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Airlines get nod to set fuel surcharge

By Lu Haoting (China Daily)
Updated: 2009-11-13 08:57

Chinese airlines will be able to set their own fuel surcharges, subject to a government-set ceiling, from Saturday, the country's top economic planner said yesterday.

The National Development and Reform Commission (NDRC) announced a mechanism that links jet fuel prices and fuel surcharges for domestic routes and scrapped a unified standard for the surcharge.

Domestic airlines can collect the surcharge when their jet fuel purchase prices are above 4,140 yuan ($606) per ton. The government will set the ceiling based on a formula that includes jet-fuel prices, flight distance and airport fees.

The airlines must shoulder at least 20 percent of the increased fuel costs, the NDRC said on its website. The airlines will be able to make changes to their fuel surcharges within five days of the government adjusting jet-fuel prices.

"The new mechanism will allow airlines to differentiate their fuel surcharges and give passengers more choice. It will help promote healthy competition in the market," the NDRC said on its website.

The NDRC cancelled fuel surcharges 10 months ago when oil prices hit a record low. But expectations for a resumption of fuel surcharges soared after the NDRC raised domestic jet fuel prices by 6.6 percent to 5,190 yuan per ton from Tuesday to reflect global oil prices.

"We definitely welcome the new system because it will give airlines more flexibility," said Rao Xinyu, board secretary of Air China, the country's flag carrier.

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But Rao declined to tell when and how the airline would start charging the fuel tax and how the new system would affect its profitability.

Jet fuel accounts for about 40 percent of the total operating costs of Chinese airlines.

"The airlines will have more freedom to design their own pricing strategies and alter their ticket prices more easily to win travelers," said Li Lei, an aviation analyst with CITIC China Securities.

Chinese airlines carried 18 percent more passengers in October than a year earlier, the Civil Aviation Administration of China said yesterday. Domestic passenger air traffic soared 22 percent year-on-year in the first 10 months despite a worldwide industry slump.