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Say Goodbye to Super Cheap Plane Fares as Fuel Costs Rise and Peso Weakens

Budget carrier Cebu Pacific files petition to collect aviation fuel surcharge
By Elyssa Christine Lopez |

 

 

Airplane tickets for domestic and foreign travel may start getting pricier as the country’s two largest airlines, low-cost carrier Cebu Pacific Air and full-service carrier Philippine Airlines (PAL), have applied for the imposition of the fuel surcharge in airfares to authorities to offset their increasing expenses.

 

In a report by Bloomberg on May 28, Cebu Air Inc. CEO Lance Gokongwei said the airline’s costs have been increasing by Php700 million a month from a year ago due to the rising price of fuel and the Philippine peso’s decline.

 

“We will have to adjust prices accordingly,” said Gokongwei, according to the report, which added that Cebu Pacific has filed a petition to add a fuel surcharge in its air fares to cover the rising cost of aviation fuel.

 

A Cebu Pacific spokesperson said the airline filed its application with the regulator Civil Aeronautics Board (CAB) early in May.

 

PAL filed its petition to impose a fuel surcharge several months earlier, in December 2017. It said the airline spends an additional $11 million for every $1 increase in the price of a barrel of fuel.

 

An official at the CAB confirmed that both airlines have submitted petitions, adding the board has begun to review the applications.

 

 

Related story: PAL Seeks Reimposition of Fuel Surcharge Amid Rising Aviation Fuel Prices 

 

 

Data from the US Energy Information Administration show that as of the third week of May, global price of jet fuel has hit $2.21 per gallon, a 57-percent hike from its price in the same period last year.

 

Meanwhile, the Philippine peso hit its lowest level in almost 12 years on Friday, May 25, as it reached Php52.57 per dollar during the day. It was its lowest level since July 2006.

 

The last time both airlines collected a fuel surcharge was in 2012 when the average global price of jet fuel was at $3.05 per gallon, a 29-percent increase from its price in 2010 of $2.15 according to the US Energy Information Administration.

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From 2012 to 2015, the airlines’ fuel surcharges ranged from Php200 to Php500 for domestic flights, and from $20 to $300 for international flights. The cost recovery mechanism was removed in January 2015, when aviation fuel prices started to drop.

 

Cebu Pacific Air is owned and controlled by the Gokongwei family, some of whose members also run Summit Media that publishes Entrepreneur Philippines online.

 

 

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Elyssa Christine Lopez is a staff writer of Entrepreneur PH. Follow her on Twitter @elyssalopz

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