Airlines won’t cut ticket prices just yet, cite unrecovered costs
BusinessWorld | 08/11/2008 2:31 AM
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Local airlines have no plans to cut ticket prices just yet even with jet fuel easing from its record $180-per-barrel price in early July.
Local carriers said on Friday they still have to recover costs as a result of the fuel price surge in the past months. Jet fuel prices have eased by more than 16% to $151 per barrel since hitting a record high last month.
In an interview, Southeast Asian Airlines (SEAIR) President Avelino L. Zapanta said they were not yet rolling back prices.
"Everybody’s suffering, including us," he said. He added that fuel now eats up more than 40% of SEAIR’s costs, compared with just 20% to 25% allotted for fuel the year before.
It was not only oil that weighed carriers down, he said, noting the third quarter would be a low season, while bad weather could slow airlines down.
Mr. Zapanta also said some jet fuel suppliers had yet to lower prices, adding that the supply they had ordered was still being shipped out.
Meanwhile, Philippine Airlines (PAL) President Jaime J. Bautista said fuel surcharge increases were not enough to cover the higher costs even with oil prices slowly going down.
Rising oil prices slashed the Lucio Tan-led flag carrier’s profits by more than three-quarters for the year ending in March, to just over $30 million from more than $130 million a year earlier.
Mr. Bautista said the airline had been finding ways to cut costs and make the low-margin long-haul flights more profitable.
He said the expected delivery of the first of six long-haul Boeing 777-300 aircraft late next year is expected to help the airline in the long term. The six planes will cost PAL $1.5 billion
He said the fuel-efficient aircraft, which will be used for PAL’s expansion to new routes in North America, will help keep fuel costs in check. "We cannot pass everything on to the passengers," he pointed out.
Both PAL and SEAIR were granted fuel surcharges in July for passenger and cargo operations. SEAIR was allowed to hike the surcharge by P150 on top of standard ticket prices for all its destinations. PAL likewise hiked its fuel fees for freight operations by a peso per kilogram.
The Civil Aeronautics Board has also approved the dominant carrier’s application to increase fuel surcharges for regional and domestic flights in June.
Meanwhile, low-cost carrier Cebu Pacific announced on Friday a ticket price cut of up to 35% for its Manila-to-Visayas and Mindanao routes. In a statement, Cebu Pacific Spokesman Candice Iyog said the lower fares would hopefully encourage Filipinos to keep flying "despite the economic downturn."
"With fares comparable to other modes of transport, passengers who take bus and ferry rides may now look into flying as a very viable option," the airline said. The airline was last granted a price hike in April, when it doubled fuel fees to P100 for domestic flights.
Analyst Astro del Castillo of First Grade Holdings, Inc. said the airline "has no choice but to lower prices... to compensate for unintentional delays" due to operational lapses following the airline’s move to Terminal 3 of the Ninoy Aquino International Airport (NAIA-3).
He said the price cut could be Cebu Pacific’s way of making up with passengers for the delays.
Airline officials said the delays, lasting for more than a day for some flights, were caused by a combination of bad weather, extended maintenance on some aircraft and operational adjustments for the new terminal.
"Now that our operations at the new Cebu Pacific terminal at the NAIA-3 have stabilized, our passengers may look forward to a better airport service." Ms. Iyog said.
