Jet fuel prices increase
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Shanghai Daily, July 5, 2011
Domestic carriers will pay more for fuel after China's dominant jet fuel supplier raised prices for the third quarter of this year.
Despite the price hike, analysts said the waiving of an import tariff will reduce costs in the fourth quarter.
China's civil aviation regulator has notified China National Aviation Fuel Group Corp to raise the jet fuel price by 50 yuan per ton to 7,700 yuan (US$1,191) for the July-September quarter, according to a source familiar with the situation.
"The increase is not big enough to trigger a rise in fuel surcharges for passengers," said Li Lei, an analyst at China Securities Co. "But we expect both fuel prices and surcharges to decrease in the fourth quarter after the country slashed import tariffs on jet fuel."
China removed a 6 percent import tariff on jet fuel from this month to boost domestic supply and balance its trade.
"Imported jet fuel accounts for about 40 percent of Air China's fuel, 30 percent of China Eastern Airlines and 20 percent of China Southern Airlines," Li said.
GF Securities Co said the removal of the tariff will help Air China save 117 million yuan this year, China Eastern 140 million yuan and China Southern 164 million yuan.
In 2009, the National Development and Reform Commission introduced a mechanism linking fuel surcharges with fuel costs on domestic air routes to better reflect price movements. Fuel accounts for about 40 percent of total costs for airlines.
Fuel surcharges on routes longer than 800 kilometers rose to 140 yuan from 90 yuan in May, and those on shorter routes climbed to 80 yuan from 60 yuan. The current fuel surcharge level is the second-highest on record.
