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15 January 2010

Philippine local airlines may keep promotions to boost travel

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Local airlines in the Philippines are likely to continue offering cheap fares in efforts to spur travel, despite the sudden rise in the price of fuel in international markets, according to the Civil Aeronautics Board (CAB), Philippine Daily Inquirer reported.

As a result, however, industry stakeholders will be forced to struggle with shrinking profits, as companies compete to have more seats filled on each of their flights

"You'd expect them to be hiking their fuel surcharges, but that will have a dampening effect on market demand," CAB Deputy Executive Director Porvenir Porciuncula said.

In an interview, the official said local airlines prior to last year's crisis invested heavily in new planes and found new routes, expecting world travel to stay strong for several more years to come.

But Porciuncula said airlines have lately been at wits end finding ways to encourage people to travel, which should help fill up seats despite the fragile state of the world's economy.

"With all the capacity that was put in place before 2009, even if there is a spike in world oil prices, airlines will first have to consider demand conditions before considering hiking their fares," he said.

In 2008, carriers suffered massive losses due to a spike in oil prices in world markets. The price of a barrel of crude oil rose to a record high $150 a barrel in world markets.

But as the United States' financial sector crashed, bringing the entire world economy down with it, demand weakened, sending oil prices down to as low as less than $40 a barrel.


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