Beijing raises domestic fuel prices by 3.48%

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Published: March 7, 2012

Chinese carriers at Beijing International. By Rob Finlayson

The Chinese government has raised domestic jet fuel prices to CNY7,725 ($ 1,222) per ton, up 3.48% from CNY7,465 per ton as the cost of international oil continues to climb.

This is the second time the Chinese government has raised domestic fuel prices this year. Beijing increased domestic fuel price by 1.43% to CNY 7465 per ton in February ( ATW Daily News, Feb. 2 ). Since July 2011, Beijing has made monthly adjustments to domestic fuel prices based on fluctuating international fuel prices.

Fuel costs comprise more than 40% of Chinese carriers’ operating expenses. China Southern Airlines (CZ), which operates 80% of its flights on domestic routes, could see its fuel costs increase by CNY676 million annually. Air China (CA) and China Eastern Airlines (MU), which operate 70% of their flights on domestic routes, could see their annual fuel costs rise by CNY579 million and CNY599 million, respectively.

Chinese carriers have also raised fuel surcharges on domestic routes but industry analysts say the increase of fuel surcharges cannot offset rising fuel expenses, which has reduced domestic airlines’ profit figures in January.

Chinese carriers reported a collective net profit of CNY1.98 billion ($ 314.5 million) in January, down 29.9% compared to CNY2.82 billion in the same period of last year, citing higher fuel expenses that jumped 30% over the year-ago period as the main reason ( ATW Daily News, Feb. 20 ).

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