Higher air fares loom next month

MANILA, Philippines — Air fares may rise starting next month due to the possibility of an increase in fuel surcharge, according to the Civil Aeronautics Board.

An official from the CAB told The STAR that preliminary calculations indicated that passenger fuel surcharge level for domestic and international flights for the months of July and August may rise from the current level 2 to level 3.

“Per our monitoring, average jet fuel price increased for the two-month evaluation period, which was April to May,” the official said.

“Indicative figures show that fuel surcharge may go up by one level for July to August,” the official said.

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

This is compared to the existing P45 to P171 allowable increase per passenger for domestic flights, and P218 to P2,076 for international flights under level 2 being implemented for the May to June period.

Fuel surcharge has been at level 2 during the March to April and May to June periods. Prior to that, it was at level 3 during the January to February period.

Jet fuel price and the peso dollar exchange rate are the two factors that affect the passenger fuel surcharge.

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

The CAB 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 over the dollar.Fuel cost accounts for over 50 percent of the total operating costs of airlines.

Both local and foreign airlines are allowed to collect fuel surcharge rates that are lower than the stated level for the given two-month period if they choose to do so depending on how they want to compete with other carriers.