Fuel surcharge soars to highest level since 2018

MANILA, Philippines — The fuel surcharge allowed to be imposed by airlines will soar to its highest level next month due to an increase in jet fuel prices.

This means that air fares could rise significantly beginning June, should airlines decide to implement the new fuel surcharge level.

The Civil Aeronautics Board (CAB) said passenger fuel surcharge for domestic and international flights for the month of June would rise to Level 7 from the prevailing Level 4 for May.

This is the first time airlines will be allowed to collect fuel surcharge under Level 7 since the government allowed its reimposition nearly four years ago.

Level 7 is the maximum in the passenger fuel surcharge matrix that was introduced and adopted by the CAB since September 2018.

The applicable fuel surcharge level, which is the ceiling rate for fuel surcharge, is determined based on the two-month average of jet fuel MOPS (Mean of Platts Singapore) prices in its peso-per-liter equivalent.

Under Level 7 of the fuel surcharge matrix, airlines are allowed to collect an increase of P201 to P769 per passenger for domestic flights, and from P1,035 to P9,892 for international flights.

This is compared to Level 4, which is being implemented for this month, wherein airlines are allowed to impose an additional P108 to P411 for domestic passengers, and P543 to P5,189 for international passengers.

CAB said airlines wishing to impose or collect fuel surcharge for the same period must file their application on or before the effectivity period, with fuel surcharge rates not exceeding the allowed level.

Local and foreign airlines are allowed to collect fuel surcharge rates that are lower than the stated level if they choose to do so, depending on how they want to compete with other carriers.

The effectivity of the applicable fuel surcharge is usually fixed for a two-month period, but it has been limited to only a month starting this month as  CAB’s passenger fuel surcharge for domestic and international flights is being reviewed and evaluated.

Fuel surcharge is an optional fee that is imposed and collected by airlines to recover costs and stem losses resulting from rising fuel prices.

The CAB in 2015 lifted the authority of domestic and foreign airlines to impose the surcharge on domestic and international flights. But with the continuous escalation of fuel prices in the global market and the foreign exchange rate since then, the CAB approved the applications of local airlines for the surcharge reimposition in September 2018.

Aviation think tank CAPA-Center for Aviation earlier said soaring jet fuel prices could add to the woes of airlines this year.

This comes as airlines have yet to fully recover from the impact of the COVID-19 pandemic.