DOTr official: Fuel surcharge to help offset airline losses | Inquirer Business
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DOTr official: Fuel surcharge to help offset airline losses

/ 05:12 AM July 19, 2018

A senior official from the Department of Transportation (DOTr) said he was open to allowing local airlines to once again impose a fuel surcharge due to rising oil prices.

Manuel Antonio L. Tamayo, DOTr undersecretary for aviation, said in an interview they would study the fare matrix schemes submitted by Philippine Airlines (PAL) and Cebu Pacific Air to the Civil Aeronautics Board.

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These will determine the corresponding add-on charges considering movements in the price of oil.

In its fuel price monitor, International Air Transport Association noted the price of jet fuel already stood at $90.2 per barrel as of July 6 this year. This was higher by 50 percent compared to a year ago.

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Tamayo said the surcharge, which would be included in the ticket price, would help airlines offset losses from fuel costs, a major operating expense.

“What might happen [without a cost recovery mechanism] is they cancel flights in routes where they are losing money,” Tamayo said.

PAL posted a comprehensive net loss of $129 million last year, reversing an $86-million profit in 2016. Cebu Air Inc., which operates Cebu Pacific, said profit last year dropped almost 19 percent as it also cited lower yields given increasing oil prices.

PAL president Jaime Bautista earlier warned that PAL would book a loss in 2018 if its request to impose a fuel surcharge was not granted. The practice was scrapped in 2015, when oil prices were on the decline.

Among local carriers, only Philippines Air Asia has yet to file an application seeking a fuel surcharge for its flights.

Philippines Air Asia CEO Dexter Comendador said in a previous interview that the airline would consider applying if PAL and Cebu Pacific were allowed to impose the surcharge.

The higher cost of oil remained a risk, Comendador had said. To offset these expenses, he said Philippines Air Asia may cut unprofitable routes and slow expansion initiatives.

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TAGS: aviation, Department of Transportation (DOTr), fuel surcharge, Manuel Antonio L. Tamayo
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