Cebu Who? Many people have never heard of it. But Cebu Pacific is quietly becoming a profit champ

In the year’s first quarter, Allegiant and Spirit were the world’s two most profitable lowcost carriers, measured by operating margin. Can you name the third?

No, it wasn’t WestJet nor Southwest nor JetBlue nor Frontier, which were other North American LCC positioned among Q1’s top 10. Nor was it perennially profitable Ryanair, during what’s always its most off-peak quarter. The answer? Cebu Pacific of the Philippines, all the more surprising because of the severe overcapacity problem afflicting the ASEAN region—the Philippines is one of 10 ASEAN countries, the second most populous, in fact, after Indonesia, whose airlines fared poorly. ASEAN’s premier lowcost carrier, AirAsia, is itself mired in difficulties.

Now for another quiz: Which publicly-traded airline grew capacity, in ASK terms, more than any other worldwide in the first quarter? That’s right: Cebu Pacific, with an expansion rate exceeding 30%. Growing quickly is easy—just ask Norwegian or Lion Air. But growing so quickly and so profitably at the same time? That’s a far tougher trick to turn.

Cebu’s performance from January through March was indeed exceptional. Operating margin reached 20%, obliterating its prior year Q1 margin figure of just 4%, even as it grew ASKs 32% y/y, to be precise. This follows five consecutive years of full-year profits since the start of the decade, with operating margin for 2014 reaching 8%, its best figure since achieving 10% in 2011. Steadily if quietly, Cebu Pacific is becoming a moneymaking force in East Asia’s crowded market for low-fare air travel.

The particularly plump profits during Q1 did have something to do with luck. Cebu saw its total fuel bill, quite remarkably, decline by more than a fifth y/y despite its bullish capacity growth. One reason for this is that unlike most world currencies in the early part of 2015, the Philippine peso actually appreciated a bit against the U.S. dollar, further reducing the cost of dollar-denominated fuel. Sure enough, Cebu’s chief rival, the legacy-burdened Philippine Airlines, enjoyed a massive fuel windfall too, which propelled it…

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Fasten your seatbelts. Second quarter earnings season begins now, starting with U.S. carriers poised to report another round of record earnings. Profits will be up y/y, reaching extremely high levels. But the overwhelming driver is dramatically cheaper fuel. Revenues, alas, are falling sharply too—just not nearly as much as fuel costs.

For Delta, it was anything but a quiet week of preparing its Q2 accounts for release on Wednesday. As the auditors worked, pilots—optimistic Delta will continue profiting and wanting their share of those profits—loudly rejected the tentative contract proposal before them, putting conditional B737 and E190 orders in limbo. And back at Atlanta headquarters, the network and alliance generals led a deepening of Delta’s links to Gol.

Big changes are underway at Delta’s partner Air France/KLM, a financial laggard that’s now strained by cracks in what was one of its strongest pieces of armor: longhaul routes to emerging markets like Asia, Africa and Latin America. The KLM side is now preforming even worse than the French side, prompting a round of Dutch pilot concessions. French pilots are under pressure to follow suit.

Contrast the plight of Air France/KLM with the might of BA/Iberia/Vueling, which stands on the cusp of adding Aer Lingus to the family. Ryanair is poised to sell its 30% stake in the Irish carrier to focus instead on organic offensives like a plunge into the Israeli market.

Ryanair’s far less successful rival Norwegian, meanwhile, is building its longhaul capabilities from London Gatwick. Next stop: Boston.

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