This is a Category A project according to IFC’s Policy on Environmental and Social Sustainability due to risks normally associated to significant retrenchment, which in this case was caused by the COVID-19 crisis, and the corresponding planning and management of the process by the Company.  Otherwise, air transport is a highly regulated industry that has well-established policies and procedures for managing ESHS performance of accredited carriers such as Cebu Pacific.

ESHS Management Systems: The Company has a corporate-level ESHS management system (ESMS) covering its air and ground operations, which is aimed at complying with local and international ESHS requirements, including: Department of Environment and Natural Resources; Department of Labor and Employment; Civil Aviation Authority of the Philippines; International Civil Aviation Organization (ICAO); and International Air Transportation Association (IATA). The ESMS describes the objectives and processes taken to manage ESHS risks and consists of the following components: i) policy & objectives; ii) risk management; iii) assurance; and iv) promotion of sustainable practices.

Core of this ESMS is a corporate quality, EHS and security policy, which emphasizes the commitment of the Company to place efforts to manage EHS, quality, and security to the highest regards and requires full commitment from all staff to comply with applicable regulations and laws. The policy further lays the foundation for the organization, programs and corporate culture that is established to manage these risks and impacts. These programs are implemented through a management framework that includes: i) standard procedures for risk assessment; ii) risk management; iii) staff training; and iv) performance monitoring and reporting.

The Company harmonizes the ESHS practices, including on labor and working conditions, of all the companies that are under the control of Cebu Pacific in line with its corporate ESMS. As per E&S Action (ESAP) #1, the Company will adopt in the Company’s ESMS an ESHS due diligence procedure aligned with IFC PS1 for acquiring new companies where Cebu Pacific will have majority ownership and ensuring that (i) E&S risks and impacts are identified and assessed, including any retrenchments; (ii) corresponding mitigation measures; and (iii) adequate ESHS management procedures, including on labor and working conditions, are adopted for the acquired companies.

Identification of risks and impacts: The organization has established a process for identifying risks and impacts relevant to their air and ground operations, including aspects such as: i) occupational health and safety (OHS); ii) environment; iii) operational impact; iv) reputation; v) compliance with law and regulations; vi) operational safety; and vii) financial impact. For each of these aspects, criteria have been defined to assess the level of risk or impact as well as required actions to reduce or mitigate these risks according to its risk level.

Organizational capacity and competency: The Company has appointed individual staff and teams responsible to determine and manage the risks and impacts who are selected based on their specific expertise on these risks within their operations. These teams are supported by OHS & Sustainability specialists. Department heads meet monthly to review risks as per Company’s risk management process, and to determine further actions. They report semi-annually to the Board Risk Oversight Committee. Regular training programs are in place at several levels to ensure all staff, including leadership, is aware of their tasks and responsibilities within the ESMS.

Monitoring and reporting: To monitor ESHS performance, in addition to its comprehensive air safety system, the Company has in place the following: i) reporting system including a safety dashboard used to process, analyze and monitor the status of environmental and safety incidents and ii) a system tracking the status and risks related to change management. The Company has further developed a set of leading and lagging performance indicators to verify its actual performance against pre-defined goals. Reports are presented monthly to senior staff / managers in the safety review committee and Airline Safety review board. A summary of these reports including escalations are presented quarterly to executive level at the Executive Safety Review Board.                                               

The workforce includes 2477 employees under Cebu Pacific and 217 under CEGBO (53% women and 47% men). There are 766 workers employed by third parties, the majority employed in security services.

Human resources policies: The Company has a range of management policies related to labor and working conditions. The bulk of these are consolidated in a substantial and regularly updated Human Resources Policies and Procedures Manual. This Manual covers a range of issues from recruitment, through compensation and benefits, discipline, sickness, harassment, attendance and timekeeping, learning and development, dismissal and resignation, remedial issues, etc. and is aligned with IFC PS2.

Equality and non-discrimination: There are number of specific equality and non-discrimination policies including the following: a) diversity and inclusion policy; and b) sexual harassment policy, based on which the Company has in place a process and committee to address any allegations. 

