Low-cost Philippine carrier Cebu Pacific Air (5J, Manila Ninoy Aquino International) and Singapore-based SIA Engineering Co. Ltd. (SIAEC) are dismantling their joint ventures in two aircraft maintenance companies.

In a stock market disclosure, Cebu Pacific declared it had signed a Share Sale and Purchase agreement (SPA) with SIAEC on October 26, 2020, in terms of which the airline would sell its entire 35% shareholding in SIA Engineering (Philippines) Corp. (SIAEP) to SIAEC for a one-time cash payment of USD7.7 million. Accordingly, Cebu Pacific would cease to have any equity interest in SIAEP. The company was established in 2008 as a joint venture between the two parties, with SIAEC currently holding 65%.

SIAEP is located in Angeles City Clark International, in the Philippines and provides airframe maintenance, repair, de-lease checks, cabin retrofits, and overhaul services for B737, B777, A320 Family, and A330 aircraft types, as well as line maintenance services. According to the company website, the MRO has 12 air-worthiness approval certificates.

Cebu Pacific said the move was in line with its strategy to “streamline its fleet management and rationalise its aircraft base maintenance, repair and overhaul (MRO) offerings to optimise its operational efficiency and further strengthen its core competencies”.

SIAEC, for its part, said acquiring the 35% share in SIAEP supported its strategy to “strengthen its core competencies and enhance SIAEP’s status as the group’s centre of excellence for narrow-body aircraft maintenance, repair, and overhaul (MRO) offerings”.

Meanwhile, Aviation Partnership (Philippines) Corp. (APPC) will become a wholly-owned subsidiary of Cebu Pacific. The airline and SIAEP on October 26, 2020, also signed a Share Sales and Purchase Agreement (SPA) in terms of which Cebu Pacific will acquire SIAEP’s entire 51% shareholding in the maintenance company for a one-time cash payment of USD5.6 million, subject to conditions precedent set out in the sales agreement. APPC is currently 51% owned by SIAEC and 49% by Cebu Pacific. The change in Cebu Pacific’s ownership of APPC is not expected to have a material impact on the net assets or earnings per share of Cebu Pacific for FY2020.

According to another stock market report, APPC is a joint venture between SIAEC and Cebu Pacific established in 2005. APPC is located in Manila Ninoy Aquino International, Cebu, Davao, and Angeles City Clark International, as well as at other secondary airports in the Philippines. It is a key MRO player, providing line maintenance, light aircraft checks, technical ramp handling, and other MRO services to Cebu Pacific and other carriers.

Cebu Pacific said the transactions were in line with its overall strategy “to more closely align its line maintenance operations and strategic objectives with its network and service requirements, for significant operational efficiencies and optimisation of resources for an even stronger competitive advantage”.

SIAEC said divesting in APPC was in line with its overall strategy to streamline and rationalise its international line maintenance operations. It was also a way to optimise resources for areas of high growth potential and competitive advantage to ensure the long-term sustainability of its portfolio.

The airline said both deals were arrived at after “arm’s length negotiations on a willing-buyer, willing-seller basis” and took into account the net asset value and financial performance of both maintenance organisations.

Both transactions are subject to the satisfaction (or waiver) of the conditions precedent, such as all necessary approvals from relevant government bodies, statutory bodies, authorities, commissions, tribunals, agencies or entities, and those set out in the SPAs.