CEBU PACIFIC under JG SUMMIT INC. Father: John L. Gokongwei, Jr.

Son: Lance Gokongwei.

Company Info March 1996, Cebu Pacific entered the market with a promise to give "low fare, great value" to every Juan who wanted to fly. After offering low fares to domestic destinations, CEB launched its international operations on November 2001 and now flies to Bangkok, Busan, Guangzhou, Ho Chi Minh, Hong Kong, Jakarta, Kota Kinabalu, Kuala Lumpur, Macau, Osaka, Seoul, Shanghai, Singapore and Taipei. In short, destinations, where one can go shopping and sightseeing! To get every Juan to more places everyday, CEB operates a fleet of 30 Airbus (10 A319 and 20 A320) and 8 ATR 72-500 aircraft, the youngest fleet in the Philippines. With the completion of the re-fleeting program, our capacity has doubled. CEB offers the lowest year round Lite Fares for its destinations. CEB remains to be the pioneer in creative pricing strategies as it manages to offer the lowest fare in every route it operates. Cebu Pacific is not just the leader in low fares but also in innovation and creativity! CEB is the first local airline to introduce e-ticketing, prepaid excess baggage and seat selection in the Philippines. Guests have also learned to anticipate a uniquely upbeat flying experience with CEB, as this is the only domestic carrier that offers fun in the skies with its games on board popularly known as Fun Flights, together with its entertaining inflight magazine Smile. CEB also partnered with various destination hotels, car rental service, travel insurance and entertainment ticketing service, to provide its guests a more convenient travel experience. On time performance, schedule reliability and a smooth, comfortable flight are just some of the things that the air-traveling public has come to expect from Cebu Pacific. Our Mission Cebu Pacific Brings people together through an affordable, reliable mode of travela fun-filled experience that's delivered with a true heart and soul for service. We enhance the quality of life of the communities we serve and are an active partner in the nation's progress. Our Vision Cebu Pacific is internationally renowned as the most successful low-cost carrier in the Asia-Pacific region. We take pride in being the best domestic airline and the Filipino travelers' first choice. We are reputed for our unparalleled genuine, warm and caring service. We are recognized for our innovation and commitment to excellence, and we are the industry and academe benchmark for success. We are an employer of choice, providing many opportunities for professional and personal growth in a learning, egalitarian and non-bureaucratic workplace. Our people are goal-oriented team players, empowered and disciplined, with a big sense of

integrity, enthusiastically spreading the culture of fun throughout the world. Our equipment, facilities and systems enable us to ensure consistent highly efficient levels of operation. We have a deep sense of family extending beyond the airline, encompassing the communities we serve and the family we love. Additional Info: Making Flying Fun

Cebu Pacific's customers like the friendly atmosphere and the low fares. Lance Gokongwei likes the profits that roll in for his family's Philippine conglomerate. Cebu Pacific Air's flights don't travel any farther than five hours from Manila. But a video of the Philippine airline's flight attendants demonstrating the in-flight safety procedures and moving to the strains of Lady Gaga's "Let's Dance" has ricocheted around the globe. The video, shot by a passenger, quickly went viral and has gotten more than 10 million hits worldwide since September. "We take a lighthearted approach," says Lance Gokongwei, chief executive of Cebu Air. "There is a different sense of fun in the Filipino personality--singing, dancing-- and the airline reflects this." The flight attendants keep the party going in the air with what it calls its Fun Games. Anyone who participates get a round of applause, especially if they win a prize. "Flying used to be like entering a bank," says Gokongwei. "Many people were intimidated by it. Now that it's affordable, we have to be approachable." This focus on carving out an identity as a fun airline to fly has paid dividends. When Cebu started in 1996, Philippine Airlines had dominated air travel in the country for 50 years. But last year Cebu flew more passengers for the first time--10.5 million versus PAL's 9.7 million. Cebu captured 48% of the domestic market and 15% of the international market. Profits have poured in, paving the way for a huge initial offering last October to fund its expansion. Cebu raised $623 million in the world's largest IPO for a discount carrier and the Philippines' largest IPO in U.S. dollar terms. In its first annual results as a public company, Cebu reported that net profits last year jumped 112% to $157 million, on revenue of $661 million, up 25% from 2009. Like most budget airlines, Cebu Pacific changed how people get around and vastly expanded the market for air travel. Air Asia, the region's largest discount carrier, did the same in Malaysia and then in other markets it entered; last year it ticketed 25.7 million passengers. In the Philippines the number of fliers soared from 7.2 million in 2005 to 16.5 million last year. Cebu flew only 2 million people in 2005, but it's on track this year to carry 12 million and aims to carry 20 million in 2014. "We call it the Cebu Pacific effect," says Gokongwei. "If we start flying somewhere, the traffic there will definitely increase. People used to take ferries [around the Philippines], but now they can afford to fly. It's not that we are taking market share and others are shrinking--it's that more people are traveling, and more are traveling more often."

