PAL gets okay to collect surcharge

Philippine Airlines got government authority yesterday to increase its international and domestic fares by $6 and P300 per flight sector, respectively, effective Oct. 1, 2001.

PAL, however, is still awaiting approval of similar petitions from concerned aviation authorities in foreign countries where it operates.

The Civil Aeronautics Board‘s decision authorizing PAL to collect an insurance surcharge of $6 for international flights and P300 for domestic flights enables the flag carrier to buy the required coverage in the aviation insurance market, although at much higher premiums.

With PAL’s renewed access to commercial insurers, the Philippine government’s guarantee to provide incremental protection for any war-related third party liability incurred by the airline now becomes unnecessary.

The government had earlier pledged to fill the gap when aviation insurers sharply reduced their coverage of war-related third party risk, which threatened to ground the fleets of local carriers.

PAL said the $6 or P300 surcharge on ticket prices takes into consideration all costs involved in securing the required incremental insurance cover as required by its lessors.

In contrast, the nominal $1.25 surcharge levied by other carriers in the wake of the Sept. 11 terrorist attacks in the US is only a stop-gap measure to ensure their continued operation with the sudden withdrawal of war risk insurance cover.

These airlines were extended the required incremental cover through government guarantees, thus avoiding passing on the additional surcharge to their passengers.

PAL, being under rehabilitation, has limited financial leeway to meet its insurance needs. The $6 or P300 surcharge will address this critical deficiency.

With the renewed availability of risk cover in the commercial insurance market, other carriers are expected to align their surcharges to the $6 level to account for the more costly premiums.