Regulator may boost surcharges on increasing jet fuel costs

The aviation regulator will probably raise fuel surcharges on domestic routes again soon after the state-owned jet fuel wholesaler lifted prices by 720 yuan (HK$819) per tonne from July 1, according to a major airline.

China Aviation Oil Corp, the country's sole jet fuel supplier, raised the price from 7,450 yuan to 8,170 yuan this month to reflect the rise in procurement cost. As a result, the gap between domestic and international prices shrank to less than 6 per cent.

The price adjustment prompted speculation the government will allow airlines to raise the fuel surcharge, as it did last month, to offset some of the additional cost.

Beijing last month raised the levy on domestic routes by up to 50 per cent 10 days after it increased the controlled ex-factory prices for jet fuel by 25 per cent.

'I believe that the regulator will allow airlines to raise fuel surcharges on [airfares for] passengers after the increase in fuel costs,' said Su Liang, the chief economist at China Southern Airlines.

Given that Beijing had recently adopted a new mechanism to closely monitor fuel surcharges and jet fuel prices, Mr Su said he hoped that the surcharge could be adjusted soon.

Thanks partly to softening oil prices, shares in China Southern Airlines yesterday closed 5.88 per cent higher at HK$3.06, while China Eastern Airlines Corp rose 4.98 per cent to HK$2.32 and Air China traded 5.43 per cent up at HK$3.88.