Lower Airfares In March Thanks To Drop In Jet Fuel Prices

Our prayers have been answered and our deepest desires have been heard! The Civil Aeronautics Board (CAB) has announced a decrease in airfare prices starting this March.

What gives with this sudden blessing? Well, jet fuel prices went down last December 2018, and airlines can now cascade the savings down to customers in the form of lower airfares.

Airfare Price Decrease

According to CAB executive director Carmelo Arcilla, “The average aviation fuel prices for the months of December 2018 to January 2019 was $73.50 per barrel, which is equivalent to P24.32 per liter. This corresponds to Level 2 in our fuel surcharge matrix. This will be effective on March 1.”

What is a fuel surcharge?

A fuel surcharge is a fee that carriers are allowed to impose to on passengers as a way to account for both regional and seasonal variations on the cost of fuel.

As per CAB, airlines follow a price matrix that dictated the allowable amount for fuel surcharge. The fuel surcharge would depend on the cost of airline fuel.

Previously, airlines were operating under Level 3 of the fuel surcharge matrix. This meant that airlines were allowed to impose a surcharge of P45-P171 on domestic flights, and P218- P2,076 for international flights.

Fuel surcharges drop to Level 2 if the cost of jet fuel is in the range of P24 to less than P30 a liter. Under Level 2, the fuel surcharges for domestic flights are at P45-P171 for domestic flights, and P218-P2,076 for international flights.

The specific amount of fuel charges that a customer will have to pay will depend on distance for domestic routes and destination for international flights.

While CAB’s price matrix dictates how much a fuel surcharge can cost, imposing the fuel surcharge is left to the discretion of the airline. Currently, it is only AirAsia Philippines that does not apply fuel surcharge in their air fares.

(Read: How To Book Cheap Flights In The Philippines)

What this means for airline passengers?

Since the jet fuel price index is expected to go lower, which means airlines will need to evaluate their airfares and are likely to lower them as well.

2015 saw CAB removing the fuel surcharges altogether, back to the time when the Peso to Dollar exchange rate was only P44.8:$1, and fuel price in the world market was at USD63.66 per barrel.

In fact, an expert says the Philippine Peso is likely to strengthen to P49:$1 in 2019, a drop that will be caused by, among other things, an oil price decrease of USD 42 per barrel on the first half of 2019.

A jet fuel price drop of P21 per liter will bring the fuel surcharge to a full stop. This means that airline fares will be much cheaper, as what happened in 2015.

So, the next time you book a flight, take a look at the ever-decreasing fuel surcharge rates, and book your future travel plans at a #WiserWealthier timing.

Sources: The Philippine Star, Primer