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Airfares to rise this month

Gov’t approves airlines’ request to bring back fuel surcharge
/ 05:16 AM September 10, 2018

Airline ticket prices are poised to go up as the Department of Transportation (DOTr) approved requests by commercial carriers to bring back the fuel surcharge given the big increase in global oil prices.

Transportation Undersecretary for Aviation Manuel Antonio Tamayo said the department, through the Civil Aeronautics Board, had approved the petitions of the airlines, some of which were submitted as early as the beginning of 2018.

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Tamayo told reporters that the surcharge, which is passed on to consumers as part of the ticket price, would likely be implemented within the month.

“It’s been a while,” Tamayo said last week at the sidelines of a business forum hosted by the Asian Institute of Management. “We have to let the airlines survive instead of them canceling flights and sacrificing the quality of service.”

CAB Executive Director Carmelo Arcilla said further details could be released by today.

Cebu Pacific Air, the country’s biggest budget airline, posted significantly lower earnings in the first semester of 2018, citing the higher cost of oil and the weaker peso. PAL Holdings, operator of Philippine Airlines, saw losses widen during the same period.

Tamayo explained that a fare matrix, which could be adjusted depending on the movement of oil prices, among other factors, was approved. He said the CAB decided on a fare matrix that fell in the midpoint of a range.

“We also had to look at best practices of other countries. We concentrated on Japan because we saw it was the most appropriate,” Tamayo added.

The government scrapped the fuel surcharge in 2015 after the global price of oil saw a sharp decline.

In the first semester of 2018, Cebu Pacific said profits fell 23.3 percent to P3.31 billion as the price of fuel jumped by almost 23 percent. PAL Holdings said losses from January to June hit P1.4 billion versus a loss of P1.3 billion in the same period in 2017.

In approving the surcharge, the DOTr is seeking to avoid a situation where airlines would cut back or suspend less profitable routes to preserve their bottomline. PAL, Cebu Pacific and Philippines Air Asia had each sought the government’s approval to restore the fuel surcharge.

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Last week, Philippines Air Asia CEO Dexter Comendador cited uncertainties in the price of oil as one of the reasons it decided to defer its public listing from the latter part of this year to 2019.

The year-on-year price of jet fuel was up 24.5 percent to $92.4 a barrel as of Aug. 31, 2018, the International Air Transport Association said.

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TAGS: Airfares, Business, Department of Transportation (DOTr)
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