CAB suspends fuel surcharge

MANILA, Philippines — The Civil Aeronautics Board (CAB) has suspended the passenger fuel surcharge on domestic and international flights nearly two years after it was reimposed due to declining fuel prices.

This means that airlines will no longer be allowed to collect fuel surcharge “until further notice.”

“Considering that the average price of jet fuel in the past months has significantly been reduced to reasonable levels, and that the corresponding fuel surcharge level has gone down to Level 0, the imposition of passenger fuel surcharge is no longer warranted,” the CAB said in an advisory.

“Accordingly, no fuel surcharge shall be imposed for bookings on domestic and international flights originating from the Philippines until further notice,” CAB executive director Carmello Arcilla said.

Oil prices plunged as the COVID-19 pandemic significantly affected demand.

Fuel surcharge is an optional fee imposed and collected by airlines to recover fuel costs and stem losses caused by an upward spike in fuel cost, which is the largest expense by an airline operator.

In 2015, the CAB lifted the authority of domestic and foreign airlines to impose fuel surcharge on domestic and international flights.

But with the continuous escalation of fuel prices in the global market and the foreign exchange rate since then, the CAB decided to approve the applications of local airlines for its reimposition in September 2018.

The CAB then 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.

No fuel surcharge will be collected if the two-month price average of jet fuel per liter falls below P21.

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.

During the first four months of the year, the applicable fuel surcharge levels stayed at Level 2, wherein airlines were allowed to impose an increase of P45 to P171 for domestic flights and P218 to P2,076 for international flights.

It dropped to Level 0, which means no fuel surcharge will be imposed, starting last May as jet fuel prices started to decline.

In a briefing Thursday, Arcilla said the outlook for the country’s aviation industry remains bleak as restrictions both locally and abroad continue.