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Chinese Airlines Allowed to Levy Additional Fees on Jet Fuel Soon

Posted on: Thursday, 28 July 2005, 09:00 CDT

Chinese airlines allowed to levy additional fees on jet fuel soon

BEIJING, July 27 (Xinhua) -- Passengers who take domestic flights in China will soon pay either 20 yuan (2.46 US dollars) or 40 yuan (4.93 dollars) more when buying tickets as local carriers have been authorized to levy additional fees for jet fuel starting on Aug 1.

The decision, jointly made by the National Development and Reform Commission and the General Administration of Civil Aviation of China (CAAC) on Tuesday, aims to help local airlines deal with the cost pressure brought by soaring jet fuel prices, International Finance News reported on Wednesday.

Passengers who travel less than 800 km will pay an additional 20 yuan when buying tickets, and those who travel longer than 800 km will pay additional 40 yuan.

The decision is not applicable to domestic flights to Hong Kong and Macao, as the airlines were already authorized to levy additional fees on jet fuel on the air routes to Hong Kong and Macao last month.

"This is good news to the airlines," said a source with the Shanghai Airlines.

An industry insider estimates that China Southern Airlines' profit can increase by approximately 600 million yuan this year due to the decision, and that of China Eastern Airlines, 350 million yuan, and that of Shanghai Airlines, 90 million yuan.

However, it is hard to predict whether the major airlines can wipe out their economic losses, or even report profit this year as jet fuel prices rose by 1,030 yuan per ton this year. The National Development and Reform Commission raised the price of jet fuels by 430 yuan, 300 yuan and 300 yuan respectively on March 15, June 25 and July 23 this year from original 4,190 yuan per ton. However, due to the high oil prices on the international market, China's major airlines reported dropping profits and losses estimated at 400 million yuan (48.37 million US dollars) in the first half of this year.

The airlines blamed their declining profits on the rising cost of fuel, which rose nearly by 800 yuan (97 dollars) per ton to reach 4, 920 yuan per ton.

Sources from the China Eastern Airlines said that currently jet fuel accounts for up to nearly 40 percent of the carrier's overall operating expenses.

It was reported that jet fuel made up 30 percent of the national carrier, Air China's, overall operating expenses last year.

Source: Xinhua News Agency - CEIS

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