LANCE Gokongwei: "I'm no traditional entrepreneur,
that's my dad"
An article published in
Philippine Daily Inquirer, April 3, 2006
LANCE Y. Gokongwei WAS JUST 30 years old when
his father, John, one of the richest men in the Philippines , told him he
just bought four planes.
"Bahala ka na (take care of it)," John told Lance.
That led to the birth of Cebu Air Inc. or Cebu Pacific in 1996.
Today, Cebu Pacific is the second largest airline in the country with a
37-percent market share of domestic routes. It serves 15 local cities and
flies to Hong Kong and Inchon . It recently bought a new airplane and will
increase its fleet to 12 by the end of the year.
The growth of the airline, which incurred a loss only twice in its 10-year
history, earned for Lance the Entrepreneur of the Year Award of Ernst and
Young, besting 20 other successful Filipino entrepreneurs, most of whom
started their businesses from nothing.
He now joins the ranks of Ton Tan Caktiong; and National Bookstore dame
Socorro Ramos--the past two years' winners.
Lance will compete this June for the World Entrepreneur of the Year awards,
which Jollibee's Tony Tan Caktiong won two years ago.
Cebu Pacific's growth was propelled by directions set forth by Lance--focus
on being a low-cost carrier and adopt unique marketing strategies used by
other foreign successful LCCs.
He is the first to admit that he is not your traditional Filipino
entrepreneur.
"I am not the traditional picture of entrepreneurship, which is someone who
has no money, and who started his business from scratch," he says.
Lance was born with the proverbial silver spoon in his mouth, as Dad John
then owned a couple of businesses.
One of his most profitable firms was Universal Robina Corp., one of the
largest manufacturers of snack foods in the country under the Jack n' Jill
label.
Lance points out, however, that there is another way of defining an
entrepreneur, usually more common in developed nations.
He is someone who grabs at opportunities around him, takes risks, avails
himself of available resources and creates something big.
"It's about seeking out opportunities, taking risks. Developing nations have
better capital markets and these provide sources of funding for ideas,"
Lance states.
But he says most Filipinos have this picture of traditional entrepreneurs,
such as his dad.
John, although born to a wealthy Chinese-Filipino family lost his father
early. He then had to fend for his mother and siblings, riding a bike for
miles and crossing rivers just to sell goods to earn a living.
"That is my dad's story," says Lance.
But just because he did not have to start from nothing should not be taken
against Lance who still had the responsibility of growing the conglomerate
handed him.
And so far, the elder Gokongwei has no reason to believe that he did wrong
when he handed to his only son one of the biggest enterprises in the
Philippines.
Lance laughingly describes himself as the Stepford Wife, because his mind
has always been focused on becoming the perfect manager for the family
business--his only ambition as far as he could remember.
And he did as soon as he can, arming himself with unquestionable
qualifications. He finished BS (Applied Sciences) from the Pennsylvania
Engineering School ; and BS (Finance) from the Wharton School . He graduated
summa cum laude both times.
Not knowing anything about the airline industry, Lance says he read a couple
of books to give him a better idea about the business. He read Richard
Branson's book, Losing My Virginity: How I've Survived, Had Fun, and Made a
Fortune Doing Business My Way. And this somehow became a bible to him in the
early years of Cebu Pacific.
Gokongwei's entry into the airline industry was prompted by the
liberalization of several sectors during the administration of then
President Fidel V. Ramos.
Lance recalls at that time that Ramos encouraged tapping into the foreign
capital markets for funding.
This spurred several investors to go into major industries which Ramos,
through Congress, liberalized-telecommunications, airlines, cement, energy,
petrochemicals.
His family went into telecommunications, airlines and petrochemicals and
started Cebu Pacific with P125 million.
Cebu Pacific revenues as of June 2005 was P4.02 billion, up from P3.94
billion in 2004.
Its earnings before income tax, depreciation and amortization for the first
six months of 2005 dropped P359 million from the 2004 income of P772
million.
Lance attributes this to the steep rise in fuel prices. He says last year
was only the second time in the 10-year history of the airline that Cebu
Pacific registered a loss. The first was during its first year of
operations.
The Cebu Pacific president says the company made a quick turn around because
Cebu Pacific served an "unmet need in the market."
Its tickets sell at 40 percent lower than Philippine Airlines' rates.
There are many takers as he says the airline industry has been growing at
over 20 percent a year.
He admits the biggest mistake he made in the airlines was to veer away from
their focus as an LCC and introduced business class sections and other
high-end rates.
"We have to focus on just one thing," he says.
But on top of offering Filipinos cheaper rates, Lance is also attempting to
change people's habits.
By offering consumers cheaper rates if they book their tickets early, Cebu
Pacific was able to change the habit of Pinoys who used to buy their tickets
two days before they leave.
Asked if there was one thing he would change if given a chance to start Cebu
Pacific all over again, he says he would have used different airplanes.
"We would not have started with DC-9s, but started with 737 or Airbuses," he
says.
But then, it was dad John who bought the DC-9s.
Son Lance has since embarked on a refleeting program and recently purchased
12 Aibus A3192s and contracted to lease two Airbus A320s.
That's your non-traditional entrepreneur.