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Fuel surcharges rise not to bring much benefit

(Xinhua)
Updated: 2008-07-01 15:40

BEIJING -- Chinese airlines, currently suffering a sluggish aviation market, said the increase in jet fuel surcharges, effective as of Tuesday, was not expected to bring much benefit for them.

Related readings: CE pledges transparency in fuel pricing Fuel costs passed on to flyers China raises fuel surcharges on domestic routes

From July 1, passengers who buy tickets on domestic flights will have to pay extra fuel charges after the Civil Aviation Administration of China (CAAC) approved increased jet fuel surcharges amid rising world oil prices.

"There is not sufficient air traffic demand now. Despite the rise in fuel surcharges, airlines will have to make more discounts in order to compete for passengers," Luo Zhuping, a director of China Eastern, one of the country's major carriers, was quoted by the Guangzhou Daily as saying.

Industry analysts told the daily that Chinese airlines might suffer a drop in ticket revenue despite the rise of fuel surcharges since they would have to make more discounts to ensure seat occupancy.

CAAC has allowed Chinese airlines to increase surcharges to 80 yuan (about US$11.66) from 60 yuan for domestic flights of 800 km or less.

For domestic flights longer than 800 km, every passenger will have to pay 150 yuan in surcharge, a 50 yuan increase.

It was the fourth time that the Chinese aviation regulator has raised surcharges since August, 2005, and the second time within eight months that there has been an increase due to rising oil prices.

Wen Shuang, of a tourism company based in South China's Guangdong Province, said the increase in jet fuel surcharges was not expected to cause notable fluctuations to air ticket prices for tourists.

"The fuel surcharges rise, but air tickets are declining," Wen said.

The rise of fuel surcharges came after China's economic planner, the National Development and Reform Commission, announced it would raise jet fuel prices by 1,500 yuan per tonne as of June 20, casting more pressure on the country's aviation industry.

Liu Shaoyong, chairman of China Southern Airlines, had said airline companies were facing tough times because of rising fuel prices.

Liu said that the slowing of the global economy, insufficient aviation demand, macro economic control measures, the constant depression of stock market and consumers' declining of confidence have put the aviation industry under heavy pressure.

Liu noted that jet fuel costs account for more than 40 percent of China Southern's total cost. The airlines' operation cost increased by 15 billion yuan in a year because of oil price rises.

Following the jet fuel price rise, Chinese airlines were forced to seek various oil-saving measures, for example taking less food and water on a flight. (US$1 is equivalent to 6.86 yuan)