Tigerair-Cebu Pacific transaction worries legislators

LAWMAKERS are looking into the takeover of Tigerair Philippines by dominant budget carrier Cebu Pacific Air and its potential impact on fares, a member of the House committee on transportation said yesterday.

Rep. Terry Ridon said in an interview the committee was taking a “wait and see” approach on the transaction, which was approved last week by the Civil Aeronautics Board. The transaction involves the acquisition of 100 percent of Tigerair Philippines by Cebu Pacific for $15 million.

Ridon, who noted that the transaction required the approval of Congress, said the committee was wary of the deal’s impact on competition despite its relatively small size.

The takeover also neutralizes an aggressive competitor, cutting the local commercial aviation sector to three major players: Cebu Pacific, Philippine Airlines and AirAsia of Malaysia.

“We are providing fair warning to Cebu Pacific that (the business model) of airlines cannot be determined just by market forces. It’s a public utility and they have a particular social commitment to the public not to raise rates dramatically,” Ridon said.

The lawmaker also reacted to a recent application by Cebu Pacific and Tigerair Philippines to increase the fuel surcharge for a broad range of domestic and international destinations. The fuel surcharge forms part of the ticket price, meaning any increase in the surcharge would translate to higher fares.

Cebu Pacific cited higher fuel costs and the weakening of the peso against the dollar for the surcharge hike application, which covered several of its regional routes like Japan, China, Singapore, Hong Kong and Thailand.