Recently, China's domestic airlines including China Southern Airlines, China Eastern Airlines and Hainan Airlines raised their domestic freight fuel surcharge from the current 0.2 yuan per kg to 0.3 yuan per kg, an increase of 50 percent, according to the China Securities Journal.
Industry insiders believe that the jet fuel surcharge is the key factor determining whether China's airline industry can perform better than expected this year. Normally, when the price of jet fuel reaches 5,000 yuan per ton, a fuel surcharge is levied. International crude oil prices are currently rising again and China's domestic refined oil price is very likely to substantially increase although at present it remains unchanged.
At present, China does not have fuel surcharge-specific policies for the freight market. Usually, following the introduction of standards for adjusting fuel surcharges, the passenger fuel surcharge will be adjusted first, and then airline companies will decide whether they will adjust the freight fuel surcharge.
Although the international freight fuel surcharge can reach a maximum of 10 yuan per kg, the current price adjustment will not have a big impact as freight volume only accounts for 10 to 20 percent of the total.
In the first half of 2009, China's domestic freight transport volume stood at 1.89 million tons. If the fuel surcharge is raised by 0.1 yuan per kg, in the second half of 2009 the total freight fuel surcharge for all large airlines would increase by 189 million yuan, and total freight fuel surcharge revenue would reach as much as 568 million yuan.
An officer from Hainan Airlines said that fuel cost accounts for about 40 percent of airlines' total operation costs. Levying fuel charges can ease cost pressures for airlines, but it may affect seat occupancy rates. However, some researchers believe that airlines can attract customers by discounting air ticket prices.
In the first half, the passenger volume on China's domestic flights increased by over 20 percent to rank first in the world. China Southern Airlines, China Eastern Airlines and Hainan Airlines turned losses into gains during the same period.
Li Lei, an analyst from China CITIC Securities, believes that the profits achieved by China's airlines in the first half are not only due to China's domestic passenger market starting to improve, but also thanks to China's Civil Aviation Administration's tax reduction and exemption policies.
Various fees and taxes, for example, the infrastructure construction funds, have been reduced or annulled to ease the pressure of Chinese airline companies to help them whether the global financial crisis.
By People's Daily Online
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