China airlines to scrap fuel surcharge from Feb 5: aviation authority

[BEIJING] Chinese airlines will this week scrap fuel surcharges for domestic flights for the first time since late 2009 after fuel buying costs fell below a government-set level, the civil aviation authority said on Tuesday.

Air China Ltd, China Eastern Airlines Corp Ltd , China Southern Airlines Co Ltd and other carriers will abolish the surcharge starting Feb 5, a spokeswoman for the Civil Aviation Administration of China (CAAC) told Reuters.

Like other Asian airlines, Chinese airlines had gradually cut the surcharge from late 2014 as oil prices fell to six-year lows. Oil prices have since recovered, lifted by prospects of a decline in supplies.

The CAAC spokeswoman said the surcharge on domestic flights was directly linked to the fuel procurement costs of the local companies that supply airlines. The surcharge is assessed monthly and the authority decided to remove it completely after fuel procurement costs fell below the government's minimum level of 4,140 per tonne.

Industry executives said the procurement costs had fallen to 3,783 yuan per tonne. Airlines could impose the surcharge again if these costs rise, they added.

Airline executives said they had already informed their agents to remove the surcharge. "We've got notification from the regulator and informed our ticket agencies already," an executive with China Southern told Reuters.

Passengers hoping for cheaper fares over the Lunar New Year holiday week, however, will be disappointed as travel agents and airlines add a premium to tickets for this peak travel period.

According to online travel agency Ctrip.com, the cheapest one-way ticket from Shanghai to Beijing on Feb 19, the first day of the Lunar New Year, was selling for 553 yuan, up from 370 yuan on Feb 3.

Fuel expenses typically accounts for around 40 percent of Chinese airlines' operating costs, and the drop in crude oil prices is expected to boost their 2014 earnings.

REUTERS