Local air carriers hold ticket price hike

MANILA, Philippines — Foreign airlines raised ticket prices this month, while local carriers are holding back on making further increases despite being allowed by regulators to do so in line with higher fuel costs.

Civil Aeronautics Board (CAB) executive director Carmelo Arcilla told The STAR that almost all foreign airlines with outbound flights from the Philippines have applied and are already implementing higher airfares as allowed under the government-approved fuel surcharge matrix.

None of the three local carriers, meanwhile, has notified the CAB with regards to their intent to collect higher fuel surcharge for the months of November to December as competition among them tightens.

This is amid an announcement made by the CAB in mid-October which allowed airlines to collect higher passenger fuel surcharge for domestic and international flights from Nov. 1 to Dec. 31 as a result of the higher cost of jet fuel.

“Philippine Airlines and Cebu Pacific have not applied for the Level 4, they remain in Level 3. AirAsia has not availed at all. Maybe they want to absorb the cost so they will be more competitive and protect their market share. Because we have a very competitive market, it depends on the airline whether they want to absorb the cost so they will be competitive,” Arcilla said.

Last month, the CAB said the allowed passenger fuel surcharge for domestic and international flights for the Nov. 1 to Dec. 31 period which airlines could collect would increase from Level 3 to Level 4, which means additional cost of between P108 to P411 per passenger for domestic flights, and from P543 to P5,189 for international flights.

Level 3 of the surcharge matrix results to a hike of P74 to P291 for domestic passengers, and P381 to P3,632 for international passengers.

The CAB has adopted a matrix for fuel surcharge that will be determined based on the two-month average of jet fuel MOPS (Mean of Platts Singapore) prices in its peso per liter equivalent and will be fixed for two months. Should the two-month price average of jet fuel per liter falls below P21, then no fuel surcharge will be collected.

Higher fuel prices have taken its toll on the profitability of both PAL and Cebu Pacific in the nine months ending September.

PAL has reported a total comprehensive loss of P3.29 billion in the January to September period, 42.2 percent higher than the P2.31 billion recorded in the same months last year, while Cebu Pacific operator Cebu Air reported a 36.5 percent decline in net income to P2.78 billion from P4.38 billion.

Last September, the CAB decided to allow the reimposition of fuel surcharge on the back of skyrocketing fuel costs, with PAL and Cebu Pacific commencing with their implementation on Sept. 19.

AirAsia Philippines, for its part, has opted not to add fuel surcharge on its domestic and international fares as part of “staying true to its commitment to provide unparalleled low fares.”

“Our market is too price sensitive, so we don’t want to add pressure to them with all the rising prices,” AirAsia Philippines chief executive officer Dexter Comendador said late last month when asked if the company intends to collect fuel surcharge anytime soon.

The fuel surcharge is a way by which airlines can partially recover losses from higher fuel prices and the weakening of the peso against the dollar. Fuel cost accounts for over 50 percent of the total operating costs of airlines.