Some 79% of Cebu's customers are domestic fliers, but the airline has also boosted the international market. "Cebu accounted for 50% of the capacity growth over five years to markets with the greatest increase in tourism to the Philippines--China, Malaysia and Singapore," says Ian Malin of Seabury Asia Pacific, an aviation consultant. From the beginning Cebu has had other local carriers to contend with; today PAL has its own budget offspring. So it's had to keep finding ways to keep costs down and revenue up. It collects revenue from seat selection (more desirable seats such as those in the exit rows cost more), food and drinks (which aren't offered for free), and merchandise such as Cebubranded travel products. "It's giving people a choice, as some want essentials and others want the frills," says Gokongwei. "It's a continuing education process, but to save money, people learn very quickly." Cebu sometimes offers 10-peso fares, and creates a huge buzz when it does this to announce new destinations. "There are more people now going on quick weekend trips because it's so reasonable," says Candice Iyog, director of marketing. "And they are going to more places than just tourist hot spots." It was Lance's father, legendary ragsto- riches entrepreneur John Gokongwei Jr., who had the idea to start Cebu Pacific. John, now 84, sits atop JG Summit Holdings, one of the Philippines' largest conglomerates, and a family fortune that FORBES ASIA pegged at $1.5 billion last year. His interest in aviation was piqued after reading about U.S. discounter Southwest Airlines at the same time the Philippine government decided to open up the airline industry. But Lance believes there was another layer to his father's interest: "About a year before we bid for PAL and lost. So when deregulation came up, well, my dad loves challenging monopolies." For the task of building the airline from scratch, he turned to his only son, Lance, then a 29-yearold Wharton graduate who had cut his teeth working in the family's food business. "Father came up to my office one day and said, 'I started this airline--can you think of anyone who could help?'" says Lance. "I figured that meant he wanted me to help, so I did. It was actually the first I had heard of it. It was his baby, but I adopted his baby at one day old, when it had four planes and no people." Lance remembers being worried. "I had read a quote by [Virgin Atlantic Airways founder] Richard Branson saying the best way to become a millionaire in the airline business is to start as a billionaire." Challenging PAL would require creativity and patience: "Most [domestic] airports were used to having a single carrier, so just to get counter space and permits or break through to agencies was difficult." The excessive regulation meant air travel was very expensive, so Lance knew that to make an impact Cebu would have to be the affordable airline. That meant changing the mind-set of travelers. "Airlines served hot meals, provided blankets and had business class, even for domestic flights, so customer expectation was very different when we started," says Iyog. "We served snacks." Lance also had to undo the preconceptions of his staff: "A lot of people came from legacy carriers, so changing their ideas of what guests wanted was a battle. Every time we said, 'Let's stop giving out newspapers,' it would be a three-hour argument. But now no one [at a budget airline] would dream of offering free food, and customers don't expect it." Cebu launched its first flights in 1996 at prices 40% to 50% lower than PAL's. The company was profitable in its first nine years, but the rising price of fuel in 2005 brought it to

a turning point. Lance studied European discounters Ryanair and easyJet and realized that to survive, Cebu would have to stick more strictly to the operating principles of what the industry calls a low-cost carrier. That meant using one type of aircraft, flying only nonstop flights (and not connecting through hubs) and selling tickets online. Cebu had been using inefficient second-hand aircraft, selling tickets largely through travel agencies, and offering meals and premium-class seats on international flights. "We were a low-fare carrier but not necessarily a low-cost carrier," says Gokongwei. "In 2006 we found religion." Cebu's initial approach was good enough to compete with PAL on domestic flights, but after it started flying overseas in 2002, it was clear that this wasn't enough. "We wanted to benchmark ourselves internationally, to have a cost structure that could compete with the Ryanairs," says Gokongwei. The airline started buying new planes, beefed up marketing and attacked costs. Today it sells 40% of its tickets on the Internet. By 2008 the airline's domestic operation was outgrowing its space at Manila Ninoy Aquino International Airport, leading Gokongwei to take a risk. He decided that Cebu should be the first airline to use a mothballed terminal built five years earlier. The move would allow him to consolidate international and domestic operations under one roof. Planes would no longer need to be towed between terminals. "The first two weeks felt like a big mistake," he says. "The baggage handling and information systems were not working; the air bridges had no power; passengers were getting lost. But everyone pitched in. Management was there at 3:30 a.m., throwing bags into cargo holds." Gokongwei has shaped Cebu's corporate culture as much as he has its discount philosophy. "If we want our people to genuinely smile at our guests, then it's important they are happy as well," he says. "There is no [division] between operations and management. Everyone gets the on-time bonus each month if we hit our target. It gets everybody focused on the same objective--making the customer happy." At the headquarters near the airport the walls are painted to match Cebu's bright orange and yellow uniforms, and everyone calls one another by their first name. "The Philippines tends to be very hierarchical, but here everyone mingles freely--you will see Lance spending time with the engineers and mechanics," says Garry Kingshott, Cebu's chief executive adviser. The 44-year-old Gokongwei says his management style is a blend of his East- West educational background. "The Filipino side is the sense of humor and approachability, and the Western is more demanding in terms of results and being as objective as you can in assessing risks, opportunities and the talents of people." Cebu's seat capacity has been growing by 20% a year, and that will continue with the delivery of 20 new Airbus A320s over the next three years; it now has 33. After achieving 40% growth in international passengers last year, the airline's main push is to add overseas routes and build up markets in neighboring countries. But plans to expand beyond the five-hour capability of its planes are not yet in the pipeline. "We are not planning [longer] routes because we have huge growth plans for [short-haul] routes," says Gokongwei. "We will focus on where we have a clear advantage." That will become more important next year when the Philippine government plans to open the

