Airlines to reduce fuel surcharges up to 75%

By Winny Wang  |   2008-12-19  |     ONLINE EDITION

CHINESE airlines will sharply reduce fuel surcharges on domestic routes by as much as 75 percent from December 25 to keep in line with declining jet fuel prices.

Fuel surcharges for routes shorter than 800 kilometers will be slashed by 75 percent to 20 yuan (US$2.92) from 80 yuan. The additional fee for long-haul flights will decrease to 40 yuan from the current 150 yuan, the National Development and Reform Commission said on its Website today.

Babies are exempt from the surcharge. Children, disabled servicemen and police officers injured on duty will receive a 50 percent discount and people who have already bought tickets will not have to pay the extra charge.


"The decrease in fuel surcharges meets our expectations. The level is the same as in 2005, when the country resumed adding fuel surcharges," said a Haitong Securities Co analyst.


The decrease will cut income at airlines, but they will benefit from cheaper jet fuel, the analyst said.

The commission announced yesterday it would cut domestic jet fuel prices from 7,450 yuan a ton to 5,050 yuan effective today. The reduction will save dozens of billions of yuan a year for the domestic aviation industry.

"The decrease will ease pressure on airlines. For example, Air China can save 3.6 billion yuan a year and China Southern Airlines can save 6.48 billion yuan," said Yu Jianjun, an analyst at Huatai Securities Co.

Fuel costs are the biggest component of an airline's expenses, which account for more than 40 percent of total costs.

Several domestic airlines have reduced fuel surcharges on overseas flights. China Eastern Airlines, Shanghai Airlines and China Southern Airlines have cut fuel surcharges between the Chinese mainland and Hong Kong or Macau since the beginning of this month.

China Eastern and Air China will decrease fuel surcharges on a single flight between China and Japan from US$77 to US$56 from January 1.