Sexual harassment policy: The Company formed a committee to ensure that reported cases of sexual harassment are addressed and due process is followed both in relation to the complainant and the respondent. Under the terms of the sexual harassment policy, the Company is committed to provide a working environment that is free from the consequences of sexual harassment and one which educates employees on acceptable and unacceptable behaviours in the workplace.

Freedom association and collective bargaining: In relation to cabin crew, which is the largest single occupational group within the Company, a union (Juan Wing Association of the Philippines) was officially formed and recognized through a certificate of election on April 2019. There have been a number of negotiation meetings since late 2019 and a collective bargaining agreement is in the process of being agreed. The Company has also engaged with the broader national trade union federation. The Juan Wing Association is affiliated with the Associated Labor Unions – Trade Union Congress of the Philippines.

There is also an employee association which represents pilots. Although this has not undergone a formal election and is therefore not recognized as a union by the law and the Company, nevertheless, the Company’s management has an open channel with the association officers and responds to their concerns through meetings and dialogue.

Manpower Service providers: The Company has in place a procedure to ensure that companies providing manpower services comply with national laws and regulations.  As per ESAP #2, the Company will include E&S provisions in manpower service contracts to require: (i) compliance with laws relating to environment and occupational health and safety; and (ii) that manpower service providers provide a grievance mechanism to its own employees.

Grievances. In 2020, the Company agreed with the cabin crew union on a new procedure for handling workers grievances. Under this procedure, the grievances must first be addressed in the relevant department. If the parties are not able to resolve the issue, the complaints are sent to the vice president (VP) of Human Resources (HR) for further handling. If the issue remains unresolved, both parties may bring the matter to the Department of Labor and Employment for voluntary arbitration. There are grievance mechanisms for other occupational groups to be found in Employee Discipline module and Employee Compliance Management System (ECMS) but these need to be integrated into a similar process flow as how the Union grievance mechanism has been outlined. Going forward, as per ESAP #3, the Company will develop and implement a workers’ grievance mechanism to cover all employees who are not currently covered by the one agreed with the union aligned with IFC PS2.

COVID-19-related retrenchment:  Prior to resorting to retrenchment as a result of the COVID-19 crisis, the Company went through steps to seek to minimize the number of job losses, including: temporary hiring freeze, temporary freeze on bonus payments, management pay cuts, restricted overtime, and exhaustion of employee leaves, among others. An additional allowance for workers on leave without pay was provided to around 1,000 employees in May and June 2020.

Once retrenchment became inevitable, the Company designed and implemented a retrenchment plan, which was consulted with workers and the union, and was aligned with the principles of IFC PS2. The plan had four guiding principles: 1) transparency, as evidenced in the way the Company related information  related to the need for retrenchment and the process itself was presented in various communication channels and forms; 2) consistency, through which they applied the same communication and programs for all employees considered for retrenchment; 3) objectivity and non-discrimination, which was reinforced by the way in which the process was guided by labor laws and based on the objective measures of seniority and performance assessment; and 4) compassion, aimed at ensuring that all workers are treated with dignity, fairness and respect.

During the course of 2020, Cebu Pacific has, so far, undergone three waves of separation due to the COVID-19 crisis. The total reduction of headcount has amounted to some 35% of total workforce.  214 positions through a voluntary separation process in July 2020, 841 in the first retrenchment wave in August 2020 and 344 in the second retrenchment wave in October 2020. 

The Company managed the retrenchment implemented in 2020 in line with both national law and in a manner consistent with IFC PS2 objectives. Available information showed that the Company has taken appropriate steps to carry out consultation with both the elected union representatives and also with individuals affected by retrenchment. The retrenchment was undertaken based on a well-defined selection criterion, consulted with the workers, that considered length of service, skills, qualifications, experience, business needs, etc.  During consultations with workers, the Company was both open and responsive to suggestions seeking to reduce the number of overall job losses and also to adjust the selection criteria so that more employees were selected on the basis of seniority.

