Higher airfares loom with return of fuel surcharge

Higher fares loom for airline passengers this year as the Civil Aeronautics Board (CAB) is likely to allow local airlines to reimpose fuel surcharge on the back of skyrocketing fuel costs.

CAB executive director Carmelo Arcilla said while some legal procedures are still being undertaken, it is possible for the agency to greenlight the local airlines’ request to once again impose fuel surcharge, which will be included in the prices of tickets.

Arcilla said the CAB is expected to make an announcement and give a complete report today.

He said the agency’s go signal would likely be given to all those who have applied, both for their local and international flights.

“Because if an airline wants to absorb the costs because they want to capture the market, to be competitive, it’s their choice (if they do not want to impose a fuel surcharge),” Arcilla said.

Flag carrier Philippine Airlines (PAL) and sister carrier PAL Express in December last year filed a petition with the CAB to impose fuel surcharge worth P51 to P207 to recover higher costs of fuel.

PAL president and chief operating officer Jaime Bautista, however, said last June the carrier would update the figure and amend its petition as fuel prices continued to rise.

Cebu Air Inc., the operator of the country’s biggest budget carrier, has also applied for regulatory approval to impose fuel surcharge, with its president and CEO Lance Gokongwei saying recently that the extra cost of fuel is costing the company about P500 million a month.

Philippines AirAsia chief executive officer Dexter Comendador said the company has also filed its own application to impose the surcharge, but he declined to disclose details.

Once the petitions of the local airlines are approved, Arcilla said foreign airlines are expected to seek their respective fare hikes as well.

“Typically, in practice, local airlines would apply and then after this is granted, then foreign airlines will follow suit, that’s the trend,” he said.

The CAB in 2015 published Resolution No. 79, lifting the authority of domestic and foreign airlines to impose fuel surcharge on domestic and international flights.

Airlines, however, have asked the agency to allow them to raise fares to offset losses in line with the persisting soaring fuel costs.

Fuel cost accounts for over 50 percent of the total operating costs of airlines.

In the past, the CAB allows airlines to impose a fuel surcharge to help recover fuel costs and system losses caused by sudden spikes in fuel prices.

“If you asked the airlines, it should have been (implemented) yesterday,” Transportation Undersecretary for aviation Manuel Tamayo said.

“It (implementation) should be within the month because that has taken a long time already and I pity the airlines’ situation. We have to let the airlines survive, instead of cancelling flights, sacrificing quality of service,” he said.

Tamayo said the Department of Transportation (DOTr), for its part, has approved a surcharge matrix for airlines to follow in adjusting their prices.

“There’s a matrix already. It went through the DOTr, me and Secretary (Arthur Tugade) and we followed the model of Japan because we want to have a matrix that everytime there is an increase in fuel, an increase in anything, or there is a decrease, they will not have to go through us. You have a matrix so just follow it,” he said.

Tamayo said the matrix, which was prepared by the CAB after undergoing public consultations, will depend on the cost of fuel.