Fuel surcharge likely to decline by March 2019 — CAB

MANILA, Philippines — Air fares may start to decline in March due to the sustained decline in jet fuel prices in recent months, according to the Civil Aeronautics Board.

CAB executive director Carmelo Arcilla yesterday said the applicable fuel surcharge level allowed to be imposed by airlines under the government-approved surcharge matrix may drop further for the March to April period.

The applicable passenger fuel surcharge for domestic and international flights since Jan. 1 up to Feb. 28 has been set at Level 3, a drop from Level 4 during the November to December period.

Under the Level 3 of the fuel surcharge matrix, airlines are allowed to impose a hike of P74 to P291 for domestic passengers, and P381 to P3,632 for international passengers.

Arcilla said there is a possibility that this could further go down to Level 2 given the cost of jet fuel in recent months.

“Right now we reduced to Level 4 to Level 3. Hopefully, it will continue to (go down) because in general it (fuel prices) is going down, although it is still erratic in the sense that sometimes it will spike up. But the general trend is going down. We will just review the trends in the past two months and by February 15 we will announce it,” Arcilla said.

The level that will be announced on Feb. 15 will determine the maximum amount which airlines can implement for the March to April period.

Airlines are allowed to collect fuel surcharge rates that are lower than the stated level if they choose to do so depending on their strategy. They can also opt not to collect fuel surcharge, which are reflected on ticket prices.

Airlines wishing to impose or collect fuel surcharge must file its application with the CAB on or before the beginning effectivity period.

In September last year, the CAB decided to allow the reimposition of fuel surcharge on the back of soaring fuel prices.

The agency has adopted a matrix for fuel surcharge that will be determined based on the two-month average of jet fuel MOPS (Mean of Platts Singapore) prices in its peso per liter equivalent and will be fixed for two months. Should the two-month price average of jet fuel per liter falls below P21, then no fuel surcharge will be collected.

The fuel surcharge is a way in which airlines can partially recover losses from the soaring fuel prices and the weakening of the peso against the dollar.  Fuel cost accounts for over 50 percent of the total operating costs of airlines.

“It’s a competitive decision. Maybe an airline would like to have a bigger share of the market by competing, by not charging surcharge. Then that’s their call,” Arcilla said.