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China's Jet Fuel Price Rises By 300 Yuan Per Ton

Posted on: Wednesday, 29 March 2006, 09:00 CST

China's jet fuel price rises by 300 yuan per ton

BEIJING, March 28 (Xinhua) -- Chinese airlines, which have been plagued by sky-high fuel prices, suffered another blow as the country's pricing authority announced a further rise in the ex- factory price of jet fuel, Beijing Daily reported on Tuesday.

According to the decision taken by the National Development and Reform Commission (NDRC) on Sunday, the NO. 3 jet fuel ex-factory price was lifted from 4,740 yuan per ton to 5,040 yuan per ton, a rise of 300 yuan (37.5 U.S. dollars) per ton.

The sale price of jet fuels has risen from 5,220 yuan per ton to 5,520 yuan per ton, according to sources with China National Offshore Oil Corporation Limited (CNOOC).

This is the fourth time that jet fuel prices have risen in the past year.

Jet fuel prices in China have been increased by 1,330 yuan per ton since March 2005. However, despite the latest price rise, China's domestic ex-factory jet fuel price is still 1,300 yuan lower than the price on the international market.

Currently, the cost of jet fuel makes up nearly 40 percent of Chinese airlines operation cost.

Statistics showed domestic aviation oil consumption amounted to 9.3 million tons last year, with jet fuel costing domestic airlines 45.1 billion yuan, 14.8 billion yuan more than the previous year.

Chinese airlines suffered heavy economic losses last year despite the levy of a jet fuel surcharge, 20-40 yuan per passenger on domestic routes depending on the distance, which was aimed at offsetting the impact of soaring international oil prices.

The aviation sector's profits stood at only 1.65 billion yuan in 2005, a sharp fall of 3.5 billion yuan from 2004. The nation's three major airlines all reported declining pre-tax profits in 2005.

It is widely expected the jet fuel price in China will continue to rise to reach the international level.

Experts suggest the government should relax its control on the price and sales control of jet fuels and let the market determine the price, an idea strongly rejected by domestic airlines.

The airlines hope to combat the problem either by getting more subsidies from the government, by raising the jet fuel surcharge, by abolishing tariffs on imported aviation oils, or by lowering the value-added taxes.

Source: Xinhua News Agency - CEIS

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