The recent reduction in domestic jet fuel prices will not alleviate losses of mainland carriers because what they will save in costs will be largely offset by a cut in the fuel surcharge levied on passengers, analysts say. The 32 per cent cut in the ex-factory price of jet fuel was initially welcomed by mainland carriers. With jet fuel prices lowered to 5,050 yuan (HK$5,174) per tonne from 7,450 yuan from December 19, Air China, China Southern Airlines and China Eastern Airlines could save 5.14 billion yuan, 6.48 billion yuan and 4.48 billion yuan respectively next year, according to a report by China International Capital Corp. But the positive effect is set to be neutralised by a drop in passenger fuel surcharge. Following the reduction in jet fuel prices, Beijing announced that domestic jet fuel surcharges would be cut 75 per cent from December 25. For flights of 800km or longer, the fuel surcharge will be reduced to 40 yuan from 150 yuan per passenger; for shorter flights, the surcharge will be trimmed to 20 yuan from 80 yuan. For some routes, the decrease in the fuel surcharge outweighed the benefits of the cut in domestic jet fuel prices, said a December 19 report by Nomura Securities. On the popular Beijing-Shanghai route, the net impact of the reduction in surcharge and jet fuel price on mainland airlines is a net loss of 1,050 yuan per flight, based on the calculations for an Airbus 330-300 with 75 per cent of the seats sold. In the first 10 months of this year, mainland carriers had reined in capacity expansion amid lukewarm demand. Capacity grew 5.4 per cent, compared with 14 per cent in the same period last year. However, this did not help boost seat sales, which dipped 1.8 percentage points to 74.4 per cent. So the outlook for airlines remains dim. Leading carriers would make losses next year, the CICC report said. 'Demand for economy and business-class seats will continue to fall, which will induce further price cuts in air tickets,' it said. Ticket prices on domestic routes fell in double digits in August and September, while those on relatively stable international routes began to drop in October, declining 8.87 per cent.