Airlines to Apply for Lifting Fuel Surcharges

created: 2008-07-01

Airlines will appeal for higher jet fuel surcharges to help air carriers offset the rising prices of oil, according to Monday's Beijing Business Today.

"Airlines will submit an application to the National Development and Reform Commission," said Luo Zhuping, secretary of the board from Chinese Eastern Airlines, adding details on the surcharges are not clear now.

"But the increase in fuel surcharges will not be too high, for currently, the domestic oil price is still lower than international oil price, and the airlines will also consider the impact on passengers," said Luo.

According to the National Development and Reform Commission, China's top industrial watchdog, the kerosene factory price per ton was increased by 1,500 yuan ($218.33) to 7,450 yuan, and the retail price was 8,020 yuan per ton, up 23 percent.

The new prices took effect as of last Friday.

Analysts familiar with the market said it is reasonable to increase the aviation oil price given the rising fuel prices, but the increase rate is higher than market expectations.

There are two proposals for the rate increase; one is 80 yuan for flights less than 800 kilometers and 130 yuan for flights over 800 kilometers, and the other is 100 yuan for flights under 800 kilometers long and 150 yuan for flights over 800 kilometers.

The new rule may be enforced from July 1.

Currently, the surcharges for flights under 800 kilometers is 60 yuan and 100 yuan for flights over 800 kilometers, and the charges have applied since September 1 of 2006.

"Domestic flights face great market pressure this year, as the number of passengers decreased dramatically compared with that of last year," said an analyst familiar with the market. "The airlines are squeezed for profits."