China's Airlines Seek to Double Fuel Surcharge to Mitigate Rising Jet Fuel Prices

Strategic Insights -

China's top three airlines - China Eastern Airlines, China Southern Airlines, and Air China - have jointly applied to double the current fuel surcharge on domestic flights to mitigate the impact of rising jet fuel prices. The airlines are seeking to raise the fuel surcharge from 20 yuan ($2.47) to 40 yuan for shorter domestic routes and from 40 yuan to 80 yuan for longer routes. This move comes as Chinese carriers are still selling air tickets at steep discounts. Industry insiders believe that the restoration of fuel surcharges on domestic flights between August 1 and December 31, 2005, and the appreciation of the Chinese currency, the RMB, have largely offset the jet fuel price surge.

Key Takeaways:

  • China's top three airlines - China Eastern Airlines, China Southern Airlines, and Air China - have jointly applied to double the current fuel surcharge on domestic flights.
  • The airlines are seeking to raise the fuel surcharge from 20 yuan ($2.47) to 40 yuan for shorter domestic routes and from 40 yuan to 80 yuan for longer routes.
  • The restoration of fuel surcharges on domestic flights between August 1 and December 31, 2005, and the appreciation of the RMB, have largely offset the jet fuel price surge.
  • China Eastern Airlines expects to generate a revenue of 300 million to 400 million yuan from the restoration of fuel surcharges.
  • China Southern Airlines posted a quarterly main operating turnover of 11.4 billion yuan, up 69.33% year-on-year, and a net profit of 852 million yuan, surging by 309.62% year-on-year.
  • The RMB appreciation has also brought enormous profits to companies with large amounts of foreign debts, such as China Southern Airlines.
  • The application to double fuel surcharges aim to prevent further jet fuel price rise and lobby authorities to fully restore fuel surcharges on domestic flights.

Statistics:

  • China Eastern Airlines' foreign debts: 2.2 billion US dollars
  • CEA's expected revenue from fuel surcharge restoration: 300 million to 400 million yuan
  • China Southern Airlines' quarterly main operating turnover: 11.4 billion yuan
  • China Southern Airlines' net profit: 852 million yuan
  • Year-on-year increase in China Southern Airlines' net profit: 309.62%
  • Number of airlines seeking to double fuel surcharges: 3 (China Eastern Airlines, China Southern Airlines, and Air China)

Sources:

  • "China's airlines seek to double fuel surcharge" by Asia Pulse, November 4, 2005
  • "China Southern Airlines Posts Surge in Profit" by XIC, October 2005 (no date specified)