Air firm wants end to fuel monopoly
By Chen Qide (China Daily)
Updated: 2005-09-19 08:49

SHANGHAI: China Eastern Airlines announced on Friday that it suffered losses because of recent fuel price hikes, and called for an end to the monopoly of fuel supply in the domestic market.

"The fuel monopoly system must be broken to let airlines have the freedom to choose where to buy," said Li Fenghua, president of China Eastern Airlines Group Company.

Only one company in China is now supplying fuel to airlines, limiting choice for airlines like China Eastern, which purchases 70 per cent of its fuel from the domestic market.

Airlines spent more than 3.3 billion yuan (US$410 million) on fuel in the first half of this year, up 44.19 over the same period last year.

"The fuel price increase cost the company an additional 884 million yuan (US$109 million) between January and June, leading to losses of more than 400 million yuan (US$49 million)," said Luo Zhuping, secretary of the China Eastern Airlines Co Ltd (CEAC).

"Without the price hike, we would have made profits, because we earned a revenue of 400 million yuan (US$49 million) from the appreciation of renminbi," he said.

CEAC President Luo Chaogeng said the company could still make profits by the year-end if policy is made to levy extra fuel charges on domestic air routes and to raise the ticket prices.

Li said the central government is researching for ways to reform the country's current fuel-supplying system.

"The fuel market, which is monopolized by one company, has put Chinese airlines in an unfavourable position to compete with their overseas counterparts," said Li.

"The situation must be changed," he added. A big country like China should have several companies to supply fuel and airlines should have the freedom to choose, he said.

Li suggested that China should establish a fuel futures market as soon as possible to commercialize the domestic fuel market.

At Friday's press conference, Luo Zhuping said the China Eastern Airlines earned 7.67 billion yuan (US$947 million) from passenger transport in the first half of this year, up 8 per cent over the same period last year. Its cargo revenue reached 2.28 billion yuan (US$281 million), an increase of 15 per cent. The passenger business made up 76 per cent of its revenue, while cargo transport, 23 per cent.

"China Eastern will seek co-operation with leading overseas airlines to develop the cargo business," Li said.

Luo Chaogeng said the airlines would make more efforts in developing domestic air routes by increasing flights. "The competition is fiercer on long-distance international air routes than domestic ones," he said.

Efforts will be made to reinforce air routes to Japan, Hong Kong and the Republic of Korea, creating more profits, he said.

(China Daily 09/17/2005 page5)

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