industry to more competition. It will become much easier for an airline to win approval to fly to any airport in the country except Manila's, though foreign carriers will still be prohibited from flying domestic routes. What's next for Gokongwei might involve much more than Cebu. The married father of a girl and a boy has already had his midlife crisis, but he put it to good use training for a marathon. That will help to clear his head if he oversees JG Summit some day. Already he handles much of its day-today business, along with his uncle, James Go. His five sisters also work in parts of the conglomerate. Lance is keenly aware of how he's different from his father and the role he must play. "My father is much more visionary," he says. "I am more conservative, consensual, whereas he is more of a risk taker. He started as a poor man--he did not need a business plan. He goes more on instinct, and it's my role to add the science to the method. How to maintain the science without losing the instinct is the key." PAL Battles to Reinvent Itself Standing at the helm of Asia's first airline, Jaime J. Bautista, president of Philippine Airlines, is a man on a mission. PAL was once the country's dominant carrier, but today it's under siege. It no longer carries the most passengers, losing that title last year to upstart Cebu Pacific Air. So Bautista's mandate is to turn things around. The 70-year-old PAL generated its biggest profit, $130 million, in fiscal 2007 and its biggest loss, $300 million, two years later. Bautista feels confident, however, "that the airline has hit bottom and is back on track." For the nine months ended Dec. 31 it reported a $70 million profit, compared with a loss of $30 million for the same period in 2009. PAL spent more than 20 years as a government monopoly before it was privatized in 1992. It's now controlled by Philippine tycoon Lucio Tan, whose fortune is pegged by FORBES ASIA at $2.3 billion and who became chairman and chief executive in 1995. Today it carries burdens from its past, such as inflexible and expensive labor contracts. An important cost-saving plan to retire workers and outsource catering, ground handling and call centers was approved by the government, but the union appealed. The president will make the final decision. As a legacy carrier PAL still offers perks such as hot meals and different classes of service. That makes it impossible to compete on price with budget airlines on domestic routes. But PAL has a sister company, Air Philippines, that converted to a low-cost carrier last year. As PAL's "entrepreneurial arm" it is poised to compete directly with Cebu. AirPhil took its first step into the lucrative market for short regional flights by launching a Singapore service last October. Cebu Pacific wins LCC accolades; Gokongwei named CEO of the year Thursday, February 16, 2012 THE countrys largest national flag carrier, Cebu Pacific won the Low-Cost Carrier (LCC) of the Year award and its president and chief executive officer Lance Gokongwei was named LCC CEO

of the Year during the Budgie$ and Travel Awards 2012 last Feb. 9. The Budgie$ and Travel Awards 2012 was one of the highlights of the 2012 Low-Cost Airlines World Asia Pacific Conference held at the Marina Bay Sands in Singapore last week. Representing the Philippines, Cebu Pacific bested other airlines such as Air Asia, Jetstar, IndiGo, Spring Airlines and SpiceJet for LCC and LCC CEO of the Year, two Budgie$ Awards categories that were introduced just this year. Cebu Pacific won the Friendliest LCC of the Year award in 2011. We at Cebu Pacific are very happy and humbled by these awards, especially since they were voted by our peers in the Asia Pacific aviation industry. It is a very exciting time for the airline since we recently announced we will offer long-haul services in the 3rd quarter of 2013. Rest assured we will continue providing the lowest fares, extensive route network and more innovative travel products to our passengers, said Cebu Pacific vice president for marketing and distribution Candice Iyog. Gokongwei announced last month that the airline will lease A330-300 aircraft to expand its range to possible destinations such as Australia, Middle East and parts of Europe and the US. The airlines domestic destinations are Bacolod, Boracay (Caticlan), Busuanga (Coron), Butuan, Cagayan de Oro, Catarman, Cauayan (Isabela), Cebu, Clark, Cotabato, Davao, Dipolog, Dumaguete, General Santos, Iloilo, Kalibo, Legaspi, Laoag, Manila, Naga, Ozamiz, Pagadian, Puerto Princesa, Roxas, San Jose (Mindoro), Siargao, Surigao, Tacloban, Tagbilaran, Tawi-Tawi, Tuguegarao, Virac and Zamboanga. Cebu Pacific currently operates 10 Airbus A319, 20 Airbus A320 and 8 ATR-72 500 aircraft. Its fleet of 38 aircraft with an average age of 3.6 years is one of the most modern aircraft fleets in the world. Between 2012 and 2021, Cebu Pacific will take delivery of 22 more Airbus A320 and 30 Airbus A321neo aircraft orders and 2 Airbus A320 aircraft on operating lease agreements. (PR)