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Continental hesitant to pass airport rate hike to customers
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Posted on May 18 2008
Continental Micronesia is hesitant to pass on to customers the recent increase in local airport rates.
Wally Dias, staff vice president for sales and marketing at Continental Airlines, said it is difficult to impose more add-on costs to passengers, given the rising price of fuel.
“Unfortunately, since fuel prices are going up so fast and so high, it’s so hard for airlines to pass that total cost to the customer. If you do that, at some point, your revenue will start dropping because some people won’t be able to afford tickets. It’s a very sensitive question as to how much you can pass along. For the airport costs, it may not be absolutely possible to pass that along,” Dias said.
Last week, the Commonwealth Ports Authority adopted new rates. The landing fee increased by 62 cents—from $1.40 to $2.02—per 1,000 tons. The facility service charge for the Saipan main terminal was raised from $8 to $9.07 per passenger. And the cost per enplanement—or departure fee—increased from $11.30 to $13.23 per passenger.
Dias said he had not seen the details of the increase and how much it would affect the airline’s costs, but he said it “could be significant.”
Assuming that Continental’s twice-weekly service between Saipan and Manila flies at full capacity at all times, the increase in three charges combined could translate to an additional cost of $30,000 a year.
The impact will be more for other airlines that operate larger aircraft and more frequent flights.
At present, Dias said, the biggest challenge for airlines is the cost of fuel.
He noted that, the cost of fuel reached $126 a barrel last week, a huge difference from $110 just a month ago. For Continental worldwide, he said, each dollar increase in the price of a barrel of oil translates into a $45 million added cost in one year. “It is now our largest cost of doing business,” he said.
