Domestic carriers are expected to reduce jet fuel surcharges on domestic routes next month as China's top economic planning body yesterday announced a cut in the unit rate of jet fuel surcharge.
The National Development and Reform Commission will cut the maximum surcharge unit rate by 4.5 percent from Friday, it said in a statement posted on its website yesterday.
"As passengers face growing inflationary pressure, the move is expected to result in a cut in fuel surcharges imposed on passengers by airlines," said Li Lei, an analyst at China Securities Co.
"Domestic airlines achieved higher profitability last year, so they can afford the rising costs under the new surcharge unit rate," Li said.
The NDRC in 2009 introduced the mechanism that links fuel surcharges on domestic air routes with fuel costs to better reflect price movements. The jet fuel cost is calculated at the weighted average of ex-factory price jet fuel and imported fuel price.
Domestic carriers impose the fuel surcharges when jet fuel cost hits 4,140 yuan (US$630) per ton, and suspend them when the cost falls below that level.
Ex-factory prices of jet fuel rose by 300 yuan per ton to 6,340 yuan in the latest round of oil price increase on February 22.
Domestic major airlines such as Air China and China Eastern Airlines raised fuel surcharges to 90 yuan from 70 yuan per person on routes longer than 800 kilometers and to 50 yuan from 40 yuan for shorter distances.
Fuel costs are the biggest component of an airline's expenses.
