(Bloomberg) — Philippine budget carrier Cebu Air Inc. plans to raise $500 million by selling preferred stock and bonds, joining airlines worldwide in trying to increase capital to help cope with the pandemic.



a group of people sitting around a car: A Cebu Air Inc. aircraft prepares to land at Ninoy Aquino International Airport (NAIA) in Manila, the Philippines, on Thursday, Feb. 13, 2020. In response to the coronavirus outbreak, the Philippine government has banned travel to Hong Kong, along with Macau and mainland China. Earlier this month, the Philippines' Labor Department announced that it would offer financial assistance and temporary housing to workers who'd gotten stranded in the capital en route to their jobs overseas.


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A Cebu Air Inc. aircraft prepares to land at Ninoy Aquino International Airport (NAIA) in Manila, the Philippines, on Thursday, Feb. 13, 2020. In response to the coronavirus outbreak, the Philippine government has banned travel to Hong Kong, along with Macau and mainland China. Earlier this month, the Philippines’ Labor Department announced that it would offer financial assistance and temporary housing to workers who’d gotten stranded in the capital en route to their jobs overseas.

The proceeds from the $250 million convertible preference share issue and $250 million private placement of convertible bonds will be used to strengthen the carrier’s balance sheet, it said in a statement. First-half revenue at the airline controlled by the family of John Gokongwei plunged 61% from a year earlier to 17.3 billion pesos ($358 million) and the company said it is operating only about 15% of flights compared with pre-Covid.

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Cebu Air is undertaking a business transformation that involves trimming down its fleet and network while improving operations as an abrupt drop in passenger traffic “casts uncertainty over the near term prospects of the company,” it said, without providing more details of its downsizing plan.

Airlines in the Philippines have suffered a shaky restart amid one of the world’s longest and strictest lockdowns, with lingering concerns over the virus and stringent movement restrictions damping demand for travel. Cebu Air in August dismissed more than 800 of its about 4,000 employees, while rival Philippine Airlines Inc. on Oct. 5 said it may cut up to 35% of its 7,000 workers as part of a larger restructuring and recovery

Early in the COVID-19 pandemic, Delta Air Lines (NYSE: DAL) decided to accelerate its fleet simplification plans while demand was depressed. On April 30, Delta announced that it would permanently retire its MD-88 and MD-90 fleets in early June. Two weeks later, it said it would phase out its Boeing 777s by year-end.

In late June, I suggested that Delta Air Lines might not be done with fleet restructuring. Sure enough, the company recently announced that it will retire three additional aircraft models earlier than previously planned.

Where Delta was — and where it’s going

Under prior CEO Richard Anderson, Delta Air Lines embraced (and mastered) the complexity of operating numerous aircraft types in its fleet. By opportunistically snapping up used jets that other airlines didn’t want, Delta was able to minimize capital expenditures following the Great Recession, helping it rapidly pay down debt.

Delta’s current CEO Ed Bastian and Chief Financial Officer Paul Jacobson were both involved in the leadership team that adopted this used-jet strategy a decade ago. However, over time, the costs of this strategy — ranging from lower pilot productivity to increased maintenance expenses — have become clearer. Additionally, a new generation of jets that are cheaper to operate has entered service over the past five years or so, increasing the attractiveness of buying new aircraft.

At its investor day last December, Delta touted the efficiency benefits of shifting from a “legacy” fleet to an “optimal fleet” over time. The full-service airline said it expected to have 13 fleet families in 2020, but had the potential to reduce that to just eight fleet families over time.

A Delta Air Lines plane taking off.

Image source: Delta Air Lines.

In terms of individual models, Delta operated 20 distinct mainline aircraft models and five regional aircraft models at the beginning of 2020. The carrier has