Plunging peso puts pressure on Philippines

If you are planning a trip to the Philippines this summer, be prepared to pay say the country’s carriers.

Reports in Manila said 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 last week, 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.

It’s not only travel that is stinging Filipinos in the pocket book.

Millions of Filipinos have admitted they are suffering from the steep increase in the prices of basic commodities, prompting President Rodrigo Duterte to order concerned government agencies to help ease their plight especially by imposing stiff penalties on profiteers taking advantage of the situation.

Officials have attributed the rising prices of basic items like rice, canned goods, milk and coffee mainly due to the surging cost of petroleum as well as to the adverse impact in the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Harry Roque, the presidential spokesman, said Duterte was aware of the plight of most of the 100 million Filipinos and ordered particularly the Department of Trade and Industry to protect them from predatory pricing by imposing stiff penalties on profiteers.

“The president is not callous or insensitive to what is happening. Nobody wants oil prices to be high,” Roque said in an interview with radio station DzMM, adding that about 70 percent of businessmen could be taking advantage of the situation.

Aside from the war on profiteers, Duterte also ordered the Department of Labor and Employment (DOLE) to convene the 17 Regional Tripartite Wages and Productivity Boards to study the possibility of granting wage increases for workers, according to Roque.

Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) spokesperson Alan Tanjusay said with the price hike of basic goods and fuel, partly due to the tax reform law, the minimum wage should be increased to P800.

The ALU-TUCP explained the current P512 minimum wage is only worth P326 in Metro Manila. This is down from P357 last month, when prices of basic commodities were lower.

Tanjusay added the government should also grant a separate P500 cash subsidy for minimum wage earners.

Trade Secretary Ramon Lopez, meanwhile, told CNN Philippines they will step up monitoring of stores to guard against profiteering.

"We monitor 400 stores per week and given directions from PRRD, we shall double that this coming weeks," Lopez said.

He said, however, manufacturers and supermarkets have been following the suggested retail prices (SRPs) for fear of being penalized.

Lopez added they will closely monitor agricultural products in wet markets as prices fluctuate.