The payments that have been made to those who have been selected for retrenchment have been significantly enhanced, compared to those required by national law. Workers who were dismissed were provided with one-month basic salary per year of service (twice the legal requirement), an extra month salary and a range of additional benefits including extended medical coverage. There were no indications that there had been any delays in payments to any employees. Additionally, the Company’s retrenchment plan included a range of interventions to support those employees who had lost their job to find new employment, including paid external outplacement, training sessions and life transition support.

Based on the learnings relevant to managing the significant retrenchment that already occurred, as per ESAP #4, the Company will adopt a retrenchment procedure aligned with IFC PS2, Company procedures and local laws and regulations.         

Occupational health and safety: OHS management is grounded in the safety management system and further defined in the Human Resources Policies and Procedures Manual. The VP of the HR department has a central role in driving OHS management and chairs the OHS committee that meets regularly to ensure compliance with regulations and corporate standards by planning, promoting, and implementing the company’s OHS program. This program focuses on both the physical work environment as well as the personal well-being of all employees. This includes subjects related to ergonomics, indoor air quality, management of waste and hazardous materials, infection and pest control, safe use of work tools and equipment, psychosocial health, and workplace violence. Detailed procedures to assist in the implementation of safe working methods have been developed by the company.

The Company has identified areas where high levels of noise exposure is possible and established procedures to prevent hearing loss by their employees in these areas. As per ESAP #5, the Company will update the existing procedure for hearing protection in line with the WBG General EHS Guidelines.

The Company has procedures in place to record, classify and investigate incidents and near misses. All staff has entry to an application to report incidents and near misses. These are further reviewed by the safety team, classified, and investigated to determine preventive and corrective actions. Close out of these action items is monitored

During the COVID-19 crisis, the Company has put in place multiple prevention and response measures to protect the workforce in line with local requirements and recommended practices, including adequation of office spaces, awareness campaigns and trainings, among others.                                                

Resource efficiency and GHG emissions: The Company monitors and manage its fuel consumption and takes steps to reduce this by continually updating its fleet with higher efficient airplanes and maintaining an average fleet age of five years. The Company utilizes the SkyBreathe Fuel Efficiency Management System to provide information that helps optimize flight operations. It further implements fuels saving practices by: i) single engine taxi operations; ii) reduction of weight carried; iii) better route utilization; iv) identifying efficient flight paths; v) implementing more efficient descents; and v) rationalization of auxiliary power supply while on ground.  The Company monitors its fuel usage for each flight and analyze these to further improve on its fuel efficiency.

The resource efficiency measures described above are part of the efforts by the Company to minimize the GHG emissions of its operation.  The Company monitors and discloses its GHG on a voluntary basis. Calculation of GHG emissions follows the guidelines developed by the ICAO in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The Company has achieved a reduction in carbon emission per passenger kilometer traveled of approximately 8% over the period 2017-2019. Currently, the Company is partially offsetting its carbon emissions and is compliant with the national regulations for this. It has the ambition to further strengthen this carbon offsetting program in the coming two years.  Pre-COVID-19 crisis, annual GHG emissions by the Company in 2019 were estimated at 2,001,463 tCO2e. The estimates for 2020 are an outlier and call for a significant reduction due to the impact of COVID-19 on operations.  

Electricity is purchased from the grid and its use within the headquarter is monitored. The Company is in progress to effectively track electricity usage from its other facilities. The company has implemented measures to reduce its electricity use and targeting an annual decrease of electricity use of 5%. The actual electricity consumption over the last three years has continual decreased with an achieved reduction of 6% in 2019.

Pollution prevention: The Company’s aircrafts comply with the relevant ICAO noise standards. Noise levels for ground operation are reduced by implementing single engine taxi operations. Noise emissions from aircraft will be further reduced by the planned update of its fleet. The Company currently has no outstanding complaints by relevant regulatory agencies relating noise emissions. 

