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HomeAviationHigher air fares seen with ok of fuel surcharge

Higher air fares seen with ok of fuel surcharge

  • The Civil Aeronautics Board is allowing airlines to impose the passenger fuel surcharge from July to August 2021 following increases in jet fuel prices
  • Surcharges range from P34 to P132 per passenger on a domestic flight (one way) and from P163 to P1,557 per passenger on an international flight (one way).
  • The passenger fuel surcharge is being reimposed after its suspension in August last year

Airlines may levy the passenger fuel surcharge from July to August 2021 following a decision by the Civil Aeronautics Board (CAB) which took into account higher jet fuel prices.

In a Civil Aeronautics Board (CAB) advisory dated June 30, 2021, CAB executive director Carmelo Arcilla said that from April to May 2021, the price of jet fuel averaged US$71.82 per barrel, equivalent to P21.78 per liter at an exchange rate of P48.21 per dollar. This latest rate falls within Level 1 of the passenger fuel surcharge matrix for domestic and international flights. The matrix was released through CAB Resolution No. 44 in September 2018.

Under Level 1 rates, surcharges range from P34 to P132 per passenger on a domestic flight (one way) and from P163 to P1,557 per passenger on an international flight (one way).

CAB announced the indefinite suspension of the fuel surcharge in August 2020, saying imposing it was no longer warranted as the average price of jet fuels then had been significantly reduced for the past months. But even before then, CAB had not imposed a fuel surcharge since May 2020 due to lower jet fuel price.

Resolution No. 44, which reimposes the collection of fuel surcharge on passengers on domestic and international flights, states that the applicable fuel surcharge should be determined based on the two-month average of jet fuel Mean of Platts Singapore (the average of a set of Singapore-based oil product price assessments published by Platts) priced in its peso-per-liter equivalent, and will be fixed for two months.

The two-month price average will be the ceiling rate for the fuel surcharge.

The applicable fuel surcharge will be evaluated every two months and announced 15 days prior to its effectivity, in accordance with the timetable in Resolution No. 44.

If the two-month price average of jet fuel per liter falls below P21, no fuel surcharge will be collected.

Resolution 44 notes that airline fuel surcharge is an optional fee that airlines may impose and collect to recover fuel costs and stem losses caused by a spike in fuel cost.

“Fuel surcharge is not a part of the basic airfare and may be reduced or removed spending on the price of jet fuel in the market, in accordance with prevailing international practice,” the resolution adds.

Airlines wishing to impose or collect fuel surcharge from July to August 2021 must file their application with CAB on or before the effectivity period, with fuel surcharge rates not exceeding the stated level. For fuel surcharge to be collected in the equivalent currency, the applicable conversion rate for the period is $1 is to P48.21.

The imposition of fuel surcharge stopped in 2015 as fuel prices during that time had dropped, and the surcharge was reimposed in 2018 upon the request of airlines following increases in the prices of fuel.

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