aviation industry

PAL eyes higher fuel surcharge amid rising oil costs

Aika Rey
PAL eyes higher fuel surcharge amid rising oil costs

PAL. Philippine Airlines president and chief operating officer Stanley Ng.

Philippine Airlines

New Philippine Airlines president Stanley Ng pledges to keep fares 'reasonable for passengers to fly' even as the flag carrier seeks measures to deal with costly fuel

MANILA, Philippines – Flag carrier Philippine Airlines (PAL) is proposing the implementation of a higher fuel surcharge as rising oil prices affect the global aviation industry.

In a media interview on Tuesday, March 15, newly installed PAL president and chief operating officer Stanley Ng said they reached out to the Civil Aeronautics Board (CAB) for help.

“We’re also working with the CAB to put some fuel surcharge for the fares. However, we’ll make sure that it’s still going to be reasonable for passengers to fly,” Ng said.

The PAL president declined to give an amount, for now, but noted that fuel accounts for about half of flight costs.

The surcharge adjustment is the “biggest” of PAL’s requests, according to Ng.

Even before the Russia-Ukraine war erupted, the CAB already upgraded to Level 4 the fuel surcharge that airlines can collect from passengers. This recent order covers March to April 2022.

Based on the CAB’s matrix, a Level 4 fuel surcharge ranges from P108 to P411 for domestic flights and P543 to P5,026 for international flights.

But airlines can decide to collect a lower surcharge than the published rates for competitive advantage.

The applicable fuel surcharge depends on the two-month average of Mean of Platts Singapore or MOPS jet fuel. From December 2021 to January 2022, jet fuel prices averaged at $95.34 per barrel, which is equivalent to P30.43 per liter, following an exchange rate of P50.75 to the dollar.

Aside from the surcharge, the Air Carriers Association of the Philippines earlier said it supports the proposal of a House panel that the government either reduce or not increase government-imposed fees on the aviation industry.

Recovering

In his speech, Ng said the flag carrier will be strengthening its cargo business.

Ng later told reporters that PAL will be mounting all-cargo flights from Asia to the United States. The returning flight will then be a passenger flight.

Having recently emerged from Chapter 11 proceedings, PAL is still recovering. Ng expects up to three more years before the airline returns to its pre-pandemic size. 

“It’s gonna take about two to three years because we’ve reduced the fleet size. We won’t be able to go back there if we don’t acquire more airplanes,” he said.

Asked about the airline’s aircraft acquisition plans, Ng said talks are already underway.

PAL exited from Chapter 11 credit protection proceedings at the end of 2021. A US bankruptcy court had approved PAL’s recovery plan last December. – Rappler.com

Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.