Lower airfares seen as CAB lifts fuel surcharge

MANILA, Philippines – Lower fares await airline passengers as the Civil Aeronautics Board (CAB) ordered the lifting of the fuel surcharge imposed by foreign and domestic airlines.

Per Resolution No. 79 (BM 10-12-22-2014) dated December 22 and published Tuesday, January 6, CAB ordered lifting the authority of domestic and foreign airlines to impose fuel surcharge on domestic and international flights.

“Whereas, with the substantial and continuous decrease of fuel prices in the world market, the Board has deemed it appropriate to compel airlines to discontinue their imposition of fuel surcharge,” CAB stated in the 4-page resolution.

Transportation Undersecretaries Jose Perpetuo Lotilla and Benito Bengzon J., together with Civil Aviation Authority of the Philippines (CAAP) director-general William Hotchkiss III and former Clark International Airport Corporation (CIAC) president Victor Jose Luciano, signed the resolution.

Airline passengers could expect lower air fares starting the end of the week with the removal of the fuel surcharge on domestic and international flights, CAB executive director Carmelo Arcilla said in a telephone interview.

 The fuel surcharge depend on the flight’s distance, Arcilla said.

The surcharge ranges from P200 ($4.44*) to P500 ($11.10) for domestic flights, but could go as high as P15,000 ($332.88) for international destinations.

Fuel cost accounts for over 50% of airlines’ total operating costs.

Slash fuel surcharge

The CAB allows airlines to impose such surcharge to help them recover fuel costs and stem losses caused by the sudden upward spikes in fuel prices.

Per prevailing international practice, fuel surcharge may be reduced or removed as it is not part of the basic fare, depending on the price of jet fuel in the world market.

Citing data from the Department of Energy (DOE), the CAB said fuel prices have declined by more or less 25.51% from January to November last year.

As of December 26, jet fuel price in the world market plunged 42% to $75 per barrel, data from the International Air Transport Association (IATA) showed.

On December 5, CAB summoned domestic and foreign airlines to explain why they have not reduced or lifted the fuel surcharge imposed on airline passengers.

Malaysian Airlines lifted its fuel surcharge as early as July 2013.

Asiana, Etihad Airways, Jin Air, Korean Air, and Qantas argued though that jet fuel remains relatively high, and it is not the only factor considered in imposing fuel surcharge.

Cathay Pacific and Hong Kong Dragon Airlines reported a slash in fuel surcharge by 33.44% to $18.30 last October from $27.90.

All Nippon Airways and Japan Airlines reduced their fuel surcharge by 6.9% to $80 in January 2014 from $86.

Gulf Air fixed its fuel surcharge of $90 as early as 2010, followed by Jeju Air at $40 and Qatar Airways at $120 in 2012. – Rappler.com