Highest fuel surcharge not dampening demand?

Published June 22, 2022, 5:25 PM

by Emmie V. Abadilla

In order to cushion the effect of skyrocketing global oil prices on airlines, the Civil Aeronautics Board (CAB) this month allowed airlines to collect Level 7 fuel surcharge, the highest level in its matrix.

Airlines now slap on fuel surcharges of P201 to P769 for local flights and P1,035 to P9,892 for international flights per passenger.

The approved domestic rate, effective June 1, 2022, was double the P108 to P411 fuel surcharge for domestic flights in May, which was at Level 4.

Notably, June to November is off-peak period for airlines.

And all three local carriers – Philippine Airlines (PAL), Cebu Pacific (CEB) and AirAsia Philippines, continued to woo passengers via seat sale promos, offering tickets for a song.

Passengers remain keen to travel after being locked down for over two years due to the pandemic, snapping up flights to leisure destinations.

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In the past four years, the CAB has implemented a fuel surcharge matrix ranging from level 1 up to 7, allowing airlines to impose a fuel surcharge on top of the base fare – the actual amount which passengers pay for their seat.

Russia’s invasion of Ukraine on Feb. 24, 2022 pushed global oil prices at a time when local carriers are hauling in higher revenues for the first quarter of the year.

But so far, AirAsia Philippines maintains it has not seen any fall in demand.

In terms of forward bookings, the low cost carrier was still able to offer promos like the “P66 Freedom Sale” on June 12, Independence Day.

Budget carrier CEB “continued to see strong demand for air travel” and offered P12 seats for Independence Day.

PAL imposed the fuel surcharge which the CAB allowed to “cushion the impact of high fuel costs.”

However, that did not stop the flag carrier from launching its five-day Finally Free to Fly Independence Day Seat Sale with domestic fares (economy base fares) of P188 and international fares (economy base fares) of $89, roundtrip.

Globally, strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fueling a resurgence in demand that will boost passenger numbers 83 percent of pre-pandemic levels in 2022, according to the latest projections of the International Air Transport Association (IATA).

Alteady, the Phlippines registered the highest volume of summer bookings in Southeast Asia and ranked among the most popular destinations for US visitors, according to international travel analytics firm ForwardKeys data.

Summer flight bookings for the Philippines are currently at 70 percent of pre-pandemic levels.

Travel to the Philippines in the first five months of 2022 was dominated by people returning to visit friends and relatives, whereas travel to other destinations is more for work and leisure.

 
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