Fueling is conducted by a combination of organic staff and third parties both in Manila and Cebu Stations.   The Company operates three ~450 M3 fuel tanks, to cover part of their fuel requirements in its home airport. These tanks are situated in a dedicated fuel area within a secondary containment. The environmental and safety aspects relating the operation of these tanks are covered in the company’s Fuel Operation Manual. This covers all stages of the process including receiving, storage, transporting of fuel as well as final delivery of fuel to the airplanes. Included in these standard operation procedures are measures to: i) prevent ignition by grounding and removing ignition sources; ii) prevent spills during loading and unloading operations; iii) requirements for inspection and maintenance to ensure the integrity of the equipment; and, iv) detailed emergency response procedures in case of fire, earthquakes or spills. Fuel spills, when occurred, are reported in the incident reporting system and closely follow up for remediate, preventive and corrective actions.

Wastewater management from maintenance operations is the responsibility of APlus, on which majority stake has been acquired by the Company.  As per ESAP #6 the Company will ensure that APlus: a) starts monitoring effluents and b) ensure compliance with applicable World Bank Group Environmental, Health and Safety Guidelines.

Waste: The Company has developed guidelines for handling, treatment and disposal of waste.  Where possible, the waste products that can be reused are separated and sold. The remaining waste is disposed by the 3rd party treatment, storage and disposal (TSD) facility. A certificate of treatment is provided to the company to ensure disposal is conducted according local regulations. An accreditation system is in place at national and corporate level to ensure selected TSD facilities comply with relevant regulations. Waste generated during outbound flights will be collected by ground staff of the specific airports and disposed of as per local guidelines. If a destination airport does not allow garbage disposal, all generated waste will be returned to the airport of origin. 

In order to reduce the waste and its impact due to single use plastics during flight, the company has shifted to alternative in flight utensils and is using biodegradable food packaging were possible. It is further implementing systems to segregate waste by in-flight separation of used PET bottles for upcycling. A similar waste reduction program has been established for its offices where alternatives for single use plastics are encouraged to be used and awareness programs have been started to reduce generation of waste. Future plans of the company include the establishment of a material recovery facility to further separate waste streams.

Hazardous materials: The Company has procedures to manage dangerous cargo safely based on relevant aviation requirements. These procedures are defined in the cargo operations manual and include requirements for classification, packaging, labelling, inspection, handling, warehousing, and stowage. Only staff trained, according to national civil aviation requirements, can perform these tasks. The Company has developed procedures for the storage and handling of hazardous materials used in its operations. These procedures include: i) requirements for storage; ii) safe handling guidelines; use of personal protective equipment; and, iv) specific emergency response procedures such as availability of eye wash, emergency showers and spill kits.                                             

Air Safety: The Company has obtained and maintained air safety certification by IATA through the Operational Safety Audit (IOSA) program. As such, the Company is subject to biennial audit to assess its safety programs and performance.

Emergency preparedness and response: The Company has developed detailed plans describing the process for preparedness to and management of emergencies at the workplace and affecting ground operations such as: i) fire; ii) earthquake; iii) flood; iv) explosion; and v) workplace violence. These plans include a definition of the organization in charge of responding to and managing the emergency as well as the relevant communication protocols. Staff are trained on their expected behavior during emergencies and evacuation plans are available and posted as required. Simulation practices are conducted regularly.

Emergency preparedness and response linked to flight operations is managed by the airport authorities of each airport served by the Company.  Additionally, the Company develops plans for the management of emergencies involving flight operations in line with ICAO requirements.

Community exposure to disease: The Company has implemented strict measures in line with national general and air travel requirements to prevent infection risks for COVID-19 for both its staff and passengers.

Food Safety: All meals, snacks and drinks served during the flight are prepared by accredited local caterers to ensure quality and adherence to food safety standards. These caterers further ensure compliance with both national and international relevant requirements for food safety within their supply chain. Laboratory tests are conducted by the company on all meal samples to verify its food safety. The companies inflight catering services have obtained both an HACCP and Halal certification. Information on known allergenic ingredients is provided.          

Security Services: The Company does not employ armed security services and those that it engages follow national regulations.