Lifting of Authority to Impose Fuel Surcharge on International and/or Domestic Flights

December 22, 2014

CAB RESOLUTION NO. 79 (BM 10-12-22-2014)

 

WHEREAS, on 05 and 18 December 2014, the Civil Aeronautics Board called for a hearing with both domestic and foreign airlines to determine to propriety of maintaining the imposition of fuel surcharges in light of the significant reduction in fuel costs. The airlines were required to report if they have reduced or lifted the imposition of fuel surcharge or to explain why they have not done so;

WHEREAS, Malaysian Airlines lifted its imposition of fuel surcharge since July 2013. Likewise, Japan Airlines, Hong Kong Dragon Airlines and Cathay Pacific have decreased their fuel surcharge. Cathay Pacific and Hong Kong Dragon Airlines from 27.9USD in January 2014 to 18.3USD beginning October 2014 or a 34.44% decrease in fuel surcharge imposition; Japan Airlines and All Nippon Airlines also reduced fuel surcharge from 86USD in January 2014 down to 80USD beginning the last quarter of 2015, or a 6.97 decrease;

WHEREAS, other carriers such as Gulf Air, Qatar Airways and Jeju Air have maintained their fuel surcharges at a fixed rate beginning 2010 for Gulf Air, at 90USD; and since 2012 for Qatar Airways at 120USD, and Jeju Air at 40USD; CaESTA

WHEREAS, on the other hand, some carriers like Asiana, Jin Air, Korean Air, Etihad Airways and Qantas reasoned that while oil prices in the global market significantly decreased in recent months, jet fuel remains relatively high. They stated that fluctuating fuel cost is not the only factor considered in imposing fuel surcharge because jet fuel prices are covered by contracts which provides a fixed price for definite periods;

WHEREAS, the Department of Trade and Industry, in its letter dated 10 December 2014, stated that based on the records of the Department of Energy, the average retail price of Diesel alone fell by 26% to 21% by January 2014. Moreover, from June to November 2014, fuel prices have declined by more or less 25.51%;

WHEREAS, Airline Fuel Surcharge is not a government-imposed tax, but an optional fee, imposed and collected by airlines to help recover fuel costs and stem losses caused by the sudden upward spikes in fuel cost; Fuel surcharge is not part of the basic airfare and may be reduced or removed depending on the price of jet fuel in the market, in accordance with prevailing international practice;

WHEREAS, Republic Act No. 776, particularly Section 10 thereof, requires the filing of and approval of all charges imposed by the airlines. Hence, airlines operating to and from the Philippines are required to secure with the CAB authority to impose fuel surcharge. Fuel surcharges thus remain to be an option exercised by the carriers and approved by the Board in compliance with the provisions of RA 776; EICSTa

WHEREAS, with the substantial and continuous decrease of fuel process in the world market, the Board has deemed it appropriate to compel airlines to discontinue their imposition of fuel surcharge;

NOW, THEREFORE, in view of the foregoing, the Board RESOLVED, as it hereby RESOLVES, to lift the authority of domestic airlines and international airlines operating to and from the Philippines, to impose fuel surcharges on international and domestic flights.

Adopted December 22, 2014, Mandaluyong City, Philippines.

(SGD.) HON. JOSE PERPETUO M. LOTILLAUndersecretary for Legal Services

(SGD.) HON. BENITO C. BENGZON, JR.Undersecretary for Planning and Promotions

(SGD.) HON. DIR. GEN. WILLIAM K. HOTCHKISS III AFP (RET.)Civil Aviation Authority of the Philippines

(SGD.) HON. VICTOR JOSE I. LUCIANOCivil Aviation Authority of the Philippines

Attested by:

(SGD.) JEAN MARIONNE A. BERMUDEZActing Board Secretary

Noted:

(SGD.) CARMELO L. ARCILLAExecutive Director