Philippine Airlines and Cebu Pacific Seek Airport Fee Relief as Peso Weakens and Fuel Costs Surge

 

The Philippine aviation industry is facing mounting financial pressure as a record-low peso and soaring jet fuel prices drive up operating expenses, prompting the country’s largest airline groups to seek reductions in airport charges.

The Air Carriers Association of the Philippines (ACAP), which represents Cebu Pacific, Philippine Airlines (PAL) and AirAsia Philippines, is urging airport operators to temporarily suspend or reduce selected fees to help airlines manage the escalating cost of operations.

The group is appealing to returning Transportation Secretary Vince Dizon to consider relief measures at major aviation hubs, particularly the Ninoy Aquino International Airport (NAIA), as well as airports in Cebu, Davao and Clark.

ACAP executive director Jose Enrique Perez de Tagle said airlines are struggling to absorb the combined effects of expensive fuel and the peso’s continued depreciation. He explained that reducing airport-related charges could provide much-needed financial breathing room for carriers navigating the current market conditions.

The proposed assistance could also extend to passengers through lower passenger service charges (PSC), potentially easing some of the financial burden on travelers.

Weak Peso and Expensive Fuel Drive Airline Expenses

The peso's decline has become a significant concern for Philippine carriers because much of the aviation industry's operating expenditure is denominated in US dollars.

Aircraft maintenance, spare parts, leasing arrangements and jet fuel are among the major expenses exposed to foreign exchange fluctuations. When the peso loses value, airlines need more local currency to cover the same dollar-denominated obligations.

The peso recently breached the ₱64-per-dollar threshold, reaching its weakest level on record.

Fuel prices have compounded the problem. Jet fuel has reportedly doubled since February 28 following US-Israeli attacks on Iran, which intensified geopolitical tensions in the Middle East and raised concerns about global energy supplies.

As of October 23, jet fuel averaged $196.70 per barrel, approaching the $200 threshold.

For airlines operating on relatively thin margins, these increases create a difficult financial equation: revenue collected in pesos must cover operating expenses that continue to become more expensive in dollar terms.

Cebu Pacific Faces a Growing Currency Mismatch

Cebu Pacific is particularly exposed to the peso's weakness because of the difference between its revenue and expenditure currencies.

Company president and chief commercial officer Alexander Lao disclosed that approximately 70% of the airline's revenue comes from the domestic market, while around 70% of its costs are dollar-denominated.

This imbalance leaves the carrier vulnerable whenever the peso depreciates.

Lao said the airline has little choice but to reflect higher operating expenses in its pricing, potentially resulting in more expensive airfares for travelers.

The financial impact is already evident in its operating figures. Cebu Pacific's flying expenses climbed to ₱30.88 billion in the first half of the year, up from ₱20.59 billion during the same period last year.

That represents an increase of approximately 50%.

Aircraft servicing costs also rose by 8% to ₱8.64 billion, reflecting additional pressure from higher aviation-related expenses.

PAL Uses Fuel Surcharges to Manage Higher Costs

Philippine Airlines has a different approach to managing fluctuations in fuel prices and foreign exchange movements.

PAL chief operating officer Carlos Luis Fernandez said the airline benefits partly from dollar-based pricing, allowing it to adjust its fares according to market conditions.

Fuel-related increases are also reflected through passenger fuel surcharges, which follow rates established by the Civil Aeronautics Board (CAB).

Despite these mechanisms, PAL has not escaped rising operational expenses. Its aircraft servicing costs increased by 2% to ₱11.21 billion during the first half.

The airline recorded a net loss of ₱1.84 billion, while Cebu Pacific posted a larger deficit of ₱5.91 billion over the same period.

These results highlight how rising operating costs can undermine airline profitability even as carriers attempt to adjust their pricing structures.

Higher Airport Fees Add Pressure on Airlines and Passengers

Beyond fuel and foreign exchange expenses, airlines are also dealing with higher airport-related charges.

At NAIA, passenger service charges have increased substantially since 2025. International travelers now pay ₱950, compared with the previous ₱550, while domestic passengers face a ₱390 charge, up from ₱200.

These fees form part of the broader cost structure introduced under NAIA's privately operated management.

ACAP argues that temporarily reducing or suspending selected airport charges could help airlines maintain operations without transferring the entire burden to passengers.

The appeal also reflects a wider concern about airfare affordability. As operating expenses rise, airlines have limited options beyond adjusting ticket prices, introducing additional surcharges or reducing costs elsewhere.

Slower Passenger Growth Complicates the Industry Outlook

The timing of these financial pressures is particularly challenging because passenger demand is no longer expanding at the pace recorded in the previous year.

CAB data showed that Philippine air passenger traffic reached 32.7 million in the first half, representing only 1% growth from 32.3 million passengers a year earlier.

The comparable period last year recorded a much stronger 9% increase, supported by double-digit growth in domestic air travel.

Domestic passenger demand has since flattened, limiting airlines' ability to offset higher expenses through increased passenger volumes.

This creates another challenge for carriers: they must contend with rising costs without the benefit of similarly strong growth in passenger numbers.

ACAP's proposal for airport fee relief therefore comes at a critical point for the aviation sector. Lower airport charges could help airlines manage their immediate financial difficulties while potentially preventing further increases in travel costs.

However, the extent of relief will depend on whether airport operators and the government are willing to reconsider existing charges as the industry navigates an increasingly expensive operating environment.