business

Flights to the Philippines Are About to Get Pricier

Updated on
  • Cebu Air says monthly expenses are rising by about $13 million
  • Philippine Airlines says peso’s drop also hurting demand

Photographer: Edwin Tuyay/Bloomberg

Airlines in the Philippines are under pressure to raise ticket prices to offset rising fuel costs and the peso’s plunge to an almost 12-year low, risking lower demand from travelers also hurt by the currency’s decline.

“We will have to adjust prices accordingly,” said Lance Gokongwei, president of Cebu Air Inc., which owns the nation’s largest budget carrier. Cebu Air and market leader Philippine Airlines Inc. said they’ve applied for regulatory approval to add fuel surcharges imposed on customers.

Philippine Airlines, owned by tycoon Lucio Tan, incurs $11 million a year in additional costs for every $1 increase in the price of a barrel of fuel, President Jaime Bautista said in a mobile-phone message. The nation’s largest carrier consumes about 11 million barrels a year, while the price of jet fuel has risen by $13 from January to April, he said.

Cebu Air’s costs are increasing by 700 million pesos ($13 million) a month from a year ago with jet fuel prices hitting $87 per barrel and the peso declining to 52.50 against the dollar, Gokongwei said. The currency’s decline is already diminishing Philippine consumers’ appetite for air travel, Bautista said.

Singapore jet fuel rose to $92.73 a barrel on May 23, the highest in more than three years, and traded at $87.97 at noon on Monday, according to Bloomberg Fair Value. The peso on May 25 fell to 52.705 per dollar, its lowest since July 2006, and is down 5 percent this year, among the worst performers in the region.

— With assistance by Ann Koh

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