Cebu Pacific sold empty seats early and made flying cheaper than ferries

In 2005, Cebu Pacific faced high fuel prices in a country where many travelers still took ships between islands. A simple discount would have trained customers to wait for promotions. The Go fares program instead made cheap fares a year-round, advance-purchase structure.

Philstar reported that fares were cut by as much as 50%, with Manila-Cebu falling from P2,569 to as low as P999 before add-ons. The company said the program should increase travel and lift revenue by up to 20%.

The design forced useful behavior. Philstar said there would be five fare buckets, that the lowest prices required early booking and flexible travel, and that more than one million seats were set below old fare levels, including over 300,000 at the lowest advertised fares.

Forbes later described the operational hardening behind the pricing: after 2005, Cebu Pacific committed more strictly to one aircraft type, nonstop routes, online ticketing and the removal of legacy frills such as meals, newspapers and premium-class domestic service.

Turn empty seats into advance demand

Advance purchase let Cebu Pacific sell seats that might otherwise go empty in lean months.

Fare buckets protected revenue by making the lowest price scarce instead of universal.

Removing frills kept the cheap fare from becoming an unfunded promise.

In an archipelago, making flights cheaper than ferries expanded the market rather than only stealing share.

A price cut can be an operating system when it changes when customers buy, how assets are used and what costs the company refuses to carry.

The model quickly showed up in market share. Philstar reported that in June 2006 Cebu Pacific reached more than 41% domestic market share, with load factor above 79% and domestic passengers up 65% from June 2005. Forbes said Philippine fliers rose from 7.2 million in 2005 to 16.5 million in 2010.