or last in 2019. Your flights from Caticlan to Manila have doubled almost, I think, or doubled from 8 to 16. I'm just wondering, what's the situation there in terms of the cap on visitors? Is there no cap? Do you think this is sustainable going forward? Everybody talks about sustainability these days. Can this number of flights actually be maintained in a sustainable way in terms of what the island can take, you think? Is there a concern that at some point you'll have to reduce Caticlan again?
[Brendan], let me take that. We do have a peak period of 16 times a day, and we recalibrate some of the capacity going to Caticlan. We have, I think, the introduction of around eight down to 8 to 10 flights in the seasonally low periods of the year. Having said that, we take a look at both the domestic and international capacity flying into Boracay, both from Caticlan Airport and Kalibo Airport. We've not seen a massive return of international capacity just yet into Kalibo. But I think in terms of the overall carrying capacity, that relationship exists. Having said that, the overall capacity going to Caticlan, I think is probably similar to that of previous years when we combine domestic and international. We haven't seen a lot of Chinese carriers or Korean carriers, for example, flying back into Kalibo just yet, o r if they are, it's not at the same levels as it was in 2019.
[Brendan], onto your question. By the end of the year, we should be at about 100% international capacity on a seats basis. Obviously, on a domestic basis, we will be in excess of 100%, in fact, we already are. That will then give you the mix of the number that I said earlier in terms of overall seat capacity growth on our runway in December. Yeah, by end of year, we should be at 100% on international seat capacity restoration. Slightly different market mix, because China won't be in there to the same extent that we once had it.
Yeah. I thought it would still be down because there's this 560 figure for fourth quarter number of departures, which is still 10% down from 2019. Maybe its seats are different, or by December you add a lot in October, November, to get back up by December. Do you plan to add a lot? Yeah.
Look, what I'm looking at now is showing that we will be on a seats basis, international basis, we'll be around about 100% by year end.
Just on generation of each of the international get more A321s.
Yeah. Because people won't come back from next year. Yeah. Okay.
Well, A321s and A330neos as well. Whilst we've been short on A330neos, when they do come in, they each got quite a few seats on them.
Yeah. Okay. Okay. Thanks for the explanations. Have a good weekend. Thanks for the call.
Thank you. For other questions, again, please press raise hand. If there are no more questions, we will now end the call. Oh, there is another question. Sorry. There is another question, sorry, from [Paula Garcia]. After the series of cancellations, delays from unforeseen fleet aircraft problems seen in the past, was there any significant negative effect on forward bookings or increase in customer canceling flights?
No, I do not think we have seen that. I do not think we have seen a long-term impact there. We do measure our customer Net Promoter Score as part of our business, and certainly that dropped during the period. It is now recovering. But forward bookings have remained healthy. But certainly, clearly, there was some dissatisfaction amongst our customers, and that was reflected in the NPS and the CSAT scores that we measure. But long term, and as we are seeing, the bookings are coming in as we would have normally expected.
Thank you. We will have one last question from [Adrian]. I see on the fleet side you are up to 91 by end of 2024, but back down to 88 by 2028. Does that indicate extra aircraft being brought in in 2024 due to delays?
[That is part of it. We are adding aircraft on short leases, capacity. But the other factor to that is, we fundamentally know we are under ordered for the. We anticipate topping up with more aircraft, whether through the leasing or directly.]
It will probably be a combination. I think from 2027 onwards, the economy in the Philippines is growing strongly. The fundamentals of the Philippine market, which is our core market, remains extremely strong. Plenty of opportunities for growth. The fact that it is dropping there is really the factors that Mark said. We do need to top up fleet from 2027 onwards, and that is something that we will be working on in the months and year ahead.
Once again, everyone, we will now end the investor call. Thank you for joining us today, and you may now disconnect. Thank you, everyone.
Thank you.
Thank you.