There are no plans to impose a fuel surcharge for domestic
flights, despite rising jet fuel prices, the General Administration
of Civil Aviation of China (CAAC) said yesterday.
Airlines are not allowed to raise ticket prices in line with
increased jet fuel prices, an official from the CAAC's Department
of Planning, Development and Finance said.
The country's three major airlines - Air China, China
Eastern Airlines and China
Southern Airlines - jointly appealed to the industry watchdog
last month to allow them to collect a fuel surcharge to reduce
operation costs. "They could choose instead to cut down on ticket
discounts to defray higher operation costs," said the official, who
refused to be identified.
Jet fuel prices have risen steadily since June last year - from
3,400 yuan (US$410) per ton early last year to 4,620 yuan (US$558)
per ton now - and this has placed immense pressure on carriers.
"A 100-yuan (US$12) increase in jet fuel prices will lead to a
loss of 250 million yuan (US$30 million) in net profits," said Yang
Defeng, spokesman of the Guangzhou-based China Southern
Airlines.
According to CAAC statistics, in the first quarter of this year,
the operation costs of domestic airlines totaled about 27.8 billion
yuan (US$3.3 billion), an increase of 4.1 billion yuan (US$500
million) over the same period last year.
On the other hand, cut-throat competition on domestic routes
forces carriers to offer heavily discounted tickets to lure
customers.
In China, base ticket prices are set by the government, but
airlines have the leeway to adjust the prices within an acceptable
framework.
According to CAAC regulations, fluctuations can be either 25
percent higher or 45 percent lower than the base price.
"We can only decrease the administrative and personnel expenses
to reduce operation costs," Yang said.
Early this year, CAAC Director Yang Yuanyuan said at an annual
work conference that airlines have to face the challenges that the
rise in the jet fuel prices poses to the industry.
An added challenge facing China's airlines is the jet fuel
monopoly. The Civil Aviation Oil Corporation is the only jet fuel
supplier in the country. ?
Airlines are expecting authorities to introduce more competition
to the jet fuel supply market to drive prices down, Yang said.
(China Daily June 3, 2005)