Industry insiders believe that the jet fuel surcharge is the key factor determining whether China’s airline industry can perform better than expected this year. Normally, when the price of jet fuel reaches RMB5,000 a ton, a fuel surcharge is levied.
International crude oil prices are currently rising again and China’s domestic refined oil price is very likely to substantially increase, although at present it remains unchanged.
Where the decision becomes very iffy is if it is applied to passenger travel. Levying fuel charges can ease cost pressures for airlines, but it may affect seat occupancy rates. However, some researchers believe that airlines can attract customers by discounting air ticket prices, which seems totally daft. Raise the prices by adding a fuel surcharge. Lower the prices by subtracting a discount. Let us hope wiser counsels prevail.
In the first half of the year, the passenger volume on China’s domestic flights increased by over 20% to rank first in the world. China Southern Airlines, China Eastern Airlines and Hainan Airlines turned losses into gains during the same period.
People’s Daily Online reports that Li Lei, an analyst from China CITIC Securities, believes that the profits achieved by China’s airlines in the first half are not only due to China’s domestic passenger market starting to improve, but that this is also thanks to China’s Civil Aviation Administration’s tax reduction and exemption policies.
Various fees and taxes, the infrastructure construction funds for example, have been reduced or annulled to ease the pressure of Chinese airline companies to help them weather the global financial crisis.