Air Asia expansion in PH seen slowing down

Philippines Air Asia said its hiring and business expansion could slow if oil prices would continue to increase.

The company, a unit of Malaysian budget carrier Air Asia Berhad, is seeking to further mitigate the rising cost of oil although it is not yet contemplating asking the government to allow it to impose a fuel surcharge as its rivals had done, CEO Dexter Comendador said in a recent interview.

In recent months, Philippine Airlines and Cebu Pacific Air sought the Civil Aeronautics Board’s approval to allow them to again include a fuel surcharge in the ticket price.

“If they are given [the go-signal], then we can follow,” Comendador said.

He said Philippines Air Asia, instead, would increase efficiency and likely cut unprofitable routes.

He said expansion initiatives, however, would slow should the operating environment turn more difficult. In the case of Philippines Air Asia, jet fuel accounts for about half of operating costs.

“To offset those costs, we could limit our hiring of pilots and ground crew,” he said.

Philippines Air Asia is taking delivery of two more Airbus A320s this year, which would add to existing fleet of 19 A320s, he said.

The International Air Transport Association (IATA) earlier cut its profit forecast for the global commercial aviation industry, citing higher costs. It said the price of jet fuel is forecast to hit $84 a barrel this year, up from $66.7 per barrel in 2017 and a 60-percent increase from 2015.

PAL and Cebu Pacific, which are larger rivals of Philippines Air Asia in the country, said earlier that they needed the fuel surcharge to keep expenses under check. The practice was scrapped in early 2015, given the decline in the price of oil then.

PAL earlier filed an initial petition with the CAB last December to impose a fuel surcharge of P51 to P207 for local flights and $5 to $21 for international flights. PAL president Jaime Bautista said they would revise those figures to reflect the higher cost of oil in a new petition.