Philippine Airlines and Cebu Pacific Inc. are set to lower their ticket prices this summer following the drop in fuel surcharge.
The Civil Aeronautics Board (CAB) said in an advisory on February 15 fuel surcharge for domestic and international flights will go down from level 3 to level 2 for the period of March 1 to April 30, 2019.
As required by the CAB, PAL and CEB last week had filed separate applications to impose lower fuel surcharge.
CAB said from December 2018 to January 2019, the price of jet fuel average to $73.50 per barrel with the US exchange rate of P52.60 to the dollar for the same period. This is equivalent to P24.32 per liter which corresponds to level 2 of the passenger fuel surcharge matrix.
Based on CAB’s fuel surcharge matrix, level 2 fuel surcharge per passenger per way for flights in the Philippines ranges from P45 to P171 for domestic and P218 to P2,076 for international.
Level 3 fuel surcharge being imposed until this week by airlines ranges from P74 to P291 for domestic flights per passenger per way and for international flights, from P381 to P3,632.
The fuel surcharge matrix is published by the CAB every 12 months and is revised as necessary.
Surcharges are suspended once the average price of jet fuel falls below P21 per liter.
The applicable fuel surcharge is determined based on the two-month average of Mean of Platts prices in jet fuel in its peso per liter equivalent, and is fixed for two months.
The applicable fuel surcharge is evaluated every two months.
The jet fuel cost is the largest expense by an airline operator.
Volatility in fuel costs culminating in recent price spikes prompted airlines to adopt two actions: increased revenues by applying fuel surcharges and ironed out volatility by adopting increasingly complex hedging mechanisms.
Fuel surcharge helps airlines offset part of their operating cost in which fuel bills contribute the most.