Hike may see fuel levy return | Shanghai Daily

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September 3, 2009

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Hike may see fuel levy return

China raised ex-factory jet fuel prices by 6.29 percent to 5,070 yuan (US$742) per ton yesterday and sparked speculation that the country will soon resume fuel surcharges on domestic routes to offset rising costs faced by airlines.
"The increase is similar with our expectations and the government is very likely to approve airlines to resume fuel surcharges after the ex-factory jet fuel price exceeds 5,000 yuan a ton" which already has gone past the point at which the surcharges would be collected, said Wu Li, an analyst at Guotai Jun'an Securities Co.
"We expect the surcharge will reach 40 yuan per capita for routes longer than 800 kilometers and 20 yuan per capita for other routes," Wu said.
The National Development and Reform Commission, China's top economic planning body, began collecting fuel surcharges in August 2005 when the ex-factory prices reached 4,740 yuan per ton.
"The resumption of fuel surcharges can offset fuel prices by 870 yuan per ton to benefit domestic carriers," said Wu Yunying, an analyst at Changjiang Securities Co.
In January, the NDRC suspended surcharges due to a fall in kerosene prices as world oil prices dropped. Since then, world oil prices have been on the upswing.
Some airlines, including Air China and China Southern Airlines, have applied to resume fuel surcharges to offset higher fuel expenses. "I haven't received notice about resumption of fuel surcharges," said Huang Bin, board secretary of Air China.
"The fuel price increase is expected to add about 200 million yuan to our fuel costs by the end of this year," Huang told Shanghai Daily.
Fuel costs are the biggest component of an airline's expenses, accounting for more than 40 percent of total costs.
"The fuel price increase is estimated to cost the aviation industry 2.5 billion yuan annually, including 752 million yuan for China Southern, 412 million yuan for Air China and 476 million yuan for China Eastern Airlines," said Mao Ang, an analyst at China Galaxy Securities Research.
The NDRC has raised jet fuel prices three times this year after global crude prices more than doubled from a low in February to nearly US$70 a barrel.



 

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