Airlines eye return of fuel surcharge

Airline ticket prices could go up this year as domestic carriers consider asking the government to again allow a fuel surcharge mechanism. This was ordered scrapped in 2015 as global oil prices saw a sharp decline—a trend that has been gradually reversing in recent years.

Inquirer sources said large carriers such as Philippine Airlines (PAL) could soon seek the government’s permission to pass on part of their fuel bill—a major operating cost for airlines—to customers as they had done before when the fuel surcharge was allowed.

A PAL spokesperson could not be immediately reached for comment, while a Cebu Pacific Air official said there was “no view” yet on any move to file a petition.

AirAsia Philippines CEO Dexter Comendador said the budget airline was looking at it, but a final decision had yet to be made.

“We are watching PAL and CAB [Civil Aeronautics Board] on this issue,” Comendador added.

CAB executive director Carmelo Arcilla said he was anticipating that airlines would file a petition to bring back the fuel surcharge on a broader scale. “It is inevitable,” he said in an interview on Tuesday, while citing the higher cost of oil and the effect of the Tax Reform for Acceleration and Inclusion (TRAIN) law, under which aviation gas would go up by P4 a liter.

“If ever they will file, we will review it,” Arcilla said.

Global oil prices have been on the rise with production cuts by Russia and the Organization of the Petroleum Exporting Countries (Opec).

The International Air Transport Association, the trade group of the world’s airlines, said Brent crude oil price as of November 2017 was the highest since the end of 2014. It was also up 25 percent in a year.

Higher costs have cut into the industry’s profits. Cebu Pacific saw earnings in the nine months through September last year fall 38 percent while PAL operator PAL Holdings posted a loss during the same period. Both carriers cited higher fuel costs and the weakening peso.

A fuel surcharge mechanism is granted by the government to help airlines recover expenses due to volatile oil price movements. It is still allowed in some cases. For example, PAL imposes a fuel surcharge for flights coming from Japan, its website showed.

The fuel surcharge ran from a few hundred pesos for domestic flights to several hundreds of US dollars for long-haul international destinations when the CAB scrapped it at the start of 2015.