In the News

Yey! Exam week is over. So I have a time now to update my blog.

This post is our requirement in school. Supposedly, it should be submitted through our respective blogs but our teacher decided that we submit a hard copy for easy checking. Since I still haven't created a blog post recently, I decided to post my reaction paper about an economic issue to leave readers something new to read.

In Partial Fulfillment of ECON 222

Cebu Pacific's 2011 earnings fall on high fuel costs

MANILA, Philippines - Budget carrier Cebu Pacific's earnings last year fell by almost half due to high jet fuel costs.

In a statement to the Philippine Stock Exchange, the Gokongwei-led airline said its 2011 net income amounted to P3.624 billion, down 47.6% from P6.922 billion in 2010.

It said the 16.7% growth in its revenues to P33.935 billion failed to offset the increase in its expenses.

Cebu Pacific's operating expenses grew 34.3% to P30.408 billion last year as fuel costs surged 39.3% amid escalating global market prices. Fuel made up about 50% of the airline's total expenses.

Cebu Pacific flew 11.94 million passengers last year, 14% higher than 2010's 10.5 million, but narrowly missing the company's 12 million target.

Fuel surcharges

Due to higher oil prices, Cebu Pacific wants to hike fuel surcharges collected from passengers of its local flights.

The airline has asked the Civil Aeronautics Board (CAB) to approve a P50 to P100 adjustment in surcharges.

The International Air Transport Association’s price monitor showed that jet fuel prices reached $137.1 per barrel as of March, up 9.7% from the same period last year and 6.1% higher compared to the previous month.

The CAB set the hearing for Cebu Pacific's petition on March 22.

Source: http://rp3.abs-cbnnews.com/business/03/14/12/cebu-pacifics-2011-earnings-fall-high fuel-costs

REACTION:

            News about oil price hike is not new to us. This issue does not only affect one person or firm but it affects a lot of people or the economy as a whole. Oil price hike is a burden to motorist, consumers and even business entities that uses large amounts of fuel in their operation. Due to the high price of fuel in the market, the price of other commodities would increase as well. This would be another load for the consumers. They will be forced to buy products that are expensive because it is necessary for their everyday living and be left with nothing on their pockets. When I read the news about the decrease in Cebu Pacific’s earnings, I realized that high fuel costs do not only affect prices of commodities but also the price of services offered by some firms.

            In the case of Cebu Pacific, they opted to increase fuel surcharges that they collect from passengers. This decision can affect the outcome of their operations. Increase in fuel surcharge would mean increase in price paid by the passengers. People may hesitate to buy a ticket or not. This would result to fewer sales and less customers. Customers might opt to wait for promo fares to lessen the costs of traveling. On a positive note, the increase in fuel surcharge can give the firm enough funds to cover expenses on high fuel costs.

            I think, the government should resolve this problem. They should work hand in hand with the department of energy (DOE) to regulate the prices of oil in the market. I know this is not simple but with right decision and plan, everything would be possible. If the government can regulate prices of oil, this would be a big help to all people – motorists, consumers and even big firms. It is also important for people to be aware of this issue for them to cope up with change in their living. People should also make right decisions and be wise consumers.

share your thought about this issue...!

:)