News & Events

March 18, 2015

THE FREEMAN: Airlines urged to cut base fares due to 40%-drop in jet fuel price

MANILA - Besides scrapping their fuel surcharges, commercial airlines operating in the countryshould  slash  their  base  fares  amid  the  40-percent  plunge  in  jet  fuel  prices,  House  DeputyMinority Leader and LPG-MA Rep. Arnel Ty said in a news release Sunday.“Fuel costs comprise some 50 percent of an airline’s operating expense, so they are definitelymaking more money due to the steep drop in jet fuel prices. They now have greater leeway toreduce base fares,” said Ty, a senior member of the House transportation committee.“This basically implies that if an airline used to spend P1 million to operate a flight, the sameflight now costs to only P800,000 to run, assuming all other non-fuel expenses are constant,” Typointed out.Budget Filipino air travelers, including overseas Filipino workers (OFWs), deserve to benefitfrom declining oil prices and cheaper air fares, Ty said.Philippine Overseas Employment Administration statistics show that more than 5,000 Filipinosfly out of the country every day to work abroad. This figure does not include the number ofOFWs returning home, who also stand to gain from lower air fares, according to Ty.

Meanwhile,  Ty  urged  the  Civil  Aeronautics  Board  (CAB)  to  ascertain  which  airlines  haveactually abolished their fuel surcharges, ranging from as low as P500 per domestic passenger toas high as P18,000 per international traveler.“We’ve received complaints that a number of airlines have supposedly decided to scrap their fuelsurcharge via installment, rather than all at once. Other airlines have purportedly removed thesurcharge on certain flights, but kept the extra fee on other flights,” Ty said.Ty’s LPG-MA first publicly called for the scrapping of airline fuel surcharges on Dec. 13, 2014,not long after the collapse of world oil prices.Heeding LPG-MA’s call, the CAB on Dec. 22, 2014 issued Resolution No. 79, “eliminating theauthority of domestic and international airlines operating to and from the Philippines to imposefuel surcharges on international and domestic flights.”The resolution, published Jan. 7, 2015, was supposed to have immediate effect, according to theCAB.In the past, the air transportation system regulator permitted carriers to tuck a fuel surcharge intoticket prices to help the industry cope with soaring oil costs.

However, as of Feb. 6, 2015, global jet fuel prices had plunged by 40 percent compared to a yearago, to as low as $73 per barrel,  according to Platts,  the world’s leading energy informationprovider.“The problem with airline ticket  pricing is the  lack of  transparency,  which the  CAB shouldaddress  to  safeguard  consumers.  In  fact,  there  are  also  complaints  of  passengers  paying foroptional insurance charges they were not aware of,” Ty said.The lawmaker prodded the CAB to closely track airline ticket price movements on a weeklybasis, and routinely post the changes on the agency’s website, for all consumers to see.The CAB should also require airlines to itemize and fully disclose in passenger tickets their basefares and other charges, he said.“Right now, we’re concerned that a number of airlines may have jacked up their base fares torecover revenues lost  owing to the removal of fuel surcharges.  This may explain why ticketprices remain elevated,” Ty said.

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